Thursday, April 28, 2005

April the 27th

James Enck

Wednesday, April 27, 2005

Use your illusion

I often use musical references here, and I genuinely and sincerely apologize for the Guns-'n'-Roses reference, but it somehow seems appropriate, at least for telcos, in the short term.
The past three days have been somewhat unprecedented, at least as far as I can recall, in terms of EuroTelco carnage.
On Monday we had a bombshell from Tele2 (first in the sector to report), which demonstrated that it appears to be competing credibly in a number of key markets, but missed market expectations by a significant margin.
The share price is down 8.6% in three sessions. Yesterday, TeliaSonera breached the low-end of consensus (EBITDA in Finland fell by over 50% YoY) and got hammered, and today was another world of pain: two day decline - 8.9%. Today, Telenor shocked and awed with the underperformance of its domestic fixed business and margin softness in emerging markets, and the market drove its shares down 9.4%.
That's a helluva lot of value wiped off the sector over three days, but only at the mid-cap end of the market.Tomorrow we have numbers from large-cap name France Telecom, and if it drops a poo-bomb on us, then I really am going to start to think that maybe all these disruptive influences I've been writing about for nearly three years have at last become undeniably evident.
One thing France Telecom has going for it is that the company will be reporting based on a radically revamped organizational structure. Yes, the analysts have some pro forma restated historicals to work from, but I am always skeptical when companies change reporting lines (as has repeatedly been the case over the past three years, usually justified on the basis of a "more accurate representation of operations").
I am particularly skeptical when the structural change coincides with significant shifts in market dynamics.
My cynical nature leads me to conclude that companies are buying time, but I didn't say that, and you didn't hear it.We analysts generally like to portray ourselves/be portrayed as "industry experts," and no doubt there are a lot of very bright and talented people out there. I do not seek to denigrate their work.
However, when I stand behind a podium and speak frankly to people who work in, live, and breathe this industry on a day-to-day basis, and I come away with a sense that we are living on different planets, I worry even more.
Maybe it's I who am deluded, but if it's the case that the misguidedly orthodox views of the industry are filtering down to the analysts through multiple generations of spin (as I think is almost certainly the case), with all the distortion inherent therein, no wonder we see such aggressive share price targets, and accordingly see such massive share price falls when things go wrong.Periods like the past three days bring me back to recurring conflicts I have had with our sales team from time to time, and the vague sense of incomprehension I sometimes encounter from colleagues covering other sectors.
"Surely there must be something you can recommend within the sector?" is a common refrain. "Well, actually maybe not," is my typical reply, and though it concerns me, developments like we have seen over the past three trading sessions only lend support to this view.
To my colleague covering utilities I typically say, "Where would power companies be if there emerged a technology for competitors to supply energy at virtually no cost?" To my automotive colleague I say, "What is the value of the auto industry if we crack the secret of teleportation?" These are patently ridiculous propositions for the industries in question, but in a telecoms context are all too relevant, if slightly exaggerated.
Maybe a more salient question generally is, "What if your powerful national brand has its face ripped off by global internet players, device makers, and people you've never even heard of?"I have often made the point to our sales force and clients that traditional telco valuation is a dangerous business in the IP world.
We can cling doggedly to comfortable traditional methods, or in a pinch, desperate last-ditch bastions like multiples of net PP&E and other such relics - or we can do the right thing and admit that any valuations we attempt are speculative at best.
My feeling is that investor expectations are so low that it only takes one quarter's disappointment to reset expectations to a much lower level, and ultimately this process can be repeated down to near zero.
Analysts who might have felt confident in valuing Telenor at NOK 68 - 70 a few weeks back are adjusting to a new reality today, with the share price struggling to hold NOK50. Finding your feet may be increasingly challenging in the world to come, if you have failed to board the ClueTrain. No doubt we're going to see a lot of complicated gymnastics in the quarters ahead, and a lot of smoke and mirrors employed to place a brave face on a fairly grave situation.

However, my sense is that the gloves truly are off as of this week, and we may be entering a new phase. For the sake of investors in the sector, and the thousands of people employed in the industry, I hope I'm wrong.

Permalink posted by James Enck : 10:32 PM

It's not all grim up NorthWhew, the market really hated the Telenor numbers (stock down 9.4%), and there must be some pretty sore backsides in brokerland given some of the aggressive price targets I've seen just recently. Anyway, Norway did produce some positive news today, from Telio, which is licensing the Xten eyeBeam development kit to develop their own video softphone. Based on Telio CEO Espen Fjogstad's presentation in Barcelona last week, I expect the company must be nearing the 50,000 subscriber mark in Norway (which is huge in a market of 4.5m people), and I am reasonably confident that Telio minutes of traffic are in the 40m range per month. Looking at Telenor's figures today, that would seem to be equivalent to about 4% of traffic on the Norwegian PSTN.
Permalink posted by James Enck : 5:05 PM

Mark Evans

Three days, three missesWe're early into the Q1 reporting season in EuroTelcoland, and so far things are looking rough.
Tele2 missed expectations on Monday, TeliaSonera reported numbers below the bottom of the consensus range yesterday, and Telenor has repeated the feat this morning.
Our forecasts were towards the more cautious end of the range (based on Reuters consensus), but revenues and EBITDA were still NOK600m and NOK400m short, respectively.
That's an undershoot of 4% and 7% respectively.
On the conference call just now, CEO Baksaas remarked that the weak showing from the fixed business reflects mobile substitution and "changes in the nature of the market due to the broadband generation."
I think the short form of that phrase is "VoIP/IM/Skype." Another phrase used was "intensify operational excellence" in the fixed business, though no specific figures were outlined. I assume that means supersizing some downsizing.
Permalink posted by James Enck : 8:19 AM

Salvation for Mobile Couch Potatos

by Mark Evans on April 27, 2005 10:36AM (EDT)
Do you really think people will watch a 30-minute sit-com on a wireless device?
It's not something I would ever do but some analysts believe there are couch potatos who will need to get a TV fix while on the road.
ABI Research's Alan Varghese is a mobile TV believer, although he concedes most usage will be short video clips.
He said, however, that "for die-hard fans, watching their favorite half hour sitcom is not out of the question."
Varghese also throws out a physical theory about mobile TV's potential, suggesting the optimum TV viewing distance is 5x the screen size.
Using this formula, he argues mobile devices are perfectly suitable for on-the-go TV. What may put Varghese and I in different camps is I don't watch much TV - other than Deadwood, Arrested Development and - when the NHL is not on strike - the Toronto Maple Leafs.
As a result, it may be difficult for me to relate to people who may watch 10, 20 or 30 hours of TV a week.
For these people, maybe the ability to watch "Survivor" or "Desperate Housewives" while you're waiting to catch a flight is a pleasure worth paying for - even if it means looking at a small screen.
You should never under-estimate how the mass market behaves, and never under-estimate the power of TV. In other TV-related news, I was listening to CBC radio today about a device called TV-B-Gone that lets people to turn off TVs in public places such as bars and restaurants.
It was interesting to hear there was little reaction when a TV was turned off in a bar - suggesting TV can often be more background noise than anything else.
Leave Comment Permanent Link Cosmos

1,100 VOIP SPs and counting....
by Mark Evans on April 27, 2005 08:33AM (EDT)
According to research done by Sandvine Inc., there are more than 1,100 VOIP service providers around the world - ranging from large telcos and cablecos to local "mom and pop" operations and free services from firms such as Skype.
Sandvine came up with this eye-catching statistic after analyzing data traffic moving across its global network of ISP customer sites, which account for more than 20 million broadband subscribers worldwide.
Sandvine, which provides a variety of services to ISPs such as traffic management technology, said the growth of VOIP traffic means there will be serious quality of service challenges to broadband service providers.
"The failure or success of VoIP offerings depends on the level of QoE that a service provider can achieve and sustain, so network managers must determine very quickly how QoE can best be quantified and ensured," Sadvine opined in a press release.
Om Malik makes an excellent point that if you assume there will be three million VOIP subscribers in the U.S. by the end of 2005, and that the cablecos and Vonage will have two million customers, it leaves hundreds of VOIP SPs battling it out for the rest. Yikes!
or people not familar with Sandvine, its founders started a company in Waterloo, Ont. called Pixstream Inc., which was acquired for nearly US$400-million in 2000. Four months later, Cisco closed Pixstream as part of a corporate restructuring that saw the elimination of 8,000 employees.
It was a strange move given Pixstream was originally only looking for a small investment from Cisco but the deal expanded when Cisco made it clear it wanted the whole kit and kaboodle.
Leave Comment Trackbacks (1) Permanent Link Cosmos

Eric Lagerway -

ineen VoIP client now supports Actiontec's Internet Phone Wizard
Here is a beta build of the ineen client for windows that supports the Actiontec Internet Phone Wizard [not just for Skype anymore]. A cool little device that combines a traditional telephone with the ineen softphone.
Posted by erik at 03:52 PM Comments (0) TrackBack (0)

Xten VoIP and Video Softphone Bundled with Telio Service in Norway

- Telio AS has recently licensed Xten softphone technology for bundling with the Telio VoIP and Video Service currently being offered in Norway, The Netherlands, Denmark and Sweden
SANTA CLARA, CA, April 27 /PRNewswire-FirstCall/ - Xten Networks, Inc. (OTCBB: XNWK - News), a provider of VoIP (Voice over Internet Protocol), Video over IP, Instant Messaging (IM), and Presence SIP softphones, today announced that Telio AS has licensed Xten's eyeBeam Software Development Kit (SDK) which Telio will use to build their own VoIP and Video softphone for use within their market-leading and fastest-growing access-independent Broadband Telephony network in Europe.
Continue reading "Xten VoIP and Video Softphone Bundled with Telio Service in Norway"
Posted by erik at 07:50 AM Comments (0) TrackBack (0)

Om Malik - VoIP Daily

Rocky Mountain News: Technology
Rocky Mountain News: Technology has a round up story about VoIP in the Front Range of Colorado and what Qwest may or may not do.
The story also mentions Comcast, which is testing VoIP and being too cute about their plans. All one has to do is look at how successful CableVision, AT&T and even Vonage have been.
Does anyone really think that Comcast won't be a big player in 2005 in VoIP, and that Front Range network operator Level3 won't be in the mix...

Vonage Darwin Awards and Motel 6
The Vonage series of commercials has a very "don't be so stupid to pay more for phone service." That and a Tom Bodette, Motel 6 feel. They're cute, catchy, thematic. They are following the tv commercial feeling of AT&T's spots (that are no longer running) by focusing on broadband (without offering to get it for you) and they are implying you're stupid if you don't switch.

I like the creativity, the focus on price, broadband and the fact that the first half of the spots is just the jingle. What I don't like is that there is no reference to leading national retailers selling the service. My guess is Vonage wants to capture as much of the business directly to help recoup their advertising expense as fast as possible.
This is not going to be cheap and they need to start adding more than 1,000 customers a day. While they don't have to be as tribbles like as Skype, they need to start seeing faster adoption or the burn rate will finally begin.

Techdirt:Cablevision's Bundle Is Working
Techdirt:Cablevision's Bundle Is Working as they seem to have brought the price to a point where it's FREE according to TechDirt.
So let me get this straight. They advertise for free. They reduce the cost of services. They hurt the phone companies. Next !

Jeff's Opinion In The WSJ - Write to The Wall Street Journal has a letter from the guru of VoIP, Jeff Pulver. It's a great read and makes many salient points.
Give it a read.

Jeff Pulver - The Jeff Pulver Blog

April 27, 2005
'Help! I Need Somebody!'...But do we really need Somebody to Micromanage Emergency Response Solutions for IP-Based Communications?
Last night I read with some concern several news accounts of a comment FCC Chairman Martin made yesterday regarding application of emergency response obligations on VoIP service providers.
Now, to be clear, I have no problem with the adoption of appropriately-tailored rules establishing guidelines for implementation of an emergency response system for IP-based communications providers.
Who could argue with the promotion of such a public good? As I've said repeatedly, IP technology will allow for the establishment of next-generation emergency response capabilities that will dwarf anything we currently see on traditional telecom networks.
In fact, the Global IP Alliance, which I helped to found, is now taking the lead to develop a global IP-based Emergency Response System.
It is my hope that this global effort will allow users to hit a single button and immediately activate appropriate language translations, notify appropriate points of contact and emergency responders, transmit individualized medical histories and special circumstances, etc.
New rules designed in such a way so as not to disrupt new technology and services but ensure the public good should be acceptable to both industry and government. Cookie-cutter application of old rules to IP-based communications, however, could tend to stifle new technology and innovation and interfere with the ability of IP-based communications providers to develop superior emergency response systems.
My preference of course is that industry take the lead to develop non-proprietary emergency response systems that are most suitable to promotion of IP technology while promoting the broadest public good.
Short of that, I would hope that regulators, as they inject their authority over IP-based communications, look at IP technology with a fresh eye and an understanding of the differences between IP-based communications and traditional telecom networks.
One area where I think it is appropriate for government intervention would be to ensure that unaffiliated IP-based communications providers have access to the "selective routers" and other infrastructure currently controlled largely by incumbent carriers.
I would hate to think that those that control necessary infrastructure could stand in the way of establishment of a workable emergency response capability by IP-based communications providers. Certainly, lives should not be lost so that certain providers might be able to maintain a competitive advantage or point to the inadequate capabilities of unaffiliated IP-based communications providers.
Another area for government oversight would be to ensure that PSAPs do not block the use of administrative access lines for nomadic emergency response services.
These administrative access lines provide a critical interim solution while the IP-based communications industry moves forward rapidly to develop the technological means for the provision of emergency services to nomadic end users.
I'm curious to see the fruits of Chairman Martin's statement and I trust that he will not simply "react" to current fears as he and his colleagues weigh in on emergency response solutions that might implicate IP-based communications.
Any regulator involvement must continue to promote innovation and advance the promise of IP-based communications while simultaneously promoting the public good and allowing IP technology to improve emergency response solutions.
Posted by jeff at 10:24 PM Comments (0)

April 27th issue of the Pulver Report just released

It seems that being on "vacation" sometimes means an opportunity to actually catch up on work.
The latest edition of The Pulver Report has just been published and set out to our 50,000+ subscribers.
Posted by jeff at 11:58 AM Comments (0)
House witness list for Hearing Later Today:
- Lewis K. Billings, Mayor, Provo, Utah;- Charles M. Davidson, Commissioner, Florida Public Service Commission;- Kenneth Fellman, Mayor, Arvada, Colorado-Member, NATOA Board of Directors;- Commissioner Diane Munns of Iowa, President of NARUC;- John Perkins, Iowa Consumer Advocate-President, National Association of State Utility Consumer Advocates;- David C. Quam, Director, Federal Relations-National Governors Association;- Karen P. Strauss, KPS Consulting, Alliance for Public Technology.
Posted by jeff at 04:08 AM Comments (0)

Rich Tehrani - Rich Tehrani

There seems to be a criminal element in everything these days. Someone invents e-mail, spammers and virus writers hijack it.
Someone invents VoIP, spammers are there to send us SPIT (spam over internet protocol). Now –say it isnt so, it hurts to write – they are coming after, are you ready? Our iPods! Seriously, they are.
The subway thieves in Manhattan aren’t going after purses and gold chains, snatching the latest iPod loaded with songs is like stealing the deed to Trump Tower.Criminals are now high-tech. Forget muggings, its all about the iPods baby.
What’s next? If Willie Sutton is a prognosticator worth his salt in casket weight, can we foresee a day when the Apple store in the mall gets knocked off? Is Steve Jobs really minting money these days? Seems like he is.
According to an article in the New York Times most of the thieves and the victims are students. Cell phones by the way are up on the list as well. 50 iPods and 165 cell phones stolen so far this year, up from zero and 82, respectively, last year.
So before you wear your iPod on your sleeve as it were, consider the fact that you too can become a statistic on the New York subway.
To think violence on the subway was once a concern. Nowadays, people will tell you, "Sure the subway is safe just leave your music at home with your rings and jewelry."
Posted by rtehrani at 08:10 PM Comments (0) TrackBack (0)

Teltel Traffic Drop is a great site to use to monitor how much traffic sites get.
I noticed recently that Teltel, a company I have written about before in an entry titled: Teltel A Skype Killer? had a huge drop in web traffic from a 3-month average of around 10,000 to a one-day average of 31,381. I didn’t have a chance to ask the company the reason and to be honest it could even be a problem with Alexa causing this drop. Who knows? What I did do was to compare their traffic to Vonage, Skype and Packet8.
One thing I should mention is that service providers who direct callers to their site when taking or making calls will have higher Alexa rankings as they get more traffic. Here is the link to Alexa so you can try it for yourself.Here are the rankings (Lower numbers mean they are closest to the top site in the world).


Alexa Ranking

TelTel 9,998
Vonage 607
Skype 449
Packet8 10,007

I am not aware of any problems with Teltel that would cause the drop but thought it was worth this information.
Posted by rtehrani at 07:30 PM Comments (0) TrackBack (0)


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