Broadcom Acquires LVL7
November 29, 2006Wireless Telecom Profits Trump Wireline
November 29, 2006Wow! Good datapoint on why telco’s spend wildly on “wireless” infrastructure. Wonder what the trajectory of this looks like?
Wireless Telecom Profits Trump Wireline: “From a new StatCan report on the Canadian telecom industry:
In 2006′s second-quarter wireless industry total profits for the first time exceeded those of conventional wireline telecommunications.‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ Q2 2005 ‘ ‘ ‘ Q2 2006 ‘ ‘ ‘ ‘ ‘ %
Wireline:
Operating profit ‘ ‘ ‘ ’1,112,027 ‘ ‘ ‘ 821,731 ‘ ‘ ‘ ‘ -26.1
Operating margin (%) ‘ ’20.0 ‘ ‘ ‘ ‘ ‘ ‘ ’15.2 ‘ ‘ ‘ ‘ ‘-23.9Wireless:
Operating profit ‘ ‘ ‘ ’734,649 ‘ ‘ ‘ ‘ 996,457 ‘ ‘ ‘ ‘ 35.6
Operating margin (%) ‘ ’27.4 ‘ ‘ ‘ ‘ ‘ 32.0 ‘ ‘ ‘ ‘ ‘ ‘ 16.5
Realtime Parking Data in Santa Monica
November 29, 2006Realtime Parking Data in Santa Monica: “Whoa, I like this: The city of Santa Monica has launched a web-based service displaying realtime parking space availability on a lot-by-lot basis for the shopping district . Link this to vehicle navigation systems and SMS and a whole bunch of downtown congestion would go away as people would stop doing the daily parking derby.
As I have written here (too) many times, the theme for 2007 remains realtime. Trust me on that one.
Dr. Strangelove (Loving Huawei)
November 29, 2006
Or: How I Learned To Stop Worrying and Love Huawei. I know two American engineers who have relocated to China to lead optical module design teams at Chinese equipment companies. They live and’work in China for Chinese companies, using their skills to build custom modules – skills no longer in demand from their American Tier-1 telecom equipment employers.
Huawei and ZTE are more than happy to make use of their knowledge. Unlike most big Optical Equipment suppliers, these Chinese companies have gone counter to the trend of buying off the shelf optical modules. Instead, they continue to homebrew their own optics for the most demanding applications.
Huawei and ZTE understand how to gain a competitive advantage in high end Optical Transport; you cannot outsource a core competency to Bookham (BKHM), Avanex (AVNX), or Opnext (OPXT).
One of the more interesting speakers at the Gilder Conference was John Rutledge – I blogged his talk here. He’wrote a short summary of his impressions of China gleaned from his latest visit. He summarizes the threat China presents to the USA.
The big words in China are entrepreneurship and innovation. …The Chinese government knows they will not be able to continue growth through manufacturing. There is not enough oil, gas, and coal and the air and water quality is terrible. They have decided to grow by investing in IT (fiber optic communications networks) and human capital (education) to increase productivity. Fighting over textiles is yesterday’s war. We should be thinking about where Cisco puts their next R&D facility. China is currently bidding very hard for such operations to relocate to their country.
They may not need to bid, as many readers already know.’Huawei has vaulted to #2 supplier of optical networking hardware in the world with a 9.5% share’without even selling large quantities to tier-1 carriers.
I’ve been negative on Ciena (CIEN) for a long time because I believe their metro transport products are the most vulnerable to overseas commoditization. I believe that the only optical transport equipment companies that will profit and thrive in the long term are those that attempt to develop an internal component edge through R&D, like Infinera, or are big enough to sell an entire platform of products and perform the system integration – like Alcatel (ALA). Huawei is aiming to do both.
Huawei has already taken a dominant position in DSLAMs (#2) and Optical Transport (#2). So,’what’s next?
I think the answer is easy -’Layer 2/3 switching for the Enterprise. Cisco (CSCO) has 70% global market share in this area and’derives at least 50%’of their operating income (my calculations, includes optical module resale) from this business.’Competition has effectively thrown in the towel with the exception of (surprise!) the Huawei / 3Com (COMS) joint venture. Huawei/3Com has secured 35% market share in China and has grown revenue 70% annually since 2004.
Important Footnote: I have expressed reservations about the accuracy of Huawei’s numbers (see Huawei 2005 Revenue).
Full Disclosure: I am short Cisco as a hedge against other positions.
(Via Nyquist Capital.)
Evolution of the Hard Drive
November 29, 2006I’m afraid to read this ’cause its Christmas party season. I’m sure that I’ll end up “straining” someones brain with all these details. Cool Stuff. I did a sneak walk thru. It is as good/bad as I suspected. Trust Andrew@Nyquist to arm me with material my wife will hate at Christmas time
Evolution of the Hard Drive: ”
Toms Hardware Guide published an article‘about the evolution of the hard drive, including benchmarking tests that bolt old hardware (circa 1991) to modern PCs. In the last 15 years, storage density has increased 10,000x!
It’s worth a read, particularly for the graphics and narrative about how hard drive technology has evolved. I thought the graphic showing the evolution of storage from 1960 (the graphic on their website is munged, but the data is there) to today. It’s clear that Magneto-Resistive (MR) technology was a crucial development, as the graph knees right at that point.
The article examines in depth the relationship between storage density and the bandwidth to that storage (known as ’storewidth’) and how the bandwidth has failed to keep pace.
While this fact causes problems for general computing (and why Vista can now use flash memory to accelerate boot times), I believe that latent information (giant databases) and media (access is not random) have been the primary drivers for more storage capacity and are not as sensitive to access speeds.
Anyway, there’s lots of good raw data in the article that will get your wheels turning after a holiday break.
“
(Via Nyquist Capital.)
Squirrels Ate My FiOS
November 29, 2006good fun … High-Tech meets Low-Tech. I like the gloves taped to the fiber line!
It’s not just a catchy title. I lost my FiOS connectivity Saturday morning, rendering my Verizon (VZ) triple-play package of voice, data, and television inoperative. The culprit? Squirrels.
I blogged my original install here. I’ve linked to a few of the original photos in the narrative below.
Voice, Video, and Data were all humming away Saturday morning. I phoned my parents, checked the Best Buy website for LCD pricing, and the kids watched some TV. After late morning family excursion to the park, supermarket, and a failed quest for Estes rocket engines for my son, we returned home to a home not unlike one circa 1900 (Not necessarily a bad thing). Sometime between 9AM and 1PM, we lost optical connectivity.
I went down to the basement, disconnected the’backup battery, and power cycled the Tellabs’(TLAB) ONU terminal. Nothing. Opened the ONU – aha – red lights where there had been none. Not good. Looks like an optical RX failure. Visual inspection of the fiber from where it emerged from the conduit all the way to the pole mounted connecterized service interface showed nothing out of the ordinary. I call Verizon on my cell phone. They run a remote loop test and confirm I’m down. They file a ticket and commit to fix the issue by November 28th (3 Days?!!?!??). It is 2 PM on the 25th.
Nothing happens for 4 hours. Cell phone rings. It’s Verizon. They’re working on the problem. Guy on phone tells me it’s a wide issue and crews are working on the issue now. Hmmm.
10PM Saturday night. Watching Downfall from Netflix (the whole circa 1900 lost it’s appeal quickly) and the doorbell rings. My wife and I jump – who rings your doorbell at 10PM? It’s two Verizon techs and they are walking around my front yard. I explain the buried conduit and show how it’s wired. They want to see my ONU, and I invite them in. They see the lights they expect to see on the ONU and leave.
Movie is over at 11PM. Verizon truck still outside. They’ve got the connecterized splitter inside the truck and are checking it out as I spy through the windows. I leave them alone and go to bed with their’trucks yellow warning light flashing through the bedroom windows as it spins.
Kids wake up at 6AM. Dark outside. Verizon truck still there. At 8AM I decide to offer the guys some coffee and’I'run into’the Verizon guy as I exit… he’s smiling. They found the problem. He walks me 200m down the street and points to a pair of work gloves duct taped to the fiber stretched along the pole.
They had quickly figured out that some of the fibers from the local splitter cabinet had been cut, but only a few. Considering they are all bundled, this was a bit odd. Verizon hooked up a high power laser (Neon/Argon? Man that must be one hell of a laser…) that emitted visible light and visually inspected the fiber looking up from the ground. They did this three times. Nothing. The fourth time they used the bucket truck to look at the fiber from above, and they spotted some small pinholes of light leaking out.
Turns out the fiber had chew marks on it, most likely from a squirrel. The tech had never seen anything like it. They swapped my house onto another fiber drop from the splitter until a crew can come out and replace the entire bundle. The tech duct taped his gloved to the fiber to mark the failure.
Overall, I thought Verizon handled the failure very well. I’m not sure Comcast (CMCSA)’would spend the night troubleshooting their coax for voice issues. There are upsides to the old-school Telco mentality, though as a Verizon shareholder I shudder to think what this repair will cost them overall.
Closing note: my wife asked – did the squirrel get electrocuted?
Author is long Verizon and’Tellabs and holds Comcast puts.
(Via Nyquist Capital.)
X-Series analysis (Hutchison 3G)
November 29, 2006After the YouTube/VZ deal posts … I was a little depressed
X-Series analysis, Nokia’s bit pipe, Sony Ericsson enabling web services & NFC initiatives: ”
Three X-Series
Last week Hutchison 3G held a major launch event for its ‘X-Series‘ initiative, making a clear statement to the industry that it intended to turn away from convential price plans and its previously restrictive policies of limiting internet access. Instead, Hutchison will embrace an open access model across its Three networks, allowing users to pay a flat fee for accessing web services and removing the ‘garden walls’ which have prevented subscribers from visiting web pages outside the operator portal.
While certain operators around the world have already been flirting with a similar model – T-Mobile with its Web ‘N’ Walk, for instance – Hutchison has scored a marketing coup by trumpeting its plans as a key strategy change. As a ‘greenfield’ operator with no legacy business to canabalise and a network rich in capacity, it can afford to embrace a new approach to pricing and service delivery without the same fear of investor backlash that constrains the likes of Vodafone, Orange and other operators who have large institutional shareholders.
More importantly, it has also lined up a dream team of partners to deliver popular web services for the X-Series: Yahoo, Google, Microsoft, eBay, Skype, Sling Media, Orb Networks, Nokia and Sony Ericsson. To quote Three, the X-Series represents: ‘TV, home PC and all the best of the web on your mobile.’
It is no small feat for Hutchison to have brought all of these partners, often competitors in their own fields, to the same table. This has been achieved because Three has worked closely with them to ensure they can provide a user experience which is integrated with their existing businesses, familiar to users and priced sensibly – i.e. flat fees for unlimited monthly usage.
While many operators in the mobile industry are still relying on the size of their customer bases and their ownership of the billing relationship to ensure long-term growth in data services, Three has woken up to the uncomfortable truth: it doesn’t matter how many voice and text customers you’ve got if you’re not capable of marketing new services to them. Companies like Google and Skype have active networks of passionate subscribers who rely on their data services. As such, they are an incredibly powerful ally in building a mobile data business. Quite simply, customers are more likely to want to mobilise their existing services than commit to new offerings from an operator they associate with voice calls.
The result will be two-fold: Three’s approach will attract the savvy, active data users who are keen to extend their digital lifestyle applications into the mobile envirionment. In doing so, it will be able to leverage network effects to cross-sell additional services to these customers and increase basic communications usage. Secondly, Hutchison will potentially change the dynamics of its revenue stream. Voice and text will become true commodities and the flat-rate subscription pricing for data services will allow it to break the ‘25 percent’ ceiling which seems to cap data as a proportion of revenue for most other operators.
It was interesting to see Hutchison taking this approach just a couple of weeks after my article entitled ‘Why value is slipping away from the operators‘. I have since had private conversations with several major European carriers who are looking closely at their long-term role in the industry and how they can profitably evolve from service provider to service enabler. This will be a major theme at our next MEX conference in May 2007 – now is the time to get in touch if you’d like to be involved in the debate.
I truncated here…. Go to original for remaining part of post on Nokia and Sony Ericsson products
YouTube & Verizon V-Cast Articles
November 29, 2006Here are the links to the NY Times article on YouTube & Verizon and some commentary. My favorite commentary is Om Malik’s Walled Garden, Not Going Away. It’s like a shot in the gut for me 
I keep searching for the slippery slope of wireless internet to begin its change to look like the horizontal wireline internet. But this deal shows that horizontal wireless may be far far far far away. Wireless operators are protecting their “network hardware” investment very well.
Hmmmmm…..
Also, I just can’t imagine spending $15/month for this. But Kedrosky had a post a few months ago with some data indicating that most “new” wireless services were subscribed to by teens & university students whose parents paid. So it has a market … sooooo Lame.
- YouTube Coming Soon to Cellphones – NY Times – Matt Richtel
- Lame (A VC)
- Better Options than Verizon-YouTube Lite (giga om)
- My favorite
Walled Garden, Not Going Away – GigaOmFred Wilson’s assessment of the YouTube-Verizon Wireless deal is spot on. The limited amount of YouTube inventory over Verizon wireless network and devices, “violates the entire ethos of YouTube, not free, not open, exclusive, no community, limited, censorship, etc, etc.” The likelihood of such a deal has been talked about for a while.
Despite Verizon network’s superior quality, I refuse to subscribe to them, because their (deck) interface, regardless of the phone, is the mobile equivalent of Chinese water torture.
The thought that Verizon would decide what YouTube video gets shown on the mobile makes me shudder. (For better options, we have some recommendations for you, which are more fun, to say the least.)
Steve and Chad need to answer one more question: Verizon is making money from the network; YouTube is likely profiting from this deal, but are they sharing the goodies with folks whose videos will end up on Verizon handsets?The agreement shows that the wireless carriers will continue to maintain an iron-fist like control over their networks; showing the cunning of a Night Club bouncer, deciding when and who is allowed to cross the velvet rope. When a brand as big as YouTube has to fall on its knees and play ball with Verizon (on carrier’s terms), what chance do others have?
Frankly, that is not going to change. The utopians are looking at 3 X-Series as a sign of a revolution, though in the end it might be a simple mutiny by a company, whose financial quandary might have something to do with its decision to break ranks with the global mobile oligopoly.
The Silicon Valley folks have complained bitterly about this exclusive strategy. “I think it’s inevitably just a matter of time before general IP and open protocols get to mobile phones,” Reid Hoffman, CEO of LinkedIn said at a recent event at Oxford University’s Said Business School. “I think a lot of people in Silicon Valley are agitating to work out ‘how do we take the dam down faster?’”
Others like Matt Cohler of Facebook and Chris Sacca of Google expressed similar frustration, but complain as they may, in the wireless world their network neutrality, open network argument is not going to fly. Given the billions of dollars they spent on spectrum, and building those networks, carriers want to milk their profit machine as much as they can.
The walled garden will remain just that – albeit with heavily barred windows.
[GigaOM]
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Posted by Iain Verigin
Social Media is not Mass Media
November 29, 2006
- This is fairly “dense” point on the future of online advertising.
- The take-away for network hardware vendors is that will be a significant source of cash to pay for non-telco style networks
- Focussing solely on telco-style hardware could mean missing out on this future gravy train.
Social Media is not Mass Media: ”
Following our piece yesterday about the continued growth of online advertising, let me add to Om’s practical perspective with my own take on where I believe the opportunity lies for those who are set on capturing some of those future ad dollars. What I’m about to say should be very obvious to most by now, but I believe it bears repeating.
Putting aside the issue of whether or not online ad spending will consistently grow unabated for the next 20 years, it’s safe to say that the total pie will be much bigger 10 to 20 years from now. That said, I firmly believe it is equally reasonable to assume that a big chunk, if not a majority, of future ad spending will go into online ad models & formats that do not yet exist. The big reason for this, in my mind, is due to the emergence of social media… and the fact that social media is not mass media.
As I have already written much about, social media is a new medium in its own right. As such, successful commercial exploitation of this new medium requires the development of new business/advertising models. This has been true for every other new medium that has been adopted at large scale throughout history. Yet, unlike mass media before it, social media introduces the very unique element of the previously passive audience becoming both producers and distributors of media. From a marketing perspective, this means that the people themselves will necessarily have to become an integral part of the brand communication strategies and processes.
Now, couple what I just mentioned with the prospect that the majority of future ad spending growth will come from traditional brand advertisers that, up until now, dominated traditional media budgets (e.g. TV & cable, radio, newspapers & magazines, etc.). But here’s the real quandary… while it’s easy to reallocate budgets, these brand advertisers face a problem because they cannot simply transport their traditional ad models (optimized for mass media) to the new world of social media. Further exacerbating the problem is the fact that even today’s dominant interactive ad platforms, like Google’s highly efficient AdWords/AdSense system, or Yahoo’s display ads, do not extend naturally into the social media space.
What this all boils down to is a growing and substantial market need for new ad models and platforms. Granted, there’s a good chance that the dominant players of today, like Google and Yahoo, will end up being the ones to develop the new models. But I’m an optimist, in the entrepreneurial sense… I believe it’s far more likely that new players will develop such innovative platforms. After all, 5 years ago, Google wasn’t even a player in online advertising.
Put another way… 10 years from now, my bet is that a substantial and material share of the huge online advertising pie will be captured by players we do not know of today. The real challenge, as famed author and management guru Geoffrey Moore points out, is to develop marketing solutions that are highly scalable for social media. I agree, and I also agree that such solutions are not in the marketplace today. But while Moore doubts there will ever be scalable solutions for social media, I on the other hand believe it’s a problem that actually has several fundamental solutions… many of which will start coming to market in 2007.
(Via GigaOM.)
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Posted by Iain Verigin
Wireless Telco Markets – Wow!
November 30, 2006I’m reading Inder Singh’s, Prudential, report on Ericsson’s Analyst Day in Tokyo and it strikes me that I’ve become desensitized to the numbers. The numbers are just so absolutely huge. I’ve heard all of this somewhere before, but …. it bears repeating