Hear Chris Buist, Director, Coleago Consulting talk about Managed Services during his keynote speech at European Communications’ quarterly seminar.
Territorial restrictions placed on TV anywhere apps adds another dimension to the UK pub test case with regards to the single EU market for digital services
The week-end edition of the Financial Times (23 Nov 2013), lead with “Brussels on attack over pay-TV rights”, reporting on the anti-trust probe by European commission over pay –TV rights. This was prompted by the case of the British publican fined for showing football to UK customers using a satellite card from Greece.
The UK pub test case is only the tip of the iceberg in the challenge rights holders and the digital media industry face. TV anywhere apps such as “Virgin TV Anywhere” or “Sky Go” give consumers the ability to watch the subscribed channels away from home over the internet. However, a British pay-TV subscriber on holiday in Spain wanting to watch a Premier League football match on his iPad would find the viewing blocked because access is only allowed from within the UK. In the physical world this is akin to a British holidaymaker being blocked from reading a book on the beach in Spain, with the excuse that the book was bought London.
I am sure that pay-TV operators would like to grant their customers access from anywhere within the EU because this would add value to their service. The problem lies with the country based approach to TV rights. The 2011 judgement with regards to the Premier League may not have considered the issue because at that time TV-anywhere apps did not yet exist. The EU is keen to promote the “connected continent” and should take vigorous steps to ensure that consumers are free consume digital media anywhere within the EU, regardless from which EU country the service is played out.
Written by Stefan Zehle, CEO, Coleago Consulting
Coleago Consulting discusses regional investment, spectrum and infrastructure strategies at the TMT Finance & Investment East Africa 2013 Conference
This is a really critical time for the East Africa region. Significant decisions about the framework for investment, particularly regulation and spectrum allocation for 3G and 4G, will have a fantastic impact on regional growth.
There are a number of important spectrum auctions coming up across the region and operators are looking at how best to use spectrum, infrastructure sharing, new technologies and business models, to meet the massive demand for data services. The industry is now entering a transformational stage with unparalleled fixed-line and mobile consolidation.
Despite significant growth and achievements achieved over the past decade, major new investment, innovation and infrastructure roll out is needed for the next phase of development.
Highlighting the changing telecoms landscape in East Africa, next week (November 26th) sees the first TMT Finance & Investment East Africa 2013 Conference arrive in Nairobi.
In my first conference presentation of my new role here at Coleago, I will be making a keynote on “The Data Tsunami: Spectrum Allocation and Infrastructure Sharing” at the event, discussing the actions that regulators and operators are taking to cope with the global “data tsunami” that started building with 3G and is now accelerating with 4G. If you’re attending the event, or considering it, and would be interested in meeting, feel free to contact me – email@example.com
Written by Chris Buist, Director, Coleago Consulting
The multi-band combinatorial spectrum auction (CCA) in Austria ended on the 21st of October, with bidders paying €2,014 million for 2x30MHz of 800MHz, 2x35MHz of 900MHz and 2x75MHz of 1800MHz spectrum. The 800MHz spectrum was new spectrum whereas the two other bands were renewals. The only bidders were the three incumbent operators Austria Telekom, T-Mobile, Hutchison.
The overall price paid for sub-1GHz spectrum and the 1800MHz spectrum amounted to €0.85/MHz/pop. This is only slightly less than the implied price for the sub-1GHz spectrum of €0.96/MHz/pop.
The price for sub-1 GHz spectrum is roughly in line with prices paid for 800MHz spectrum in recent European auctions. The price paid for 800MHz spectrum in Germany was €0.73/MHz/pop (May 2010) and the average in Europe during 2010 to 2013 was €0.52/MHz/pop. So the price paid in Austria for 800MHz spectrum is relatively high. Benchmark prices paid to renew 900MHz spectrum are in the €0.19-0.53 range whereas the implied price paid in Austria amounts to €0.96/MHz/pop.
Exhibit 1: Austrian Spectrum Auction Results
However, since the overall price per MHz per pop paid is only slightly lower than the implied price for sub-1GHz spectrum, this means that operators valued the 1800Mhz spectrum very highly at €0.76/MHz pop. This is significantly above prices paid for 1800MHz spectrum in recent auctions, and certainly massively more than prices paid for 2.6GHz spectrum. Benchmark prices paid to renew 1800MHz spectrum are in the €0.10 – 0.21 range. In this context the comments by Telekom Austria’s CEO Hannes Ametsreiter, referring to a “bitter pill to swallow,” are quite appropriate.
The auction outcome highlights that in the context of the rapid growth of data traffic, spectrum is becoming an ever more valuable resource. The re-farming of 1800MHz from GSM to LTE requires more spectrum in the short term because spectrum resources cannot be used efficiently. In that sense governments can hold a gun to operators’ heads and demand almost any price.
1800MHz spectrum is the spectrum of choice for LTE in Europe. Most operators have built a grid based on 1800MHz and hence the 1800MHz band provides both an LTE capacity and an LTE coverage layer. In contrast 2.6GHz is “only” a capacity band. I placed quotation marks around the word “only” because LTE capacity is of course very important in urban areas and here cell sizes are quite small. Nevertheless, the in-building propagation characteristics of 1800MHz spectrum are significantly better than for 2.6GHz spectrum and in-building capacity matters for mobile broadband.
The auction outcome, with A1 Telekom (Telekom Austria) acquiring 2/3rds of the 800MHz band means that the company now holds 53.8% of sub-1 GHz spectrum compared to a subscriber market share of around 39%. As the operator with the weakest cash flow it is likely that Hutchison faced budget constraints. The result is that the market leader managed has managed to acquire a disproportionate share of spectrum.
The design of the Austrian auction and the absence of effective caps on sub 1GHz spectrum holdings suggest that the Austrian government is not particularly concerned about the effects of spectrum concentration on competition. On the other hand, the spectrum divesture conditions imposed on Hutchison (European Commission, DG Competition, CASE M.6497) to clear its acquisition of One Austria, suggests a very different view of spectrum concentration is applied when it comes to approving in-market consolidation. The only saving grace for Hutchison is that there was no new entrant and so the requirement to divest 2x10MHz the 2.6GHz frequency band lapses; however the MVNO access requirement remains.
While Hutchison managed to increase its sub-1 GHz spectrum holding from 1.6MHz to 2x5MHz, the cost per eNodeB of deploying LTE is 2x5MHz is roughly the same as for Telekom Austria deploying LTE in 2x15MHz in the same band. Furthermore, there are already many smartphones with 800MHz LTE, where Telekom Austria acquired 2x20MHz, but as yet, none with 900MHz LTE.
In the light of this the comments by Trionow, CEO of H3G, describing the auction as a “disaster for the industry” are understandable. Certainly it is a disaster for Hutchison and for a competitive mobile broadband market in Austria.
Written by Stefan Zehle, CEO, Coleago Consulting
The availability of increasingly sophisticated softphone applications and TV anywhere applications coupled with the widespread adoption of smart devices, provides fixed operators with an opportunity to enhance their services with mobility. And while it may not always be possible to monetise the mobility aspect directly, the enhancements provide significant value to customers, making them more likely to keep their fixed telephony and cable TV services and possibly even upgrade.
With softphone apps from companies such as CounterPath, fixed telephony operators can add mobility with minimal effort and cost. In developed markets smartphone penetration is already high and is increasing fast which means that a large proportion of fixed network customers could install a Skype-like app provided by their fixed telephony company. Many people are loath to give up their fixed phone and by giving them the opportunity to make and receive “fixed line” calls away from home the value of the fixed line is much enhanced. Furthermore, instead of a voice only product fixed operators can leverage those smartphones and tablets to offer rich communications including video calls. Thus even at home, answering a fixed call on a smartphone connected to WiFi will be much more attractive to telephony users than using their old fixed voice phone.
Increasingly large LTE bundles and proliferation of free WiFi or access via the phone network make it easy for fixed operators to effectively become OTT mobile players without investing a cent in mobile access networks. Upselling opportunities may exist by offering households additional personal fixed numbers with home call management features (call home, call one, transfer, group video call). The differentiator compared to Skype and other OTT services is that a fixed operator softphone app is linked to the existing home phone account. Customers can use their existing account and bundled minutes even when away from home. Most importantly, customers benefit from universal nature of the PSTN because they can fall back to the lowest common denominator of a simple voice call to any telephone number world-wide.
While fixed telephony operators who can benefit most from this opportunity are those who do not have a mobile offer, even those who have a mobile offer may see this this as an opportunity if their mobile rivals do not have a fixed network. While a few operators already have softphone app offerings in the market, as yet this is an under-exploited opportunity.
A fixed network OTT app is particularly valuable when used abroad. In February 2013, Syniverse published research which showed that “transient roamers” spent $8.7 billion on hotel Wifi and $3.9 billion was spent purchasing access to other paid Wifi hotspots. While traditional fixed operators may not be able to garner this revenue, it shows the value that people attach to being reachable and making calls without using cellular networks.
These developments mean that IP telephony is no longer a threat to fixed operators but an opportunity to deliver rich communications services to their customers anywhere world-wide.
However, the greatest opportunity lies with triple play operators (telephony, broadband, TV). An app which combines a softphone with a TV anywhere services would represent a huge value add to cable TV customers. Already TV consumption is moving rapidly away from TVs to other devices such as tablets, smartphones and laptops. Internet based TV delivery is racing ahead. Recognising this trend, several TV providers in Europe and North America offer apps that allow their customers to watch their favourite shows on other devices. Within the home the ability to watch TV on a tablet adds another outlet which is of proven value to cable TV customers. The ability to use a cable subscription out of the home is of course even more valuable. This need not be restricted to Wifi because with LTE mobile TV, at least in a limited manner, is already reality.
In an ideal world a family with a holiday home in another country could simply take their home phone and cable TV channel package with them and access all services through a broadband connection at their holiday home. While there may be issues over geographic limits of contents rights, these could be overcome. Certainly within the EU it will not be sustainable to restrict the consumption of digital content depending on which EU country it was purchased in.
For cable TV companies this would also be a defensive move as young people opt to watch on-line video rather than pay for cable TV. According to figures published by eMarketer, in 2013 for the first time adults in the US spend more time consuming major media on smartphones, tablets and laptops as opposed to TV. This illustrates that we have reached a turning point which will lead to a great deal of disruption in the telecoms and digital media industries.
By Stefan Zehle, CEO, Coleago Consulting
Chris Buist joins to develop network sharing and managed services consultancy
Coleago Consulting, a specialist telecoms management consulting firm, today announced that Chris Buist has become the latest director to join the company. Chris’ role at Coleago will be to grow its new network sharing and managed services consultancy business division.
Chris brings 30 years’ international senior management experience in the telecommunications and media sectors to Coleago. Prior to this role, Chris was head of the communications and media practice at PA Consulting. He is based in Vienna, Austria, and has worked for clients in more than 20 countries including network operators, equipment vendors and media companies. His main areas of expertise include strategic planning and network/OSS/BSS performance improvement particularly through managed services and network sharing.
“Changes in the telecoms industry have led to operators feeling the squeeze and their margins and cash flows are suffering. They now need to create savings on their networks without affecting the performance that consumers have come to expect. We see network sharing and managed services as a potential solution to this dilemma, making these services more important than ever. As such, Chis joining the team could not have been timelier,” said Graham Friend, Managing Director of Coleago Consulting. “At Coleago we are driven to continue to grow and expand our areas of expertise and therefore provide ever better services to our customers. We are excited to have Chris on board and look forward to the opportunities he will bring to Coleago in this new business division.”
Chris joins the Coleago board which currently includes Graham Friend (Managing Director), Stefan Zehle (CEO) and Scott McKenzie (Director).
European commission proposal ignores the fundamentals: We need to create an environment that attracts capital into the EU telecoms sectorSeptember 18, 2013
The European Commission’s adoption of regulatory proposals for a Connected Continent announced by Neelie Kroes on the 11th of September 2013 are as polemic as can be expected from a politician. The headline grabbing proposal deflects from the failings of member states to adopt sensible policies with regards to developing the telecoms sector. In its opening paragraph the proposal declares that “The overarching aim is to build a connected, competitive continent and enabling sustainable digital jobs and industries; making life better by ensuring consumers can enjoy the digital devices and services they love; and making it easier for European businesses & entrepreneurs to create the jobs of the future.”
To achieve these objectives substantial investments are required. Only 12 days prior to the Commission’s proposal, on Thursday 05 September 2013, PwC published a detailed analysis which showed that mobile operators cannot make adequate returns on capital employed. For the past three years the return on invested capital (ROIC) made by Europe’s telcos was below the cost of capital of around 8%-9%. In the mobile sector this is in part due to the high spectrum licence fees charged by national governments.
And yet with statements such as “It is also essential that citizens … are protected from unfair charges and practices such as roaming rip-offs and opaque contracts” the Commission conjures up an image of ultra-profitable telecoms operators which fleece consumers.
What the European telecoms sector needs most is a climate with the regulatory certainty which is favourable to investment. Only investment in the sector will achieve the Commission’s aim – which we all agree with – of excellent fixed and mobile internet connectivity and communication without borders within the EU.
Furthermore, the Commission proposal contains contradictions. Vice President Neelie Kroes said “The aim is to gradually make the telecoms sector a “normal” economic sector with limited ‘ex ante’ rules and responsibility shifting to ex-post regulation” and then demands that “Operators will have to charge no more than a domestic long-distance call for all fixed line calls to other EU member states. Any extra costs have to be objectively justified.” “Normal” economic sectors do not “objectively justify” prices based on cost but charge what the market will bear. The image of the Coca Cola bottle in the proposal is a fine example. The price per litre of Coca Cola varies hugely between a discount supermarket and a beach club on the Cote d’Azur. And yet, nobody suggests regulating prices for Coca Cola.
On the positive side, the proposal highlights member states’ regulatory failings and tardiness in allocating spectrum for LTE. This, with a call for a European authorisation for telecoms operators – and by implication European telecoms regulation – is a very positive development. This is a prerequisite for the much needed consolidation in the EU telecoms sector which will then give investors a chance to earn adequate returns.
Written by Stefan Zehle, CEO of Coleago Consulting