IS Trends, the Cliff Notes of Telecommunications news:
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Information Society Trends
Issue number: 92- (28.04.1999 - 12.06.1999)
European Commission, Directorate General XIII, Unit XIII/1 - Analyses and policy planning.
Supervisor: Detlef Eckert. Chief editor: Denis Baresch. Editorial Committee: Maresa Meissl, Christian Micas.
The contents of "IS Trends" are based on publicly available information, in particular news articles and press releases, and do not necessarily reflect the opinion of the European Commission.;EUROPE;Trends: Europe's key news is the defeat of Deutsche Telekom in the battle to purchase Telecom Italia, the two winners being Olivetti and Mannesmann.
MARKET AND COMPANIES;
The German incumbent operator Deutsche Telekom has been dealt a serious blow by the victory of the Italian telecoms group Olivetti in the battle for the take-over of the incumbent Italian telecoms operator Telecom Italia. The take-over bid has also jeopardised Deutsche Telekom's future relation with its French partner, the incumbent operator France Tcom, which reacted angrily to the planned merger, which would have turned the two companies into direct rivals in several European markets. Particularly at stake could be the future of Global One, Deutsche Telekom and France Tcom's global telecoms joint venture with the US long-distance operator Sprint.In addition to Olivetti, another clear winner of the buy-out is Germany's Mannesmann, Deutsche Telekom's main rival in its home market. Indeed, to finance the purchase of Telecom Italia, Olivetti has agreed to sell its shares in the Italian fixed-line and mobile groups Infostrada and Omnitel Pronto Italia to its partner Mannesmann. This would give Mannesmann 100% ownership of Infostrada and a 55% controlling stake in Omnitel alongside the US operators Bell Atlantic and AirTouch.
*****The French communications, building and water giant Vivendi announced that it would take a 17% stake in the leading UK pay-TV group BskyB. The move would bring together Europe's leading pay-TV groups, France's Canal+, a subsidiary of Vivendi, and Britain's BSkyB, which is led by US media mogul Rupert Murdoch.;
LEGISLATION, POLICIES AND COMPETITION;
The European Commission has given its go-ahead to the merger between the leading UK and US mobile communications operators Vodafone and AirTouch Communications. The Commission had identified a competition problem in Germany, where the two companies are present in rival mobile communications joint ventures, E-Plus and D2, but Vodaphone has agreed to sell its stake in E-Plus.
*****The European Commission has cleared an operation by which Mannesmann of Germany and Bell Atlantic of the USA would take joint control of the Italian mobile operator Omnitel Pronto Italia (OPI). The operation is conditional on the successful outcome of the bid of Italy's Olivetti for taking-over the Italian incumbent operator Telecom Italia as this would lead to Olivetti exciting the shareholding of OPI.
*****The European Commission has approved the creation of Cegetel, a telecoms joint venture between France's Vivendi, the UK's BT, Germany's Mannesmann and America's SBC. The operation aims at turning Cegetel, initially a wholly-owned subsidiary of Vivendi, into the second full-service operator in France. As a result, Cegetel will be held 44% by Vivendi, 26% by BT, 15% by Mannesmann and 15% by SBC.
*****The European Commission has approved the US software giant Microsoft's licensing agreements with Internet service providers (ISPs). The Commission said the clearance only covers the agreements between Microsoft and the ISPs and that it had not ruled on the overall behaviour of Microsoft, in particular regarding a possible abuse of dominant position.
*****The European Commission has cleared the creation of Game Channel (GCG), a joint venture set up by Bertelsmann Interactive Studios, a fully-owned subsidiary of the German media giant Bertelsmann, and Viag Interkom, a German telecoms operator jointly owned by Germany's VIAG, Britain's BT and Norway's Telenor. GCG, which will be owned 50-50 by the two partners, will offer paid-for on-line games, downloadable electronic games on the Internet as well as a Web site on electronic games, mainly in the German language.
*****The European Commission has given its green light to the setting up by the German and French media giants Bertelsmann and Havas of BOL France, a joint venture specialised in the on-line sale of French language books.
*****The European Commission said it has decided to conclude its European Union-wide investigation into fixed and mobile operators' interconnection rates following an assessment of the substantial price reductions of more than 80% in some cases which have taken place in response to the investigation. The Commission said it intends to continue scrutinising competitive conditions within an overall enquiry of telecoms on key issues including current roaming conditions between mobile operators.
*****The European Commission has presented an amended proposal for a Directive on copyrights and related rights in the information society which incorporates part of the changes sought by the European Parliament; (www.europa.eu.int/comm/dg15/en/media/infso/index.htm).
*****The Portuguese government said it would privatise a further stake of up to 13.5% of the incumbent telecoms operator Portugal Telecom in July 1999. This would leave public authorities with about 10% of Portugal Telecom.;
NORTH AMERICA;
Trends: US news are topped by the battle between Global Crossing and Qwest for the take-over of US West and by the merger between AT&T and MediaOne.
INTERNET, MULTIMEDIA SERVICES AND PRODUCTS;
Two US start-ups, TiVo and Replay, have launched computer hard disk-based TV recording devices that could complement or challenge both traditional VCRs and emerging recordable DVDs. A key advantage of the technology is the greater flexibility it offers. Unlike streaming video-tape recordings, hard disk recordings allows to watch the beginning of a recording while the recording is continuing, to record several TV programmes at the same time, to pause live TV, etc. Reflecting the commercial potential of the technology, the Dutch electronics giant Philips said it has agreed to make a strategic investment in TiVo. For the time being, hard drive capacity is limited to about 10 hours of DVD-quality video recording for TiVo's Personal TV Receiver and Replay's Replay TV.
MARKET AND COMPANIES;
Global Crossing, a Bermuda-based telecoms company which builds and operates a global high-speed network for voice, data and video traffic, and the US regional telecoms group US West said they have agreed to fully merge into a new company, Global Crossing Corporation (GCC) which they would own 50-50. The merger would include Frontier Corporation, a US local, long-distance and Internet corporate services provider which is in the process of merging with Global Crossing in a $12.5 billion buy-out. The merger would combine Global Crossing's trans-Atlantic, trans-Pacific, trans-American and trans-European networks, Frontier's US-wide, Canadian and UK operations and US West's 25 million US customer basis and DSL network. This would give rise to a new global communications powerhouse with a strong US base offering voice, Web hosting, private virtual network and high-speed Internet services in 185 cities in 19 countries.But the announcement was closely followed by a $55 billion worth hostile bid from US long-distance operator Qwest Communications International to take over both US West and Frontier in separate transactions which would result in the creation of a $87 billion worth company. While Qwest has assets in Europe and Mexico, the Qwest-US West-Frontier merger would be more strongly focused on the US market than GCC. It would expand Qwest's reach into the local loop market in US West's region. As for the integration of Frontier, it would strengthen Qwest's broadband Internet-based data, voice and video communications services for both the corporate and residential markets.
*****;MediaOne, the fourth largest US cable TV operator, said it has accepted a $85 billion worth cash-and-stock merger offer from the US telecoms giant AT&T. As a result of the decision, MediaOne said it had terminated its merger agreement with Comcast, the third largest US cable operator, and paid it a $1.5 billion beak-up fee. The deal would extend the reach of AT&T's cable systems to 26.5 million US homes. It follows the finalisation of AT&T's merger with the leading US cable operator, TCI, which aims to boost both AT&T's presence in the local loop market through cable TV networks, thus bypassing the networks of US regional operators, and its offer of interactive broadband services.In a parallel move, the US software giant Microsoft, which owns 15% of Comcast, said it has agreed to take a 3% stake worth $5 billion in AT&T. AT&T also announced that it would increase the use of Microsoft's Windows CE operating system in digital set-top boxes from 5 million devices to at least 7.5 million and up to 10 million. It would also license Microsoft's client/server software that supports a range of digital services such as e-mail and interactive TV. This is consistent with Microsoft's strategy to take minority stakes in broadband operators to promote its Internet products.
*****The US Internet service provider Prodigy said it has agreed to acquire the US residential Internet subscriber base of the UK telecoms operator Cable and Wireless (C& W). The move, which would be Prodigy's first Internet acquisition, is aimed at enlarging the company's customer base. It would be part of C&W's drive to focus on Internet services for corporate clients. Prodigy is to pay $50 and $75 million in a cash transaction, depending on the total of customers which would be transferred to Prodigy.
*****The British electronics and engineering group General Electric Company (GEC) said it has agreed to spend $4.5 billion on buying the US networking company Fore Systems. Fore would be combined with Marconi Communications, the communications equipment arm of GEC in a move to further strengthen its networking activities and presence in the North American market. The move closely follows the purchase for $2.1 billion of another US networking group, Reltec.
*****The US microprocessor giant Intel said it has agreed to spend $780 million on purchasing Dialogic, a leading provider of computer telephony products. The move is aimed at expanding Intel's server business in the fast-growing networking market.;
LEGISLATION, POLICIES AND COMPETITION;
The 9th US Circuit Court of Appeals has decided to upheld a 1996 lower-court ruling which stated that US government limits on the export of encryption codes is a violation of freedom of expression. In a 2-1 ruling, the appeals court said that encryption codes contain expressions of ideas and cannot be suppressed indefinitely by government. The 6th US Circuit Court of Appeals is preparing to review a similar case.
ASIA AND PACIFIC; MARKET AND COMPANIES;
The UK telecoms operator Cable and Wireless (C&W) has defeated the incumbent Japanese telecoms operator Nippon Telegraph and Telephone (NTT) in the battle for the take-over of the Japanese telecoms operator International Digital Communications (IDC). This would turn C&W into the first foreign operator to take control of a Japanese operator. C&W, which already owns 17.7% of IDC, secured a 53% stake after Japan's Toyota and Itochu , which each own 17.7% of IDC, accepted to sell it their stakes.
*****The incumbent Japanese telecoms operator Nippon Telegraph and Telephone (NTT) said it would buy 15% of the telecoms operator Philippine Long Distance Telephone for about €720 billion. The move would strengthen NTT's assets in Asia, which already includes stakes in Thai Telephone & Telecommunications and Singapore's StarHub. This would allow NTT to deploy a pan-Asian telecoms network.
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