Mamma mia!

Even after the culinary tragedy that is Barcelona, there's no break from the carbohydrates this week as AWIW picks up a distinctly Italian flavour. Local incumbent Telecom Italia made the extraordinary move of delaying its financial results for 2009, as its wholesale unit, Sparkle, came under the spotlight as authorities investigate a massive money laundering scheme.

February 26, 2010

11 Min Read
Mamma mia!

By The Informer

Even after the culinary tragedy that is Barcelona, there’s no break from the carbohydrates this week as AWIW picks up a distinctly Italian flavour. Local incumbent Telecom Italia made the extraordinary move of delaying its financial results for 2009, as its wholesale unit, Sparkle, came under the spotlight as authorities investigate a massive money laundering scheme.

This week the carabinieri issued arrest warrants for a total of 56 people in connection with a €2bn tax fraud and money laundering scam reportedly linked to the ‘Ndrangheta – the Calabrian mafia – which took place between 2003 and 2006. Italy’s second largest fixed broadband provider, Fastweb, is also embroiled in the investigation and company founder Silvio Scaglia, who had an arrest warrant out for him, made the police an offer they couldn’t refuse by turning himself in this morning. Scaglia no longer has anything to do with Fastweb, which he sold to Swisscom in 2007, but headed up the firm during the time of the allegations.

The authorities claim that the service providers faked transactions to avoid paying certain taxes and have seized around $400m from Sparkle while the investigation proceeds. Parent Telecom Italia released some unapproved results for 2009, which revealed that organic EBITDA for the year was in line with 2008 at €11.3bn, while revenues were down 5.6 per cent year on year to €27.2bn, reflecting a repositioning strategy away from handset sales where revenues were down 22.1 per cent to focus increasingly on services, where revenues fell by just 4.2 per cent.

Web giant Google also fell foul of the Italian authorities, with two employees and one ex-worker who left the firm in 2008, convicted of breaching Italian privacy regulations. The case started in 2006 when students at a school in Turin, Italy, uploaded footage of themselves bullying a schoolmate to Google Video (this was prior to the acquisition of YouTube).

Google removed the video at the request of the police, but a public prosecutor in Milan pressed on with an indictment of the Google employees. At the outcome of that trial this week, a judge in Milan issued six month suspended sentences to the Google staff for failure to comply with Italian privacy laws. This suggests that content hosting companies, like Google Video or YouTube, would be criminally responsible for the content of videos uploaded by users.

Commenting on the decision, Matt Sucherman, VP and deputy general counsel for Europe, Middle East and Africa at Google, said: “European Union law was drafted specifically to give hosting providers a safe harbour from liability so long as they remove illegal content once they are notified of its existence.”

A notice and take down regime of this kind is designed to help creativity flourish and support free speech while protecting personal privacy, Sucherman said. But, if “sites like Blogger, YouTube and indeed every social network and any community bulletin board, are held responsible for vetting every single piece of content that is uploaded to them – every piece of text, every photo, every file, every video – then the Web as we know it will cease to exist, and many of the economic, social, political and technological benefits it brings could disappear.”

Yes, it’s the sort of incident that gets the hackles up, giving everyone, including the British government, a chance to jump on their soapbox and shout down some foreign draconian autocracy, right before they tell the nanny state to put its hands over our eyes ‘for the sake of the children’. The UK Home Office this week released research claiming that kids are being increasingly exposed to sexual imagery online and it should be the job of the internet service providers – fixed and mobile – to police all the content their customers can get access to. Good luck with that, or as the Calabrian mafia probably say, “fuhgedaboutid”.

Unfortunately for Google, it’s not just the Italians, but Europe as a whole that’s got it in for the firm. Earlier this week Google confirmed that it has been notified by the European Commission of the receipt of complaints from three companies: a UK price comparison site, Foundem; a French legal search engine called; and Microsoft’s Ciao! from Bing.

The crux of the complaints is that Google’s algorithms demote these sites in Google’s search results because as vertical search engines themselves, they compete with Google to some extent. So the issue here, which the EU may or may not choose to investigate, is whether Google is using its majority share of the search and advertising markets to suppress competition.

Julia Holtz, Google’s senior competition counsel, denies this: “Our algorithms aim to rank first what people are most likely to find useful and we have nothing against vertical search sites – indeed many vertical search engines like, Opodo and Expedia typically rank high in Google’s results,” Holtz said.

Never mind policing web content, the operators have probably got more pressing issues on their minds – to continue the theme from World Congress – just what to do about all this data traffic. This week UK broadcaster the BBC announced record breaking requests for its IPTV-based iPlayer application. During the month of January, requests for the BBC iPlayer across all devices including Virgin TV set top boxes, topped 120 million, driven by on demand viewing.

While iPlayer is used for TV at roughly the same time of day as linear TV viewing, on demand makes up the great majority of TV programme requests with only eight per cent of requests for live simulcast streams, although two thirds of requests for radio streams are for live programmes.

PCs and laptops remained the firm favourite for viewing iPlayer content, accounting for around 87 per cent of all traffic, with mobile handsets delivering only a thin sliver of requests. But the stats do show just what other kinds of devices will contribute to the bandwidth crunch, with the Sony PlayStation 3 and the Nintendo Wii accounting for eight per cent and four per cent of requests respectively, something which bodes well for open IPTV initiative Project Canvas.

According to research released from consultancy TNS this week, the kind of apps that are available on a mobile device are becoming an increasingly important tool in the battle for customer loyalty – something which Apple has exploited successfully in its assault on the mobile space.

Following on from a survey of 27,000 UK consumers, TNS discovered that almost one quarter of users are now placing their primary loyalties with content and application brands like Facebook, Twitter and Google – that’s the same amount that are primarily loyal to their operator.

When considered as an individual element, the single most important factor in handset choice remains look and feel (29 per cent) but available applications and content – games, music and maps perhaps – ties for second place with handset brand (13 per cent). However, this figure rises to 37 per cent among consumers aged 16 to 30, and according to TNS, almost a fifth (19 per cent) of UK users are regularly downloading applications to their devices.

Interesting stuff, as these figures claim to show a shift in how consumers are shopping for devices, although that shift is less apparent when all factors are taken into account. When all aspects of a device are considered, apps sink to the bottom of the list, with consumers more easily swayed by look and feel, handset brand, touchscreen, and genuinely interestingly, which operating system it sports.

According to Stephen Yap, group director at TNS Technology: “As uptake and usage of mobile services proliferates, we are seeing profound changes in the way that people make purchase decisions and in the brands that are the most meaningful to them.  While established handset makers are standing their ground, network operators are clearly under pressure from the rise of the likes of Facebook, Google and Twitter. These content providers are increasingly capturing consumers’ loyalties and are leading the way in bringing users the benefits of the latest mobile technologies.”

Apple may have exploited this phenomenon to its advantage, but that didn’t stop Mark Doherty, Adobe’s mobile evangelist for the Flash platform, putting the boot into Apple for “restricting open technologies like Flash.” this week posted video footage of Doherty demonstrating Flash Player and Adobe Air running on Android. Yet the technology’s absence on the iPhone has been duly noted. Doherty told “We have done a lot of work to build Flash Player for the iPhone, but Apple at this time haven’t decided to have Flash on the iPhone. We encourage them and have demonstrated that it works really well on other platforms and at some point in time the apple user base will start demanding the full internet.

“Today 70 per cent of games on the web are Flash based and 75 per cent of video is played back through Flash Player. Apple just seems to want to have some control over their ecosystem and effectively tax their developers. But our business model is about selling tools and enabling our developer customers and content providers to get access to consumers and that’s why they use Flash because it allows them to do that in a consistent manner across all screens.”

Doherty said he believes the pressure will build on Apple and force it ultimately to support Flash on the iPhone. “Recently seven million or so iPhone users have actually come to our player download centre to download Flash Player because they didn’t know it wasn’t available. So now we have a special page up telling these visitors that Apple is restricting open technologies like Flash,” he said.

Telecom New Zealand (TCNZ) would probably love to have the data boom headache, but unfortunately it’s got a headache of a different kind – it can’t get it up. On Tuesday, TCNZ’s chief technical officer, Frank Mount, resigned in the wake of technical problems stopping the operator from keeping its shiny, new HSPA network running for more than a couple of hours at a time.

Infrastructure partner Alcatel-Lucent has reportedly been put on notice for failing to fix the issue, and on Monday the vendor announced the appointment of Jyoti Mahurkar-Thombre as head of its New Zealand operations, following the resignation of Steve Lowe, who oversaw the TCNZ deployment.

Perhaps there was something in the industry Kool Aid this week as there was more quitting to be had. Dan Moloney, president of Motorola’s Home business, which makes set top boxes, left the company to head up a small, Philadelphia-based electronics firm – Technitrol. The news comes just weeks after Motorola announced plans to split up in early 2011, spinning off its handsets and set top box unit into one entity and its enterprise and networks arm into another.

Meanwhile, Harri Koponen, the chief of Swedish carrier Tele2, also walked out citing “irreconcilable differences” with the company. Koponen joined Tele2 in 2008 as president and CEO and oversaw a period of increased focus on profitability, with a refocusing of the company’s footprint in Russia and the CIS.Tele2 said Koponen will receive his maximum notice period of 18 months during which he will be paid. In the interim chief financial officer Lars Nilsson has been appointed CEO, while the board of directors embarks on a search for a new chief.

France Telecom already has a new chief in Stephane Richard, and it was straight in at the deep end for him as FT announced a drop in profit for 2009 this week. German counterpart Deutsche Telekom was in the same boat, ahead of the March 1st pronouncement from the EC on the proposed merger of the two carriers’ British mobile businesses, T-Mobile UK and Orange UK.

And it’s the EC that FT’s blaming for its 26 per cent year-on-year profit drop to €3bn last year. Back in 2004 the EU Competition Commission ruled that the French Government had been giving FT illegal tax breaks prior to 2003 and, last year, the carrier had to pony up almost €1bn in payback. On the upside, the firm said, it grew customer numbers 5.7 per cent across the year, although revenues were down 1.8 per cent at €46bn. The firm pledged to focus on staff welfare from now on, following a disturbing spate of employee suicides during 2009.

DT, meanwhile, saw annual profits plummet by 76 per cent to €400m, with Greek operation OTE hit by that country’s financial crisis.

Off to India now, where finally, finally (although the Informer’s not holding his breath), the long delayed auction of 3G spectrum in India has been given a new date – April 9, 2010. Commenting on the announcement, T R Dua, director general of the Cellular Operators Association of India (COAI) said that the GSM industry had been “eagerly awaiting” the 3G auctions, which seem to have been delayed on a monthly basis for the last year or so.

Still, the news has got the local carriers digging in their pockets. This week, wireless infrastructure operator American Tower Corporation (ATC) agreed to acquire a further 4,450 wireless communications sites in India via the purchase of Essar Telecom Infrastructure – the cell site unit of the Indian carrier.

ATC’s Indian subsidiary, Transcend, will acquire the firm for a total consideration of $430m. The move will almost triple ATC’s presence in India, where it already operates around 2,550 sites. Essar’s site portfolio averages approximately 1.8 tenants per tower, ATC said. Last month, India’s biggest communications infrastructure operator, GTL Infrastructure, took over the tower assets of local carrier Aircel in a deal valued at $1.84bn. Under the agreement, GTL will take over 17,500 existing towers and will take over rights to roll out 20,000 more.

And that’s about the size of it for this week,


The Informer

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