The other rumor is that Altice which bought Cablevision and Suddenlink is looking at a nearly $2B IPO and will use those proceeds to buy Cox. But that may not happen because Charter now wants to buy Cox.
John Malone, the pioneer cable consolidator, has been all about consolidating cable, telco and wireless. His Liberty Interactive just acquired Alaska's GCI for $1B. There is noise that he would flip that to Charter. Cox plus Bright House plus TWC plus Charter plus GCI gives a 49 state footprint and would make that entity bigger than Comcast.
Charter was fined by New York State $13 million for not living up to its merger agreement. The rest of us are enjoying newer, higher pricing.
Meanwhile Comcast is being sued for cutting a small Texas ISP's lines and putting them out of business after they rebuffed an offer to be acquired by Comcast.
Just to add some notes, a bunch of Senators asked the DOJ to "closely scrutinize AT&T's proposed acquisition of Time Wamer." It won't change the course of this consolidation.
As 5G rolls out -- or 4G gets density to satisfy the bandwidth consumption of mobile Americans, you pick -- it will require a lot of fiber to towers and small cells. The editor opinion on Fierce makes it sound like the cellcos weren't hard nosed negotiators before now. Sheesh. There has always been a cap on how much a cellco would pay for bandwidth to a tower. Always.
Nearly 25% of Urban Americans aren't connected to broadband internet, usually due to cost for broadband. And despite the fact that Americans pay more for broadband than other countries, Wall Street is asking the ISPs to charge more. Greed.
The divide between rural broadband and urban is still large. The short fall at the USF Fund isn't helping. The telcos, including AT&T, want that funding to do any build outs. A political hot potato to add to the pile with Net Neutrality, mergers, healthcare and the whole American infrastructure (bridges, roads, power grid).
Bigger not Better.
Who thinks that the CenturyLink acquisition of Level3 will be derailed by the $12B lawsuit that C-Link is facingin the wake of charges that they pulled a Wells Fargo accounting scam?
One last thing: GTCR acquired Inteliquent. GTCR also owns Onvoy. They merged them and decided to keep the name Inteliquent.
]]>CenturyLink is saying that after it scoops up Level3, they will be able to compete with cable in the SMB space. Really? You are going to offer up $300 pipes?
"Basically take some market share away from the cable companies, especially on the small and midsize customers where Qwest had lost quite a bit of market share when we bought Qwest." So you broke Qwest and its ability to sell to the SMB. What makes C-Link think you will find your mojo again?
I'm certain that during the 20+ months of integration, it will be challenging for a small business to procure bandwidth from you.
Charter/Spectrum makes it very hard to order from. It takes weeks to get a quote and contract. Then the order has to be scrubbed, checked and double-checked for 2-3 weeks. Another site survey as time ticks away and the client wonders when they will see the circuit. And despite this horrendous process of 7 departments having to touch the order (probably on paper in a file folder), it will look easy compared to a combined LEC of LevelLink or Century3 or whatever you call it.
It used to just be voice that was a bitch to deal with. LNP and toll-free RESPORs were a pain with added paperwork. Then with Hosted PBX, the extension to email mapping and other PBX planning (hunt groups, ACD, auto attendant) added to the complexity. Voice has many moving parts. Now network takes as long as voice!! Or longer. Even when there is NO construction necessary.
Makes me fear selling anything complex with most carriers.
The one thing that gets missed all the time: It isn't about EBITDA or synergies or fiber. It is about the CUSTOMER EXPERIENCE*!
End to end - from the time the prospect first encounters the provider until the long after the service is up and running, every touch of the prospect/customer adds to or takes away from the experience. Billing, support, admin, delays, lack of communications, handling expectations, CPE, and more are touch points where the CX could be improved.
It is interesting that a company would spend big dollars to redesign a website but not redesign its contract or quoting process or customer care service. Google Fiber was deliberate in how the sales offices would look and feel; the color of the boxes for CPE; and so much more. Their take rate and deployment were awful but the marketing details were very good.
With cratering revenues, I get why the merger mania is happening. But that doesn't solve the underlying problem that revenues are cratering and all products are a commodity. Until that is fixed, the rest of the actions - the new website, the mergers - are just distractions for stakeholders.
Our industry has new technology called SD-WAN that we have already over-hyped and turned into a commodity. It is hard to believe that it is all about cost savings already. Basically, you have explained to customers that broadband is just fine with a 4G card and an SD-WAN box in place of a Cisco or ADTRAN. So boom! there goes the Ethernet sales and MPLS can't be ripped out fast enough. Like Charlie Brown with a kite!
*CX or UX stands for Customer or User Experience
]]>Private equity firm, TPG, last year acquired RCN and Grande. Now they are grabbing Wave Broadband in the Northwest for $2.36B. They will combine all 3 - Wave, Grande and RCN - to make a larger MSO. The PR says that they will be the 6th largest MSO, leap-frogging Altice. Altice owns Suddenlink and Cablevision. Comcast and AT&T have 22M and 25M respectively. The Top 4 all have more than 10M pay TV subs. After that it is splitting hairs with VZ at 4.6M to Altice with 3.6M at number 7. TPG's exit strategy will likely be Altice buying them.
WISP Redzone claims it has developed a "fixed wireless spectrum aggregation technology that can support broadband speeds of up to 400 Mbps per customer", according to press. Google Fiber must be excited.
Mitel has been making noise since early last year when it tried to buy Polycom. Now it is scooping up the assets that Toshiba is leaving behind as Toshiba exits the phone business.
Mitel also announced that it had broken 3 million users. According to investor presentations, Mitel has 3.2 million cloud users but only 588,000 recurring seats. To put that into perspective, Microsoft found 25 million subscribers for Office 365 (although the take rate is slowing to 900K per quarter). Broadsoft claims 15M cloud lines but that includes SIP trunks. Vonage is over 600K seats and 8x8 is close to that.
The details can be found in the 2017 Hosted VoIP/UC Market Report for the US, which was just released. See here.
Jive Software was acquired for $462M. That is a social collaboration software company based in Portland; not the UCaaS provider out of Utah called Jive Communications.
Amazon released Chime (a Webex clone) and cloud contact center. Now with Alexa devices it is taking over the speakerphone market. A few VoIP companies have integrated into Alexa for voice enabled dialing (something we need in cars!). Only a matter of time before Amazon gets into the dial-tone replacement game in conjunction with Twilio.
Panterra Networks doesn't do marketing. It's a shame really. They have a better than average UC application that is secure (encrypted), HIPAA compliant and 24/7 hack monitored. It produces one contact management file without duplicates. Added Teams with the release of Streams, which integrates UC, team messaging, file sharing and analytics into a single customizable platform. Worth a look.
]]>Most of the collapse was due to the Big 3 claimed 94% of the market by 1955. So a hundred other companies were competing for 6% of the market.
And it was a Big Market. "A total of almost 58 million cars were produced and sold during the 1950s by the American manufacturers. Compared to the total population of the United States by the end of the decade, 179,323,175, that is almost one new vehicle for every three living persons of all ages." [wiki]
It reminds me of the cable industry. There were hundreds of mom-and-pop cable companies. Some merged to be regional; some sold out. Now there are 660 cable operators according to NCTA, but it is mainly just 4 with majority market share - Charter, Comcast, Cox, Altice.
CLEC numbers have dwindled. RBOCs are back together in 2 buckets - Verizon and AT&T. Frontier, CenturyLink, Windstream, VZ and AT&T have the lion share of the business telecom market.
Hosted VoIP/UC is a lot like the auto industry in the 1950s. Only the product is so similar as to be indistinguishable. At least, cars had distinguishing features like car doors, lines, looks, radio, interior. VoIP pretty much all looks the same. Some of the mobile apps are starting to change that a little.
Some of it is scale. Once the Big 3 got big, costs go down, name recognition goes up. The smaller guys cannot afford to make one-tenth the number of cars at the same cost. Vendors give volume discounts but when Ford is selling 12M cars and Edsel is selling is 108 thousand! there will be cost differences. It is one of the things that smaller ISPs don't grasp. They want to resell from AT&T or Verizon for cheaper than their vendor. It doesn't work that way in any industry. Do you think Firestone sold tires to Ford for a lot less than Edsel?
The problem with cable/pay TV right now is that the OTT product is a little cheaper and much better at meeting the needs of the buyers. Think Netflix or Hulu.
There are so many analogies but look at Italian food. Chains with Italian food like Olive Garden and Carabba's appeal to masses who just want food that looks Italian and is affordable. The foodies want the authentic food. Still others want pampering and service etc. VoIP providers are shooting for the masses. They have a mass market product for the masses. They are Olive Garden. However, in technology today, there isn't really a MASS market. There are many market segments with different types of buyers with varying needs and desires.
Only so many brands (I use that term loosely in telecom) will dominate the mass market. Everyone else will be niche or fringe (like the MSO sector or even the auto industry).
]]>I try really hard to avoid cablecos. They don't like the Channel; they don't like wholesale. It seems that direct sales reps can get pricing much faster.
Unfortunately, cable is chasing market share by practically giving away services. So with that in mind I had to get a quote for a EPL between Nashville and Tampa. This would involve Comcast and Charter. Let's examine the timeline:
Request for quote enters the system on 3/15. On 3/21 Survey shows FL location serviceable with construction. Sent email for pricing. On 3/28 after buffing them, I get "budgetary" pricing. On 4/3 client asks for contract. On 4/26 I am still waiting for paperwork and the "formal" pricing.
How does a company who "As of December 31, 2016, Charter's network passed 49.2 million homes and businesses, and served 26.2 million residential and small and medium business ("SMB") customers" take so long to price and run contracts?
I know it would be an effort but there's this thing called Google Earth that you can use to map your network, so every site survey doesn't take days. MasterStream has a pretty good interface for quoting. There are tools in this cloud age to take some fo the friction out of the process - if anyone actually wanted to.
This raises some questions:
I can't even fathom what a Desktop as a Service process must be like now that Navisite is under the Spectrum umbrella.
I know this looks like a bully pulpit kind of blog, but I can't be the only one who finds this ridiculous.
It gets better. One of the Tier 1 ISPs agrees to sell my customer a 1GB pipe that goes to Atlanta from Jackson, Mississippi. Route diversity was needed for my client, an ISP and VoIP Provider. Turn up took 111 days on a lit path. The Tier 1 ISP used Uniti Fiber for the loop. It was a mess.
The CFA (facilities assignment inside the central office where my client is collocated) was ignored, which created the first of a number of problems. TTU (test and turn up) was basically, "We plugged it in!" Repair had to be engaged to get it to work. (A new NID had to be installed.)
BGP took an extra week to get working properly. It only all started working properly yesterday. It was ordered on 12/19/16.
And the client says it routes to Dallas, not to Atlanta. Fantastic.
I turned up another circuit with an ILEC. It was a 20 MB DIA, but I guess 20x20 had to be specified, because it came up at 18x6. I don't even know how you make these kind of mistakes. This was noticed on the day after turn up, but we had to go through repair to get it fixed after the turn up engineer ignored all emails for 3 days.
What the hell is wrong with telecom that they can't just do the job they are hired to do? Every day we hear about airlines having big issues, but telecom firms have even more problems. I think it is just that we EXPECT them in telecom.
All I keep thinking is: If they can't deploy Internet pipes correctly in a timely manner, who would want to try using them for something complex like IAAS or security or UC?
And let's let them do more M&A! Everyone of the carriers listed has been involved in M&A in the last year. All of them suffer from the integration -- or choose to blame it.
]]>What do you do when a $60K MPLS network is replaced with a $40K SD-WAN network? And when some of those Internet links are not even on the carrier's network?
What do you do when 10GB trans-continental private lines are so ridiculously low?
Well, the management has to re-adjust their reality for the sales team. It isn't the salespeople's fault that price is eroding fast. That is an industry wide executive decision. There are no safe havens for high margin. Even SD-WAN which was hyped just a year ago has fallen under the I Will Save You Money banner (already).
Much of the merger mania is based on synergies - or that at scale the same amount of people can take care of more revenue, which adds margin. A few of the mergers are due to a debt burden that becomes due. That was Intermedia's problem in 2001. No one learned that lesson. Avaya faces that problem today with a debt load that cannot be serviced by its revenue.
But direct sales, channel managers and partners face declining revenues across the board. This means less commissions, less margins, less profitable quarters.
When cablecos stop paying commissions on modems sales (like ILECs did with anything TDM or DSL), what will the channel do? I ask because all the SD-WAN hype is about a branch office utilizing broadband - DSL, cable modem, fixed wireless, 4G, satellite or a combination - for lowered costs but improved performance via that special little white box of SD-WAN.
Also with the shackles off at the FCC, we will see bigger mergers and most likely port blocking will become a thing again. OTT VoIP providers will have to figure out how to circumnavigate the waters pf port blocking on broadband circuits at SOHO, branches and rural locations. It will be interesting.
But that is all down the road. Right now we face consolidation of vendors but price erosion, which may be accelerated by the MPLS to SD-WAN transition. Oh, Goody!
I say this a lot but we have to sell a lot more, faster to maintain.
We need to Land and Expand. Get the pipe but start taking apps and voice, backup, DR, security. It will become imperative to take a chunk of the whole customer IT/telecom budget to survive.
Carriers can help by stopping pushing product and going to a holistic package approach of bundling products into a turn key solution like UC + 4G + Internet + POS + Compliance + backup.
Or savvy partners will start bundling multi-vendor solutions themselves to get more of the pie. The carrier will be stuck being a component.
Co-Selling will be a see-saw. The carriers will like it to protect their own offerings and sales numbers but will hate paying twice one the sales.
We are in for a ride about as smooth as dealing with the airlines! Happy Travels! Back to CP Expo 17 now.
]]>In cable news, you get a site survey done supposedly before quoting. You get the quote; give it to the customer who says Yes. You get paperwork; customer signs paperwork. Then three days after the paperwork is submitted, the site survey comes back. "Subject: Construction required. Comments: A site survey was completed that determine there is a total construction cost of $71,972 for construction to bring service. Your organization can pay the contribution of $69,687 or we can amend the contract to 36 months and increase total MRC to $2,400." Mind you , that $2400 per month is for cable broadband - 150x10. This happens TOO often. It makes no sense to me at all.
There are new acronyms to know in Security. According to 451 Research, "Managed security services (MSS) is an emerging sector of the security and managed services market. As new security threats evolve, many organizations find they lack the expertise to protect against increasingly complex attacks and meet compliance requirements. Security is one of the IT functions that can be managed by a service provider." MSS providers are MSSPs. If the MSSP develops and delivers security technologies and services, it is a security service technology provider (SSTP). If the MSSP focuses on delivering security services, but does not develop their own technology, then these MSSPs are "pure play". There are also Hybrids that mix the two. Fun, right?
Businesses buy a lot of software. Office365, Google for Work, email and web hosting just being the start. CRM, UC, conferencing, digital marketing technology, Business Intelligence (BI), Virtualization, Data Storage and Database and ERP. 451 Research survey suggests that spending will be up for software in 2017.
"SAN-based Storage (67%) and Network Attached Storage (NAS) Arrays (59%) are currently the most widely used storage systems by companies, followed by Backup/Recovery Software and Disk Backup Appliances (44%)," according to 451 Research. "Respondents were asked which storage systems and related products, including upgrades/refreshes, they plan to purchase in 2017, and SAN-based Storage Arrays (48%) tops the list, followed by Third-party Cloud Storage Services (34%) and Network Attached Storage (NAS) Array (34%)."
This leads me to suggest that you ask your customers about software and storage. There is money to be made there and you are leaving it on the table.
"The U.S. (and the world) is in the midst of a sea change in how we spend our leisure time. Young people are less inclined to indulge in America's favorite pastime: zoning out in front of the TV. On average, people ages 18 to 24 spend half as much time watching live and recorded television as 35-to-49-year-old Americans, according to Nielsen...... Young people are definitely watching video, but it's more likely something from YouTube or a friend's Snapchat story on their phone than the episode of "Grey's Anatomy" their parents are watching on the living room TV."
"All told, traditional cable, satellite and telco pay-TV services (not counting OTT offerings) lost a net of about 1.64 million video subscribers last year as compared to a loss of some 980,000 in 2015." [telecomp]
Telco TV was too late to the party. It cost the telcos billions of CAPEX dollars to find out that cord cutting was real and OTT video - Netflix, Hulu, YouTube, Amazon Prime, Sling TV -was going to be the winner.
The economics look upside down. Bear with me here. Right now the cable operators are winning the war for both broadband and voice. In many areas, cable is now the incumbent voice provider.
With triple-play the operator sees ARPU of about $161. If the customer only buys broadband - which is happening more and more - the ARPU drops to $65. Never mind the tax implications for federal, state ad local government (they are screwed either way), just consider what this does for revenue numbers.
The ripple effects are already being seen. ESPN, the Disney owned sports channel, is in a tail spin with a loss of about $500M in revenue per year from cord cutters. Cable channels are either being closed by the content owners or re-named and re-tooled. There aren't 500 useless channels; there are 1M with all of the streams and social media. This will be a real problem for content creators, actors, writers and advertisers.
Windstream, CenturyLink and other RLECs (Frontier, Fairpoint, TDS, et al) have been working hard to get the percentage of revenue from residential/consumers from the average of 75% to a 50/50 mix with business services. Windstream bought EarthLink; CenturyLink bought Level3. TDS bought managed IT firms and data centers. Fairpoint sold itself to Consolidated Comms. Frontier keeps buying states from Verizon and AT&T; consequently, their mix is still heavily consumer.
Everyone has a revenue problem. Pricing pressure has squeezed every operator. It will get worse. Millennials don't want to pay a cable company. They have a huge cellular bill and student loans totaling $1 Trillion. Couple that with stagnant wages and a bleak jobs future that is getting darker with all the investment in robotics and AI, the economic outlook doesn't look bright. As I have asked before: if wages are stagnant, how does someone continue to keep the economy spinning with buying?
I hope, unlike cord cutting, that operators don't have their head in the sand on this issue.
With 5G trials rolling out, will the next generation - who aren't buying homes and aren't buying cars - buy wireline broadband? A few analysts say Unlikely. I already know several twenty-somethings and thirty-somethings that do NOT have terrestrial / wireline broadband. It is all smartphone and hotspot at home.
What does that do to the economics of the network? Business revenue will become even more important. And as revenues decrease, price increases will result, which will mean less subscribers.
Planet Networks believes that rural and under-served areas will still be on wireline because 4G and 5G will not get there any time soon. That may be true - so RLECs will be happy - but the majority (80%) of the population lives in urban areas.
In other nations, cellular (including fixed cellular) are sometimes the only available network. It is cheaper to put up towers and radios than to dig up streets and sidewalks to lay fiber.
]]>The Age of the CLEC - the competitive carrier - is at end. They fill gaps now, like Birch, Bullseye and Granite for POTS and other legacy services. XO is part of Verizon. EarthLink absorbed by Windstream to become like AllWorx, USLEC and Paetec, a memory. Level3 will be a division of CenturyLink, where it will cease to be a rival to the RBOC in the Enterprise.
Net Neutrality is going away. That zero rating investigation to determine if giving some content a free rideover all other content was fair has been closed.
It is simply cable or ILEC. And both groups have to be wondering how much longer they can continue to carry their massive debt. The big dilemma is that ARPU is stagnant but subscriber counts have peaked. Cord cutting is a real issue for cable, telco, satellite and content owners. NBCU closed two channels recently and re-branded another. Apparently, twenty five cents per subscriber per channel per month isn't enough any longer. And advertising rates are a little off too. The economics of many legacy businesses are being blown up!
The cost of services increases as more small cells are deployed to blanket coverage for 4G LTE, LTE-Advanced and how much will 5G cost? If ARPU is stagnant for cellcos in this price war, yet the cost to build and maintain the network remains constant and you don't lose any subscribers, all is good.
Sprint and T-Mobile have waged a brand battle against Verizon and AT&T. It has worked to a degree. But all 4 carriers are losers. The foreign owned T-Mobile and Sprint can afford to lose money for a while, but how long?
With the subsidized phones are gone so are contracts and large ETFs. More churn. Higher cost of customer acquisition. Ma and Pa Bell already saw this small business broadband and voice. Then they lost the consumer broadband and voice market. Now the cellular market is up for grabs.
Verizon is looking at buying Charter now. Rumor has Comcast looking at buying its 4G backup partner, T-Mobile. The cablecos denied cord cutting until it was too late. Telcos denied cable competition until it was too late. There really aren't any visionary CEOs in our space.
The problem remains the same: at some point you have to be make money, not just on paper.
Debt payments, network CAPEX, stock dividends, payroll and pension liabilities are a burden to ILECs - all of them: Frontier, AT&T, Verizon, CenturyLink, even Windstream and Fairpoint (who sold out to Consolidated).
Revenue is getting crushed as the cost of bandwidth, transport and transit collapse. Voice revenue has declined. Text revenue is flat. OTT apps have taken video calls (Skype, Facetime), some voice calling (Messenger, WhatsApp), SMS/MMS. What's left? The Enterprise market and the Government market.
What happens when there are just 4 carriers? Is the channel necessary to sell monopoly services? Well, see.
Some other points:
With subsidized phones gone, how will that affect phone makers long term? Will we see the leaps in tech that we have so far? Unlikely. Google Pixel at $649. The iPhone 7 is $700. Not that many folks are going to drop that cash every 18 months to two years. (Note to self: Get in the smartphone/device insurance business!)
When will the next highly desired device come along to prompt an exclusive carrier deal (a la AT&T and the original iPhone) to drive signups?
Even Sprint is Buying into the business of streaming media with a $200M investment into Tidal, another money losing music streaming service.
As someone at lunch pointed out, many foreign LECs like Vodafone, BT, Telstra, even NTT, are sitting on tens of billions in cash. They could buy into the US market.
We sit at the nexus point of some interesting times.
Did you notice that UCaaS consolidation halted? Yeah, me too.
]]>Verizon over the last 7 years has sold off three chunks of its wireline business to Frontier, Fairpoint and Frontier. Did they need the money to buy all the spectrum that they have been hoarding?
They had Verizon Business (VZB) up for sale. That old MCI division. Then they bought XO, supposedly for the access to spectrum leases.
VZW was even the cheerleader for 5G, saying that it would replace wireline broadband. (Others ask that question HERE).
Maybe it is merger mania consuming Lowell (VZ CEO). Maybe he wants to invest in Liberty Media now that they own Live Nation, Formula 1, the Braves, SiriusXM, and more. "The Formula One Group consists of Liberty Media Corporation's subsidiary Formula 1, its interest in Live Nation Entertainment, Inc., other minority investments, including Time Warner Inc. and Viacom Inc., and an inter-group interest in the Braves Group." With $115 Billion in debt at approximately 5%, VZ is using up cash to pay $6B in interest payments per year. Maybe they want a good investment that will bring in more than 7% annually (and Yahoo and AOL just won't cut it).
We'll see. Who knows anymore? The M&A is coming faster than anyone can keep track.
]]>Like Tech Data's TD Mobility, Amazon already offers cellular plans from many cellcos as well as a wide selection of devices. In fact, because of its e-commerce platform, Amazon is a huge step better than TD Mobility, but it is customer facing, cutting out the partner. And it is doing that again now with consumer Internet and Voice.
If this works, it is just a matter of time till Amazon is selling to small business both cable and telco bundles. SD-WAN for partners looks more and more like a life saver.
Anything that can be transacted will be replaced by either Amazon, another website platform or AI (artificial intelligence). Machines are eating jobs!
If you are not adding Value, you will be replaced. In his book, Linchpin, Seth Godin talks about Genius and Art. Channel Partners have been doing their Art: helping businesses with their technology solutions for years. It takes Genius - and we all have Genius to share.
What does adding Value mean? It varies greatly from customer to customer and vendor to vendor.
One way is to provide advice. Another way is to be on top of technology and introduce clients to new technology like cloud and SD-WAN. It might be technical knowledge or business acumen. But you have to have something because automation is going to wipe out jobs.
Now Amazon Lightsail was announced VPS starting at $5 per month. They are going to crush the hosting business too, I guess.
]]>Content and ad money is the only area of growth for the Duopoly.
An analyst is projected that Cable companies will be the Incumbent Phone company in 2017 due to the number of cable phone lines sold compared to telco. The RBOCs have been trying to get out of the incumbent label for years, much to the chagrin of their ILEC brethren like Frontier, Windstream, CenturyLink and Fairpoint, who wish that the RBOCs would shut up.
The RBOCs have cellular, voice, data, broadband, big pipe, managed services, data centers and cloud in the catalog but the cash cow was the consumer triple play. Much like EarthLink and AOL floated on dial-up revenues for years, ILECs float on wireline revenues. Unfortunately, cable is eating their lunch in the broadband market.
Easier to dump a billion or four into a company that will provide some top line revenue than spend $24 billion on fiber to the home, where Verizon lost money.
Telco has pension and union liabilities that cable does not. These liabilities are now mainly under the RLEC umbrella in the form of CenturyLink, Fairpoint and Frontier, who purchased assets from many other ILECs and RBOCs, including the pension liabilities. It is quite the financial burden.
Content is the next revenue stream for the telco, following in the footsteps of cable, who have owned TV stations and content for years.
No idea how the telcos arrived at advertising as a viable revenue stream (maybe they are following Google's model). Yet "AT&T reports $1.5 billion and growing in annual revenue for its AT&T AdWorks division. That unit aggregates 14 million households and 35 million set-top-boxes nationwide, managing ad inventory across national ad-supported cable networks. AT&T claims it's the largest addressable advertising network in the industry, thanks in large part to its acquisition of DIRECTV." [telecomp]
It looks like we will soon be back in the days of AOL and Prodigy, where your ecosystem will be defined by your cell phone operating system (Android or Apple) and cell provider and broadband provider. The cellcos are providing free bandwidth for staying inside the ecosystem, making it tough for companies like DISH/Sling, Netflix and Layer3. Captured users, eyeballs, viewer habits, buying habits, ads, etc. will result in big money per user. It is a similar model that Amazon uses with Prime and Kindle. Users of a Kindle device buy Prime and spend more than 3x what a non-Prime member spends. And we keep it in the ecosystem. Google, Apple, Amazon, AT&T, Verizon and Comcast all competing for you.
]]>Telcos spent billions on both fiber and TV services. [Verizon reportedly spent $23 billion rolling out FiOS since 2004, some of it from rate hikes, some from government subsidies.] Unfortunately, by the time telco TV, like Windstream's Kinetic, is widely available cord cutting is accelerating.
From DSLR, "Telco TV and satellite TV providers saw record pay TV subscriber losses last quarter, according to the latest analysis by Leichtman Research. According to Leichtman, the pay TV sector lost about 210,000 subscribers last quarter, though this figure is dramatically lower than the 430,000 subscriber net loss stated by Wall Street research firms like SNL Kagan. While traditional cable providers "only" saw a net loss of 90,000 video subscribers last quarter, the telcos were particularly hard hit, losing 375,000 video subscribers last quarter -- compared 45,000 during the same quarter last year."
In the broadband realm, "Cable companies added a net of 775,000 broadband subscribers last quarter, compared to a net loss of 150,000 broadband subscribers during the same period," writes DSLR. [see chart here]
For consumers, it is all about the Internet and smartphones, according to Pew.
Telcos didn't want to get into the DSL game. Mainly to protect a highly profitable T1 business. The same way they threw obstacles at Google Fiber, the LECs threw obstacles at the newly minted DLECs - NorthPoint, Rhythms and Covad. Sure, some of it was incompetence on the part of the DLECs and GF, but the hurdles kept tripping them up. After they all filed bankruptcy, the RBOCs decided to get into the DSL retil game, to the chagrin of the independent ISP, who was finally making money on DSL. Undercut by the vendor, many ISPs failed or limped along for years, which affected many small businesses as the ISP was usually the local computer expert and Internet Provider. This was something that the LEC could not provide: personal service to the small business. To this day, the Duopoly can only supply commodity service with almost non-existent support. As they have gotten bigger and bigger to take advantage of scale, the support to the small business has suffered.
Small business is 99% of the businesses in America. Yet every provider wants to go up market.
There are almost 28 million small businesses in the US and over 22 million are self employed with no additional payroll or employees (these are called nonemployers). Over 50% of the working population (120 million individuals) works in a small business. But it is under-served by the Duopoly.
From the FCC's 2016 Broadband Report:
Think about those numbers. VZ spent $23B. Other telcos spent billions. The FCC donated billions in BTOP, BIP, ARRA, CAF, CAF II and USF funds to the effort to build out broadband across America. Private companies (PCOs, ISPs, WISPs and CLECs) have invested hundreds of millions more. Cable dropped bilions. Yet not everyone has good Internet????Or a choice of more than 1 ISP?
I have to wonder where this goes. The telcos spent billions to get triple-play just as that bundle becomes undesirable. They now have to build out fiber to stop losing broadband subscribers, so more hundreds of millions. At a time when their debt is High - and the pies for TV, broadband and voice are stagnant. Even cellular has peaked.
They are all chasing Enterprise, which I imagine means 500+ employees. There are only 30K businesses in the US with more than 500 employees. So Comcast, Charter, AT&T, Verizon, CenturyLink and Windstream are fighting desperately over the same 30,000 businesses and government contracts. With VZ acquiring XO (approved today); C-Link acquiring Level3 (ugh); and WIND Buying EarthLink, that leaves Zayo as the sole big indie.
What happened? Bad short-term decisions that cost jobs, revenue losses and more CAPEX spending than if they had just done it from the beginning. To still see announcements from the telcos about Gigabit deployments in select cities is just plain sad. The monopolies that were the Bell companies re-constituted but lost their edge. It's like they don't know how to compete at all. They just lean on their brand and hope for the best.
EoC wasn't widely enough deployed and sold. Yet everyone is banking on SD-WAN, which will likely just make SLAs crumble.
Small business has suffered from this mess -- and further with the mega-mergers and consolidation. Small businesses - all businesses - rely on telecommunications to do business. The Internet is vital to our economy. Let's hope we don't stifle it anymore.
]]>CenturyLink just sold off its data center business that was a combo of Qwest Cyber Centers and SAVVIS to a group of PE firms for $2.15B in cash and C-Link keeps a minority stake worth $150M in the new company. CL bought Savvis for $2.5B in 2011. Buy High; Sell Low. Bell-Head Mentality.
The PE coalition that bought the data centers also grabbed 4 cyber-security firms in order to announce this global security co, to be run by Manny Medina, former CEO of Terremark Worldwide.
Wired's headline says it best: The World's Telecoms Are Under Threat From All Sides.
Broadband, cellular and voice are all flat or declining markets.
IAAS and PAAS are ruled by Amazon, IBM and Google. Microsoft only got into the game recently and is doing better than all the telco's combined.
PE firms are buying up data centers as the world adjust to cloud computing, an app market and streaming TV and radio.
DDoS attacks are happening too often. So are Hacks. There are not enough fingers to fill all the holes in this dyke.
UCaaS is ruled by 8x8, Vonage Business, RingCentral, Fuze and a bunch of other providers that are not a telco. The PBX market may be shrinking but not fast enough for the other Hosted VoIP players. Cisco and Microsoft have chunks of the enterprise UCaaS business that the telcos don't.
Comcast Business is at $6B in annual revenue, which makes it a bigger CLEC than almost all that are left. WIND does $5B. EarthLink less than $1B. Birch and TelePacific are private. Level3 does $8B. CenturyLink does $17B (much of it ILEC revenue). Zayo is $2B.
Apps like Messenger, WhatsApp, Skype and Slack are replacing voice and SMS and even email. It is a topsy-turvy world. What's a telco to do? Well, merge! Get bigger because bigger solves nothing, but it makes money for top execs in the C-Suite and the Board room and on Wall Street.
Our economy spins on e-commerce and the Internet. When the companies that provide that Internet are too clunky to do it properly, what happens to our economy?
We went from a five nines voice network of reliability to cell phones and VoIP that quite frankly can't be more than three nines. Have you noticed the number of outages lately by telcos and cablecos?
There is a lot going on. There are many areas of opportunity, but the fall back from these guys is "more of the same", "do what I know" and "one more quarter!". None of these transactions is good for the industry, the economy or the consumers. They are stop gap, short term money movers. We are going to wake up shortly and realize that it is 1970 all over again. It makes the NSA job easier when there are few players, but what about the customers?
In the data center space, one master agency contacted me after the C-Link announcement to tell me that the folks at CenturyLink have no details about the sale. How can that be when Monroe has been trying to sell the DC division all year? Great planning, guys!
Whose customer is it? Will the agent still get paid? Will the customer see a price increase? Who is the billing entity? Who will the customer be paying? These are good questions that bothered some TELX customers when Digital Realty took over.
I keep seeing executives at master agencies say these deals are good. Do they say that in print because they have to?
Don't forget that you can leave a public comment with the FCC on any of these mergers. You can voice your opinion here. You will need a docket number but you can google it after the filings are in the system.
]]>I wonder back to when AT&T tried to buy T-Mobile in 2011. That Obama Admin said NO. Despite the fact that AT&T was actively helping the NSA and other 3-letter agencies since before 2006, when Klein exposed Room 641A.
Then there is the other program that AT&T runs for the feds: "Hemisphere was used far beyond the war on drugs to include everything from investigations of homicide to Medicaid fraud." The Daily Beast explains how AT&T is spying on Americans for profit. (It would be weirder if they were just doing it for fun.)
Barry Eisler spells out how all this works via his "fictional" book God's Eye View.
AT&T has hedged its bets since the T-Monile No. It won approval for DirecTV. It plans to get a Yes from the DOJ - and has told the FCC that they don't have a say in this acquisition.
From NEXTDRAFT by Dave Pell: "Will the AT&T acquisition of TimeWarner get federal approval? Before you place your bet, consider this data provided by the NYT: "AT&T is the biggest donor to federal lawmakers and their causes among cable and cellular telecommunications companies, with its employees and political action committee sending money to 374 of the House's 435 members and 85 of the Senate's 100 members this election cycle."
Why are they buying TW? Well, to catch up to VZ and Comcast. And because all the pies are flat. AT&T had a bad quarter. VZ has a had a couple. They are laden with debt. Cellular which is half the revenue or more is being picked apart by T-Mobile and to a much smaller extent Sprint. Cable is eating the wireline broadband lunch*. Since all of the bets were on cellular, it is now a run to use fixed wireless (LTE or licensed) for broadband deployment which will increase ARPU for them -- and the bills to consumers.
Ma and Pa Bell have spent tens of billions on spectrum. They will use it to get out of terrestrial broadband and have everything be wireless. They will still have to figure out the T-Mobile problem as well as the cable wi-fi problem.
They want content to build a walled garden - like Facebook or AOL before them. When you own the content you can be king, just ask Comcast/NBCU or Disney.
The one thing that will kill off the telco is an economic depression. When the US experiences another economic slowdown - like say 3Q2017 - consumers will have a lot less money to spend. That means ARPU will not go - and subscriber counts will go down. When you have to eat, you skip HBO and cable TV.
The auto industry is already feeling this crunch. More leasing, less sales, more discounts, interest free loans. The cars last longer. And driverless cars are coming.
One reason for immigration is to actually increase the population of the US. Millennials aren't having kids - in many cases because student loan debt and poor salaries make a child too expensive, except by accident.
In the midst of this noise 2 things to note: (1) ABRY is selling Masergy to Berkshire Partners for about $1 Billion dollars. The reports say $900M; I was told it is more than that.
(2) Google Fiber is laying off. The CEO of Google Access, Craig Barratt, is also stepping down. Too few subscribers, too many hassles means they will try fixed wireless then probably call it a day. The Duopoly of cable and telco have successfully squashed competition. And for all the little guys cheering, it could be you next!
Please note that in the middle of all this, despite the skyrocketing analyst forecasts, cloud computing is not mentioned in this scenario. Why? It amounts to peanuts in revenue for the Duopoly. "Total SaaS/PaaS revenues of top 50 software companies globally are $22.4B. Microsoft, Oracle, IBM, SAP, Symantec, EMC, VMWare, HP, Salesforce and Intuit are the top ten software companies worldwide," according to Fortune and PWC. Unless they were to buy Salesforce to gain $5.5Billion in revenue, they have to go content. Microsoft bought LinkedIN for $26B!! And LI revenue isn't even $4B dollars.
IOT isn't even a billion dollars in revenue for VZW yet. So how do you move the revenue needle at the former Bells?
* Per telecompetitor, "The number of U.S. fixed broadband subscribers dropped by nearly 200,000 on a net basis in 2Q 2016, a decline of 0.2 percent, according to the latest market data from Point Topic."
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