The launch is also important in that it reflects two trends that we see currently playing out in the UK market. The first is the rise of ethnic MVNOs that target a specific community; this is in contrast to the more generalist players that have traditionally dominated the ethnic segment, Lebara Mobile and LycaMobile. Although Lyca and Lebara have been able to use their multi-country, multi-operator strategies to keep prices low, players like CTExcelbiz are able to offer services specific to their target markets, such as customer service in the user’s native language.

This is particularly important in a country like the UK, which has a large and diverse population, with a great many separate ethnic groups that may need different services from their mobile provider. In the case of CTExcelbiz, Chinese-language voicemail and customer service are essential for tourists who may not know English or know which SIM to buy to call home.

The other trend the launch of CTExcelbiz reflects is that of foreign operators setting up MVNOs in the UK to target their fellow citizens living abroad. This gives foreign telcos a way to reconnect with expatriates and give them a cheaper way of staying in contact with relatives back home. A notable example is in Germany, where Turk Telecom and Turkcell have both set up MVNOs catering to Germany’s large Turkish community, while Vodafone offers discounted rates on prepaid calls to its Turkish network (this is not limited to mobile operators, of course, as German-based fans of Turkish football club Fenerbahce can make calls on the Fenercell network). In the UK Vizz Mobile has signed agreements with Sri Lankan operator Dialog and Afghan operator Roshan to target those communities.

We expect this trend to continue, as immigration, tourism and student or business travel increase. It gives travellers the chance to pick up a local SIM that they can use for the duration of their stay, and lets the existing UK MNOs get traffic from customers they would normally not have access to. Call it part of the move toward globalization: a patchwork of MVNOs reflecting the UK’s cultural mix.

The rules laid out in Regulation III contain provisions for strict pricing cuts with additional reductions being implemented on a 12 month rolling basis until at least 2014. Enforced cuts can be kept active until 2022 if it is felt that it is required. Effectively prices will be slashed by 46 per cent for voice and data roaming services will be cut from averages of around $4 to just $0.26 per MB by 2014 while competitors will be allowed to compete in roaming markets previously reserved for operators alone.  That is should they be interested in doing so. Anecdotal evidence shows there has been little interest in the opportunities roaming offers to such players; thus far only one MVNO (Lebaro Mobile) has expressed any interest directly to the EU. No doubt other players will express an interest as the market matures and opportunities become clearer but at this point commitment from MVNOs is thin on the ground.

From the operator perspective with a voice or data bundle the per min/MB charge can be kept within the boundary of regulated price cap while room is left for potential profit. The larger the bundle offered the lower the per minute/MB charge if the bundle is completely used. However, the larger the bundle the lower the likelihood a roamer will be able to fully use the bundle.

Another important point to remember is that price caps must be offered as a Euro-tariff but it is not compulsory to offer the Euro-tariff alone; other packages and tariff offerings are sanctioned. Analysis undertaken for our latest roaming research (http://www.ic.informatm.com/spreadsheets/show/121329)  demonstrates that pricing options vary with the picture for average prices in the region differing from what one would expect in a price capped market.

Figure 1: Selected bundled Roaming offerings average durations

Source Informa Telecoms and Media

Figure 1 shows the strong prevalence for long bundle lengths despite the average length of a roaming trip being four days for a consumer and three days for an enterprise user (frequency of calls varies between these segments).

Figure 2: Regional Cost per MB bundled and unbundled data roaming plans – Average 1MB cost

Copyright Informa Telecoms and Media – 2012

In figure 2 the relative cost of 1 MB of data is compared between bundled and unbundled offerings using OECD averages and Informa bundled data roaming tariff research.

The correlation shown here between the size of the discount and the  bundle compared to unbundled offerings is substantial and adds support to the claim operators are relying on roaming bundling as a mechanism to fulfil roaming price caps.

Looking at the regional variations in bundled and unbundled pricing the greatest differential is seen in the Asia Pacific region. This is due to the competitive nature in this market that see’s large data bundles offered to attract customers. The substantial differential seen in Europe is most likely an illustration of the strategy operators are using to counteract pricing regulation – encouraging bundle take-up.

The conclusion one can draw from all this is that we are heading for a future defined by roaming bundles, at least in heavily regulated markets like Western Europe.  What  regulators will have to say about this, if anything, remains to be seen.

African Undersea Cables: Steve Song, Many Possibilities

Africa is my destination this week. I’m on a mission that’s both personal and professional.

Officially, I’m here to work with clients, catch up with our growing regional team and speak at Informa’s inaugural Cloud Africa Summit.

Unofficially, I hope to prove myself wrong about the déjà vu that I feel about aspects of Africa’s ICT market.

The IMF just said that sub-Saharan Africa is beginning to stand on its own feet, pointing to its sustained and major progress since the millennium.

Not least, financier George Soros recently described Africa as ‘one of the few bright spots on the gloomy global economic horizon.’ (And having met and worked for Mr. Soros, I warrant that he pulls no punches.)

Great leaps forward?
Meanwhile, progress in ICT – which is intimately linked to economic health – rarely traces a smooth curve. Take the international Internet bandwidth spike from new African submarine cables.

Lighting the long-awaited EASSy cable gave countries like Kenya 10 times more capacity overnight. And only two weeks ago, the 5.1Tbps WACS cable landed in South Africa to great fanfare. More cables are to come.

Africa’s outrageous international bandwidth prices are well under attack. But let’s hope that’s not the whole story.

Plus ça change
As a veteran of Europe’s bandwidth bloodbath, this all seems eerily familiar. My concern: A race to the bottom in international (wholesale) bandwidth pricing, and poor attention on fundamentals. What do I mean by fundamentals? I mean the critical need to close the loop by providing local and personal on-ramps to digital superhighways and clouds.

A rough calculation suggests that Kenya’s international internet bandwidth exhibited a 140% CAGR between 2005 and 2010. Yet personal access still equates to only 2,378bps per capita, according ITU figures for 2010. And Kenya is better off than most on some metrics: Smartphone penetration of mobile handsets is 14% versus South Africa’s 22% and Uganda’s 2%, per Informa estimates.

A delicate ecosystem
In 2003, I co-authored a major market study of the South African telecom market for the South African Department of Communications. My specific remit was to evaluate enterprise and wholesale services, size the market and detail its prospects and impediments.

In some ways, nothing has changed: Being a successful digital society still means keeping a delicate ecosystem in balance. That ecosystem includes many elements – and it’s not just submarine cables. Terrestrial fiber, spectrum, Internet exchange points and datacenters are among the telecom assets also required. But that is certainly not all. Affordable devices, ICT literacy and investment, rule of law and many other factors are highly relevant.

Enter the Cloud
With some irony, I reread these nine-year-old words:

Many [telecom operators] are exploring expansion into the IT services space as a way to increase wallet share with business customers.

Hosted IP telephony can help businesses increase their productivity by virtually eliminating the boundaries of the workplace [and] will become the foundation on which all other services will be built.

Indeed! And as Informa’s Telecom Cloud Monitor indicates, African operators like MTN, Safaricom and Vodacom are among those taking action. The cloud’s operational model offers extraordinary new opportunities.

But let’s be very clear: Every new kilometer of sub-sea cable and square meter of server space is only part of what Africa’s ecosystem needs to become truly digital.

For the moment, however, Dutch customers wanting faster mobile broadband are likely to be disappointed. Not only are most of the tariffs for business customers only, but the coverage, for now, is extremely limited – Ziggo’s offering is only available in three cities, KPN’s in five, and Vodafone’s LTE offering is currently limited to the city of Eindhoven.

In fairness, the first requirement was that each network must cover 80 square kilometres by the beginning of May, which they all appear to have met. But on closer inspection they don’t all seem to be the best deal.

For example, to get LTE from Ziggo, one must already be on the operator’s Internet Plus cable broadband subscription; again, fair enough, except that Ziggo isn’t providing the equipment itself. Users who want the tariff have to find their own 4G-compatible smartphone, dongle or tablet somewhere – probably Germany (it turns out Amazon.de delivers to the Netherlands and Belgium).

KPN, by contrast, does sell 4G dongles and SIM cards through its online shop. However, the service costs €67.50 per month, or €17.50 more than KPN’s top mobile broadband bundle, and users get a monthly data allowance of 8GB. Compare that with the 40GB per month that Telia Sweden offers consumers, for around €45. Or, closer to home, the 10GB that Vodafone is offering for €50 per month (with €180 charge for the modem and €10 one-off activation fee).

Of course, it isn’t completely fair to compare these initial offerings with those in countries, like Sweden, that have had LTE networks for a year or more. Sweden is a special case in that the existing 3G network infrastructure is so strong that the operators initially had trouble convincing consumers to take on 4G. By contrast most Dutch operators haven’t even introduced HSPA+ yet; KPN’s tactic seems to be to offload power users onto wi-fi networks. This isn’t a tactic that will hold up well, as customers demand more bandwidth to surf the web, stream videos, and generally do all the things their new smartphones and tablets are promising.

The sideshow ahead of the main event

The Dutch operators may have rolled out some 4G service in limited areas to satisfy the coverage requirements, but what they’re waiting for is the spectrum auction scheduled for later this year, which will dispose of the 800MHz, 900MHz and 1800MHz bands. Given that the regulator, OPTA, has reserved a certain amount of spectrum in the 800MHz and 900MHz bands for new entrants, and the entire 800MHz band is up for grabs, no operator will want to make any big LTE plans until they know what they have. As a result, it’s unlikely that Dutch consumers will see a nationwide network before 2014.

In the meantime, we’re getting a preview of how the market is likely to look after the auction: while the likes of KPN and Ziggo target business customers, Tele2 is taking the more disruptive route and offering LTE to consumers, at the lower price point of €30 for 3GB of data per month. If Tele2 does win sufficient spectrum in the fall, this is likely to give it a head start in rolling out LTE nationwide.

The Mechanics Magazine, 1829

Back in the early 19th century, the public debut of George Stephenson’s Rocket steam engine was a harbinger of the Age of Steam, which applied the technologies of the industrial revolution to transport with great success. Funded by eager speculators, railway infrastructure soon expanded across the world and eventually usurped canals as the main form of transportation.

Such technology-driven revolutions have occurred at surprisingly regular intervals in the last 250 years, according to economic historians. Steam, steel, electricity, mass production – all had dramatic impacts on world economies. Could smart cities be the next inflection point?

Smart city technology is live and effective in numerous flagship projects and in new-build showcases, such as Songdo in South Korea and Masdar in the United Arab Emirates. Yet history shows that mainstream technology adoption is always hostage to external factors, not least the availability of finance and readiness of institutions and people to adopt new ways of doing things.

So how did technologies of the past win political and public support, given that they, like smart cities, required a comprehensive overhaul of established institutions and processes?

More than a decade ago, Venezuelan economist Carlotta Perez drew attention to a simple but vivid pattern in the complex co-evolution of technological change and economic development ( Technological revolutions and financial capital, Perez, C (2002), Edward Elgar Publishing). Every 50 years or so, since about 1770, a new technological revolution has taken hold.

Perez associates a ‘big bang’ with each revolutionary epoch. This is the crucial point when emerging clusters of innovation come together to produce a highly visible new product or event – for instance, the Rocket’s victory in the Rainhill speed trials in 1829. This immediately captures the attention of pioneers in finance and technology, attracted by the growth opportunity in cheaper, more efficient products.

A frenzied period of boom and bust results, accompanied by repeated challenges to existing institutions and ways of working. Eventually – and not without job losses and financial bloodshed – the new technology displaces the previously dominant technology, which by now is recognized as inefficient and costly.

This process of socio-institutional change lags technological breakthroughs by as much as 20-30 years. Hence, the overall 50-year cycle. Perez identifies Intel’s microprocessor as the most recent ‘big bang’ event. If the model proves to be predictive as well as historical, the next is due around 2020.

The next big bang

Will the next revolution come from smart cities, or bio-tech, or some other collection of technological enablers waiting in the wings?

Informa’s view is that truly revolutionary impact will come from closed loop control, when human oversight and intervention is minimal and machine communications really is ‘machine to machine’. Systems can then respond in real time and continually learn and optimize. In contrast today, even so-called intelligent transport systems are rarely out of direct control of human operators.

The challenge will be to make the benefits of closed-loop control visible in some way to investors and the public. Like the Rocket belching smoke and noise on its maiden voyage at 24mph, smart cities need to inspire the popular imagination.

RIM's QNX platform is used on 60 per cent of cars on the road

There are great opportunities in the Machine to Machine sector, largely due to the sheer volume of devices expected to be connected to the Internet of Things. The Telematics market is the longest-standing and most mature part of the M2M industry and has been a test bed for the design of more robust, reliable and longer-lasting components.

The fact that Google has just acquired the first-ever self-driving car licence should come as no surprise. Yet a surprise participant that could make a huge impact on the market is Canadian Blackberry maker RIM, which could see its software development offset poor performance in the handset and tablet space.

RIM’s QNX platform is used in 60 per cent of cars currently on the road, the firm revealed at its BlackBerry World event earlier this month, and according to Jamie Moss, senior analyst at Informa Telecoms and Media, the firm already has the expertise required to develop a strong offering for the connected car market.

“Many people look at operating systems such as iOS think of it as being far too closed so it will never move beyond Apple’s own products and with Android the concern is that it’s far too open, and it’s a bit too “fuzzy” to use in specific deployments – it is best as a general purpose operating system for phones or tablets,” he explains.

“But RIM has the experience that is required to develop something for such a specific type of industry and such a specific type of product.”

RIM’s role in the automobile space is not a well known one. Operating on a white label basis, the in-car computers are often not branded as RIM or Blackberry, but the QNX operating system is what the head unit in the majority of cars run on.

“Drivers don’t know they’re driving a RIM device – QNX would have been commissioned by the individual car manufacturers for RIM to produce a version of the operating system that conformed to their particular requirements and allows the particular services that they wish to offer,” explains Moss. “It usually ends up being branded by the actual company vending to the consumer – so, typically the automobile OEM. They’d be oblivious to the fact that it’s QNX, let alone that RIM now owns QNX.”

At CES this year, Mike Lazaridis said in what turned out to be his last keynote to analysts as RIM’s co-CEO that software development is the key for the firm. The BlackBerry maker has a built a huge hardware portfolio, but the margins on the hardware side have been suffering, while margins on the software side are very good, even if the software side accounts for a lower proportion of overall revenue.

Operators too have not fully exploited the opportunities presented in the in-car market. Three’s CFO Richard Woodward told Telecoms.com that a negligible amount of revenue comes from M2M, but he expects it to grow in the future to a significant proportion.

Despite the negligible revenues operators are currently seeing from M2M, they believe that M2M services will generate five per cent or more of their revenues by 2015, according to the recent Informa-SAP M2M Communications survey, which drew input from more than 260 M2M stakeholders in 50 countries.

Given the strong ties that exist between mobile operators and RIM, it is quite plausible that RIM could recover from the torrid time it has of late by making a comeback in the car space.

While it’s difficult to gauge how much competition the new structural changes will bring to the market, what’s certain is that operators will have to innovate much more than in the past to try and increase the amount their subscribers use their mobiles while travelling in the EU, and also to ensure they don’t churn to rivals for roaming services.

The problem for operators is not that they haven’t innovated at all on roaming tariffs, it’s that they haven’t innovated enough. There have been relatively bold moves by operators to both reduce the amount they charge for roaming services and to innovate on how they price them. Each of the major pan-European operators have reduced some of their roaming prices below the regulated rates in recent years, and some, such as Orange, have introduced innovative applications that allow users to monitor their usage while abroad – a move designed to increase transparency on roaming behaviour to encourage greater use. Most recently (a day after the European Parliament vote), Telefonica announced that all its European subscribers will be able to use 25MB of data while roaming in the EU for as little as €2 a day – significantly less than the new initial €0.70/ MB regulated price.

What’s now clear is that operators need to be more bold and creative in the way they approach roaming. They need to build on the steps they have already taken and price services more compellingly and in new user-friendly ways to stimulate usage to offset reductions in prices. While hard facts on the elasticity of roaming are sketchy and to a degree inconsistent, there is nonetheless sufficient evidence to suggest that reducing prices in the right ways and effectively communicating these reductions does lead to an increase in roaming usage.

It’s sometimes the case that operators’ roaming departments innovate on pricing and tariff structures but organisational impediments prevent these innovations from being put into practice. Where this is the case operators need to remove these barriers to allow innovation on roaming tariffs to take effect – for the simple reason that revenues are now more than ever at stake.

Operators now face a choice – either price roaming services at or just below the new regulated rates, or, like Telefonica today, take bold steps to align their pricing with consumers’ expectations. Operators have for too long held on to the view that roaming is a premium service and so should be priced accordingly. They have lost this battle. New roaming service providers will come to the market as a result of the structural changes – and they will price services significantly below the new regulated ceiling and in new user-friendly ways. It’s time for operators to move forward with compelling and innovative roaming tariffs and applications – before rivals seize their opportunity and do it for them.

Both of these services are accessible to anyone who has a compatible smartphone (iOS for TU Me, with Android on its way, and iOS, Android and RIM for the mobile wallet). As such they represent Telefónica’s first moves to establish over the top relationships with its competitors’ customers—relationships which it will doubtless look to consolidate down the line.

But what really stands out about the announcements is that, in both situations, Telefónica is simultaneously leading collaborative efforts along similar lines with the very companies on which it is attempting to steal a march by being quick to market.

In the UK, project Oscar is a proposed joint venture between O2, Vodafone and Everything Everywhere to create a combination mobile wallet/mobile advertising offering that would enjoy 90 per cent penetration in the market. Oscar is currently being poked and prodded by the EC competition authorities and, although O2’s MD for mobile money recently suggested the EC’s analysis was more of a formality than a fundamental obstacle, the Commission won’t offer up its findings until the end of August.

Meanwhile TU Me looks a lot like an app-based version of what Telefónica, Vodafone, Orange, TIM and T-Mobile announced they would be collaborating on at a network level at MWC this year. The Joyn RCSe initiative aims to replicate in the network the kind of services that OTT players have made popular in app and browser formats. Led by GSMA, Joyn aims to exploit the traditional operator strengths of reach and interoperability.

With both its wallet and TU Me programmes, Telefónica is essentially betting against a successful outcome for the two collaborations. And for all the talk of ‘co-opetition’ I wouldn’t mind placing a bet of my own that Telefónica’s solo efforts don’t sit too well with the other operators involved in Oscar and Joyn.

After all, while Vodafone, Orange et al are still thrashing out the details of projects that are supposed to work to everyone’s benefit, Telefónica’s trying to flog its services to their customers. The fact of the matter is that the longer Oscar and Joyn take to get to the market, the better chance Telefónica has of sowing success for O2 Wallet and TU Me. And if that success starts to materialise, how motivated is Telefónica going to be to put its back into the joint efforts and welcome its competitors to the party?

The Spanish incumbent has emerged as arguably the most dynamic of the big global players in its approach to services and verticals. A high profile reorganisation has structured the company very clearly to innovate in these areas. The creation of Telefónica Digital late last year has given the firm the resources to tun these kind of projects around and fast, while the startup mentality of the unit allows some innovations to fail. Not all operators are going to be able to do this, and not all of them are going to put the same kind of effort into it as Telefónica.

You’ve got to wonder, though, whether Telefónica’s peers are going to start questioning how much of the work that goes into their collaborations is helping the Spanish firm get ahead of them as it goes it alone in precisely the same markets. Joyn and Oscar might be predicated on the notion of One for All—but Telefónica seems more interested in keeping it All for One.

The interest of the Mexican giant in investing in KPN comes at a time when European operators are struggling. In recent months, we have seen emerging players investing in European markets, such as Russian operator Vimpelcom acquiring Italian assets, and Egyptian magnate Sawiris acquiring stakes in Telekom Austria. Like many of its European peers, KPN is a troubled company which makes it a good acquisition target for a buyer looking to turn around its business. In 1Q12, KPN saw its shares at their lowest level since June 2005 and had to cut the shareholders’ dividends. For cash-rich America Movil, this situation is an attractive opportunity to extend its reach. The Mexican giant has a history of investing in troubled regional operators to exploit synergies and turn them into successful companies. To date, America Movil has concentrated all its efforts in the high-growth emerging Latin American markets, but it has now become a good time to invest in the mature European markets.

From a competitive standpoint, America Movil’s biggest rival Telefonica already benefits from a presence in a variety of diverse markets, including its home market Spain, the UK, Germany and other European markets as well as Latin America. By investing in KPN, America Movil would go head to head with Telefonica beyond Latin America and into Europe. As European economies are struggling, Latin America remains the major strategic focus for both groups, but it is important for America Movil to build a presence beyond its core markets.

Bringing the know-how of an innovative European player such as KPN will also be an important asset for America Movil in terms of innovation. Telefonica has already been able to export innovative services from Europe to Latin America, for example cloud services for the highly strategic enterprise market. America Movil’s fixed arm Telmex has struggled to bring innovation to market and could certainly benefit from KPN’s know-how. Ultimately, bringing innovation means increasing the value of the customer base through the uptake of mobile data services which will boost the operator’s financial performance. This is a key objective for a player like America Movil as it is operating in markets with predominantly prepaid user bases with significantly lower ARPU and EBITDA than mature markets.

Nonetheless, we are not in a “gold rush situation” in Europe and not all acquisitions will eventually go through. What Europe brings to the emerging market operators is primarily know-how, but also the opportunity for industrial synergies and implementing best practices including cost-cutting.

What is unique about the Galaxy S III is the level of intelligence Samsung has created around its embedded features and sensors which takes smartphone innovation into another league. The device’s features are capable of communicating with each other and sharing information, enabling it to react intuitively and automatically to an action taken by the user. For example, the phone can recognise a face in a picture taken with the camera and will associate it with a contact saved in the address book. The phone will then automatically save the picture in a relevant file (e.g. family, friends, colleagues), tag it, and suggest you should upload it to facebook or Twitter.

While the Galaxy S III will be highly desirable for enthusiastic and advanced users, Samsung will have to build on the already popular Galaxy brand and push it hard to various distribution channels before the iPhone 5 is launched. However, Samsung will find it hard to convince and educate the typical mobile phone user to adopt and use all the advanced experiences enabled by this phone. In this specific segment, Samsung Galaxy S III is unlikely to meet with great success, at least in the early stages after launch.

The casing of the Galaxy S III is another weakness, as it’s based on the usual plastic casing found in most of Samsung’s phones and doesn’t do justice to the device’s impressive features. Samsung needs to learn from the likes of Nokia and Apple which use high-quality materials and the best designs for casing their premium devices.

Galaxy S III could, potentially, also cannibalize sales of some of its popular smartphones including Galaxy Note, Galaxy S II, and Galaxy Nexus. Therefore, Samsung will have to come up with a well-structured price segmentation, where Galaxy S III addresses the premium price points while the existing Galaxy devices enter the lower price points to widen the audience of the overall Galaxy brand.