A Week In Wireless No. 85
Telecoms.com - Europe
24-JAN-2003
As any cattle rustler back in the Old West would have been able to tell you, The Regulators were gangs of tough, no-nonsense characters who, on an otherwise wild frontier, took it upon themselves to maintain law and order. They would police given areas dispensing swift justice when the need arose. Their aim, to safeguard the interests of ordinary, hard-working folk, was noble enough, although in the eyes of certain men of business they would sometimes act heavy- handedly and impose disproportionate penalties for relatively minor crimes.
This all seemed bizarrely relevant this week, as the UK telecoms regulator Oftel and the Competition Commission, having acted, as they saw it, in the public interest, found themselves labelled "a bunch of cowboys" by various sections of the industry. It all began a year ago when Oftel referred the matter of reducing call termination charges to the Commission; their final report, published this week, agreed with Oftel that the charges were excessive and needed to fall - a lot. By 46% over four years to be precise. The UK's four operators were predictably outraged and so, as the regulatory posse closed in, they circled wagons and launched a vigorous defence. Up to 25% of their revenues come from termination charges, after all, and they were not about to give that up without a fight.
"The report is fundamentally flawed," fumed the CEO of Vodafone UK, Gavin 'The Kid' Darby. "This is harsher regulation on top of increased competition." But Oftel director-general David 'Buckshot' Edmonds was having none of it. "Each operator effectively has a monopoly with its own network," he insisted, hefting the new report like a '76 Winchester. And he seemed to have a point. Termination charges currently cost the consumer 10p a minute, and yet calling from a fixed line or another mobile network can cost as much as 50p a minute. "But mobile operators need that money!" industry watchers cried out. "This isn't like fixed-line operating, there are things like handset subsidies and 3G roll-outs to consider." Indeed, the regulator seemed to have scored something of an own goal as operators threatened to increase their customers' bills to make up the shortfall. Vodafone has already decided to seek a judicial review of the Commission's ruling - the other three operators signalled similar intentions - and it might well turn out better for consumers and operators alike if they win their case. Even neutrals questioned the good sense of imposing such stringent regulation at a time when a struggling industry was only just starting to foster the first sparks of recovery.
So as operators and regulator descended into the UK Corral for what threatened to be a bloody showdown, some people wondered whether things couldn't have been handled in a more civilised fashion - by thrashing things out over a nice glass of sarsaparilla, say. Alternatively, the UK operators could have adopted the kind of bargaining tactics allegedly employed in a (vaguely scandalous) case that broke this week surrounding Nancy Victory, director of the US National Telecommunications Industry Administration, and a party that she hosted last October. Not that there was anything wrong with the party (a good time was had by all apparently). The problem was that the event had been paid for by SBC, Cingular and Motorola, all of whom appeared to have benefited from Victory's subsequent recommendation to the FCC that it scrap its limitations on spectrum ownership. Had there been a conflict of interest? some wondered. Victory's supporters ridiculed the idea. The party had only cost $480, they pointed out, and it would be downright disgraceful to sell out for anything less than ten times that.
The Taiwanese government, meanwhile, had regulatory problems of its own. As part of ongoing plans to privatise former state monopoly Chunghwa Telecom, the government expects to have sold half of Chunghwa's shares to private investors by the end of this year. However, having successfully sold off an initial 13.5% of the operator at the end of 2002, the government was concerned to discover that Taiwan Cellular, Chunghwa's main rival, had been a leading member of the successful consortium. This was not illegal, although the government realised, on reflection, that it probably should have been. Moves are therefore now afoot to prevent competitors - and Taiwan Cellular specifically - from owning Chunghwa stakes above a certain size and, presumably, being tempted to run the rival operator into the ground.
And there was yet more legal controversy, this time in Portugal. Oniway, 3G operator that never was, was formally dissolved this week, its 3G licence revoked and its spectrum farmed out to the country's other three UMTS licensees. All this went on without the blessing of minority shareholder Telenor, of course, which this week led to the Norwegian operator launching a legal action against ONI, which controlled Oniway. It was all a little bit late in one sense, but Telenor was understandably upset at having had no say whatsoever when it came to the closure of a business in which it had invested millions.
The Portuguese 3G pessimism was, thankfully, not reflected elsewhere this week. Hutchison expressed confidence that its Swedish operation could achieve ROI in five years, adding that the network would launch - and we believe them - in the spring. The French government, meanwhile, was reportedly preparing to legalise the resale of 3G spectrum to allow operator consolidation should it become necessary. However, with just three 3G operators, France is perhaps one of the few European markets that doesn't really need consolidation, and indeed one of the three, Bouygues, described the move as "neither desirable nor necessary". Hard-pressed German operators certainly looked on enviously.
The best indication of the industry's state of health, though, came from the spate of quarterly results that were released this week. Principal bellwether Nokia beat its Q4 targets but sounded disappointingly timid about the prospects for the coming quarter, with CEO Jorma Ollila pointing philosophically to the "uncertain world" in which we live. Motorola also exceeded Q4 expectations, with handset sales proving brisk and rising 27%. On the year ahead, Motorola CEO Chris Galvin sounded a little more confident than his counterpart at Nokia, promising at least to deliver "modest sales growth". Lucent remains some way behind Motorola in its bid to return to the black, but there was some evidence that it was finally getting there. Q4 losses still stood at $264m, but that compared favourably with the $423m lost in Q4 2001. Breakeven before the end of 2003 remains the ambition.
The star performer, not for the first time, was Qualcomm. While 3G only seems to keep costing everyone else money, it appeared for Qualcomm to be nothing short of a licence to print more of it. Sales of chips and licences for CDMA2000 leaped 83% in Q4, the San Diego-based firm reported, helping to drive revenues up to $1.1bn from $637m only a year ago. And the growing demand for CDMA in Asia is only expected to bolster Qualcomm's solid position still further.
In the modern US, of course, much as in the wilds of the 19th century West, maintaining law and order remains a top priority. Except that where they used to have gangs of Regulators, they now have Motorola to keep the streets clear of undesirables. Mississippi this week became the second US state to sign up for Motorola's 'Offendertrak' solution, a fully automated system that will manage and supervise the state's 40,000 or so prisoners and parolees. The technology is obviously too cutting-edge to have made it over to the UK so far, although the UK's mobile operators have expressed interest in the possibility of adapting it to automate the country's regulatory process.
The Informer
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Winners and Losers
24-JAN-2003
Winners of the week are NEC, Fujitsu and Matsushita, who are to have half of their 3G handset development costs shouldered by NTT DoCoMo. The operator has had some high profile problems with WCDMA handsets, and the lack thereof, and has clearly decided that the hard cash is the best preventative medicine available. Of course it may have its sights set on a portion of the IPR that the programme may generate. On the downside for the vendors, however, the pressure to deliver both quantity and quality within deadlines can only increase from here on in.
Throwing good money after bad this week...
WCDMA flag-wavers on the news that the technology's Korean outpost, KT, looks likely to postpone its UMTS roll-out. Particularly galling in a country where advanced CDMA-based systems have been making such headway.
Organisers of the ITU Telecom show coming up in the Autumn. In past years it has been an orgy of spending; a trend which is set to end abruptly this year. The Informer saw the (very long) cancellation lists this week and it's starting to look like you'll be able to throw a handful of gravel at the show, without hitting any exhibitors. High-profile deserters include Qualcomm, Fujitsu and SchlumbergerSema.
Cingular, which has reported its second sequential customer losses, for the final quarter of 2002. Having lost 107,000 customers in Q3, Cingular waved off 121,000 users in the run-up to Christmas. Bad news for Cingular top man Stan Stigman who replaced Stephen Carter (who left following the first loss) with the stated intention of stemming the exodus.
While taking the wife out for a steak dinner...
Canadian firm Research In Motion, which has struck a deal with carrier Telus Mobility which will see RIM's enterprise solutions offered to Telus's 1X customers.
Hong Kong operator Peoples Phone, which has just reported its first annual profit since launch in 1997. The company posted after tax earnings of HK$268m
Wireless software outfit Symbian, which has signed up another partner, BenQ, a Taiwanese white-box manufacturer that distributes brandable handsets, principally into China.
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SPOTLIGHT
24-JAN-2003
WLAN and Mobile get cozy
It's every wireless techie's dream; seamless connectivity between different access networks, local area meets wide area; high bandwidth greets low bandwidth. Everyone gets on famously and the lucky end user reaps the benefits. He can use the same services and applications anytime, anywhere and at any speed without having to reboot, reinitiate, reconfigure, or remortgage. One device, or perhaps two, will be enough to roam across networks and best of all - this is an ideal scenario remember - our road warrior, propellerhead, lonely single white male, or whoever will be able to get all of this connectivity on one, easy to digest, bill.
One day. Well, that day is inching ever closer as Wireless LAN enters the mainstream - the US Congress has caught the scent (of money, presumably), several initiatives pending to increase the spectrum available for unlicensed wireless usage. Big names have thrown their weight behind WLAN and cellular interconnectivity. The technology hurdles are being overcome. Last year, Lucent demonstrated handoff between a UMTS network and 802.11 and Nortel announced a GSM/CDMA and WLAN solution that provides for consolidated billing, authentication, security and access to the same IP data services.
More recently, Swiss company TOGEWAnet has touted its SIM-based GSM/WLAN roaming solution, which promises the same authentication, security and billing as mobile phone services. And Motorola, Avaya and Proxim have jointly said that they want to take convergence a step further and integrate WLAN, mobile and IP telephony. The companies promise a dual-mode WLAN/cellular phone from Motorola, SIP-enabled IP Telephony software from Avaya, and voice- enabled WLAN infrastructure from Proxim. The latter two are expected to be available "early in 2003" with joint trials of all the products in the second half of the year.
Seamless linkage between public and private WLAN, public cellular, and corporate IP networks with VPNs sounds like a configuration and security nightmare. One that will eventually be solved, but whether it will be user-friendly and cost-efficient is the real question. Battery life on the handsets will be key, and the eventual billing structure is a potential minefield. What happens if you have a session shared between multiple operators or providers? How is it split?
From the cellular operators' point of view, such a seamless solution will potentially mean loss of voice revenues as users, especially corporate users, choose cheap VoIP to make calls. Convergence is not inevitable. Many still see WLAN and cellular as competitor access technologies. Corporate users worldwide are flocking to WLAN, and most laptop computers now come with WLAN capability. Why shouldn't they start using it for voice? Sharp is using NTT DoCoMo's WLAN hotspots for an IP-based voice service on PDAs.
As for the end user, what happens to his experience, and his bill, when he switches networks? The obvious issue is whether users will be notified when they roam onto the more expensive cellular networks, and whether they will be given a choice. Beware false technology prophets, warn the doubters on the commercial side of the fence. Ewan Sutherland, executive director of the International Telecommunications Users Group, is scathing about the benefits of WLAN to cellular roaming. "That's very clever, but I hope it has a big flashing light which says, 'You've just come off high-bandwidth cheap to low-bandwidth hideously expensive.' Technically I'm sure it can be done. Economically it is insane." |
