Back from a brief trip to San Francisco, I wanted to share some of the industry news making headlines over in the United States.
Now that the Comcast – TWC merger has fallen through, new deals are in the works. As America’s biggest cable company, Comcast, has put an end to its plans to merge with the number two player, Time Warner Cable, largely because anti-trust authorities were proving hostile to the deal, everybody is wondering what will happen next, as there is little doubt that the country’s cable market will continue to consolidate. It is entirely possible that the number four cableco, Charter, will make the first move, reviving an earlier attempt to take control of TWC that was quashed by Comcast’s bid – albeit compensated to some degree as the company was able to pick up a few assets in the bargain.
The deal could start by Charter merging with Bright House, sixth biggest cable company in the US and an old TWC spin-off, before making a play for TWC. This merger would not be without consequence for the Europeans as Charter’s biggest shareholder is Liberty (more precisely, Liberty Broadband and its redoubtable CEO, John Malone. It is also worth considering that John Malone swooping back in into the American cable market might pave the way for a deal in Europe between Liberty Global and Vodafone…
This consolidation in the cable market cannot be seen separately from the growing popularity and presence of streaming video services (Netflix, Hulu, Amazon, HBO Now, CBS, YouTube, etc.) which represent a threat to cable companies’ revenue – with a potential ability to cut them by half. They will need to become more powerful, to stand up to this new source of competition, protect their exclusive rights to feature films, series and sport. Otherwise, they will be pushed out of the market, and reduced to the status of dumb pipe…
Ubiquitous Gigabit networks in the near future?
We still don’t know what Comcast plans to do. If it can continue to improve its clusters in the main markets through customer swaps, it no longer appears to be in a position to expand its footprint by increasing the number of households it covers. In fact, it may become increasingly bent on protecting cable’s supremacy in its broadband market franchises: currently accounting for more than 60% of the market and close to 80% of all new subscriptions each quarter for several years now. The danger here appears to come from the momentum triggered by Google Fiber to deploy symmetrical 1 Gbps access (for 70 USD a month, without the TV channels), with the first plans available in several cities, including Kansas City, Missouri, Austin, Texas and Provo, Utah. Taken first with some scepticism ("Fiber To The Press Release"), today Google’s initiative has translated into subscriber numbers in the tens of thousands, which is making ISPs sit up and take notice. It is a move that has won the support of the Chairman of the FCC who early on stated his plans to abolish the ban on municipal networks that exists in some states, and has attracted real interest from a number of cities. From a list of around 34 cities whose applications are being examined, five – Raleigh-Durham, Charlotte, Nashville, Atlanta and Salt Lake City – were selected early in the year for the next Google Fiber rollouts. As this initiative gathers pace, and feeling their franchises threatened, telcos and cablecos have responded by announcing their own Gigabit network rollouts. AT&T, which had focused chiefly on hybrid fibre-copper networks with VDSL, has begun to deploy FTTH at 1 Gbps in Austin, Texas.
Since then, the country’s biggest telco has reveal plans to follow up with similar rollouts in 21 more metropolitan areas, including cities such as San Francisco and Los Angeles where Google Fiber has no plans to set foot as yet. Century Link has also unveiled its plans for Gigabit network rollouts. Verizon, meanwhile, has taken something of a back seat, increasing access speeds on its Fios FTTH lines to 500 Mbps, and for its video bundles, but does not appear to have plans to enter the fray and expand its fibre footprint. Over in the cable market the number three player, Cox Cable, was the first to deploy Gigabit networks – in Phoenix, Omaha and Las Vegas – and has committed to steadily expand into other markets. This was the backdrop to Comcast’s subsequent announcement of 2 Gbps connections for 1.5 million households in Atlanta by next month, and for a total 18 million households by the end of the year – but no mention of how the plans would be priced.
Although we are hearing more and more Gigabit network announcements in the United States, a grain of salt would not be unwarranted. First, because we are all aware of the inevitable gap between headline speeds and actual speeds. Second, because figures on the scale of the rollouts, the actual increase in the number of homes passed and the sums earmarked for the deployments remain unclear. And, lastly, because there has not yet been any feedback on the use of these plans speeds…
Will the FCC and FTC also block the AT&T – DirecTV merger?
More than a year after the 49 billion USD merger was announced, the two protagonists are still waiting for authorities to greenlight the deal. In theory, the merger has set off fewer alarm bells than the Comcast/TWC deal, as it involves a telco and a satellite pay-TV provider. But it would nevertheless consolidate the position of the country’s biggest pay-TV provider, which already has 26 million subscribers in the United States, compared to fewer than 6 million for AT&T’s U-Verse and more than 20 million for DirecTV. This tremendous market clout is the central argument being put forth by Netflix and others who are demanding certain commitments in exchange for the deal going through.
Faced with the likelihood that the FCC and the FTC will give the merger the nod, discussions today have shifted to what these commitments might be: an obligation to sell broadband and pay-TV services separately, forbidding the new company from unduly favouring its own OTT TV programmes, for instance by imposing data caps on the use of rival services, etc.
The final thing to remember is that the merger would also provide AT&T with an opportunity to strengthen its offensive on the Mexican market, where it has already made substantial investments in its mobile business via Iusacell and Nextel, and on Latin American in general, where DirecTV already operates.
What does the future hold for T-Mobile?
The first thing to mention is the dip in the US market: after rising steadily, contrary to the European market, revenue (year-on-year) began to decrease for the first time in Q4 2014 – a trend that carried on through the first quarter of 2015 (46.093 billion USD versus 46.880, year-on-year). With 39 million customers, Deutsche Telekom’s 67% owned US subsidiary is poised to overtake Sprint in prepaid/postpaid/wholesale market share – 15.8% versus 15.9% – to become the country’s third biggest mobile operator. In Q1 2015, the telco’s aggressive pricing strategy brought in 1.125 million subscriptions, including 991,000 mobile phone accounts – the remainder being for tablets. At the same time, T-Mobile needs to sustain very high spending levels to achieve LTE coverage nationwide. The company’s finances will also feel the pinch of the second digital dividend auctions (600 MHz band) in 2016.
So it is with all this in mind that market watchers keep waiting for a new merger or acquisition deal to be announced. As it seems unlikely that the authorities will agree to a major merger inside the sector, many see Dish as the most likely candidate. The satellite pay-TV provider acquired more than 100 MHz in the different frequency bands and spent more than 10 billion USD at the latest AWS3 actions, without saying what the spectrum will be used for. Another option would be for Comcast – which, like other cable companies, is very committed to its Wi-Fi strategy – enter the mobile market. One major story making the rounds is the launch of Google’s Wi-Fi First service, based on agreements with T-Mobile and Sprint. Certainly less ambitious in scale and means than Google Fiber, this initiative nevertheless raises the same questions: is this the Mountain View company’s way to stimulate competition in the access market? Or should we see it as a desire to diversify by developing a presence over time in the telecommunications sector?
Follow-up to the FCC’s net neutrality decision
Debates since the regulator’s decision have gone in two directions. The first are over how the courts will rule in opposition cases. Among the FCC’s opponents is cable association, NCTA, whose former long-time chairman now heads up the FCC, and whose chairman today is Michael Powell who was the FCC chairman in 2005 when broadband access was classified a Title I service. The second topic of debate concerns interpretations of the FCC decision. Those who are criticising Facebook in India and its Internet.org offer are stoking the polemic over how compatible the different zero rating options are with net neutrality. Not least because Canadian regulator, the CRTC, recently cracked down on zero rating offers from Videotron and Bell Canada.
Verizon acquires AOL for 4.4 billion USD
Verizon is pushing through with its strategy to snap up the content that will allow it to sustain its LTE market leadership, and its mobile video business ambitions. In addition to the content brought in from AOL, the deal gives Verizon control of the adap.TV platform that AOL bought in 2013, which should prove an interesting asset when going up against Google and Facebook in the sale of advertising inventory (the two heavyweights currently accounting for close to 70% of the market).
The end of the Patriot Act and the NSA’s unchecked powers?
The House of Representatives voted in favour of a bill that would put an end to the most controversial sections of the law that was passed after the events of 9/11. Topping the list, wire taps will once again need to be authorised by a judge. The bill is still being hotly debated in the Senate, but hopes are high that it will go through.
Google cars hitting the road in California
We may well see city road testing begin on the first driverless Google cars this summer. Although authorities have demanded that Google put a steering wheel and brake pedal back in the cars, to allow the user to take control of the vehicle if necessary.
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Over the past few decades, TV service providers’ market power guaranteed them a certain leadership in production.
Thanks to a steady relaxation of competition rules in the United States, the resulting vertical integration trend has seen production studios merge with TV networks and cable companies. In other markets, such as France, public authorities have continued to oppose such a trend, underscoring how vital production independent of the top networks is to sustaining diversity and creativity.
A new way of consumption
Here too the Internet is changing the status quo. We watch more and more videos. We watch them more on our own, and from increasingly global sources. Content providers and pay-TV distributors are being penalised both by their costs and their only national footprint, and are having to contend with two major threats: being cut out of the service equation and being cut off from customers. Market heavyweights like the ones found in the United States are having to weigh the pros and cons of working with a platform such as Netflix that is expanding worldwide, versus setting up their own over-the-top solution… and protecting what is still their main source of income, i.e. selling programmes to TV channels (including affiliate stations). But their dilemma is still less dire than the one facing Europe’s independent providers, who have a primarily national footprint and which are often restricted in the extent to which they can exploit the rights to the programmes they help finance.
Ecosystem and legislation
The European Commission likes the idea of having TV rights negotiated for the EU as a whole. It would provide an opportunity to introduce the idea of economies of scale in a lucrative sector, and one that has a tremendous cultural influence. Unfortunately, in its revised version, this plan, which is one of the pillars of the Digital Single Market proposal unveiled in early May, is coming up against Europe’s very disparate set of national TV ecosystems. As national laws – and especially the state of the industry – currently stand, very few companies in the EU can hope to come out winners in any negotiations for rights to all 28 European markets. Bluntly put, a very cut and dried application of such a scheme would more likely be a boon for outsiders such as Netflix, Google, Apple, Facebook, Amazon, etc.
Despite which, our desire to be optimistic leads us to hope that the steady and inexorable development of the OTT video model will drive a change in legislation across Europe, and lead to cross-border and possibly continental deals between Europe’s TV sector players.
For the publication of the last study about "OTT Regulation" and the 15th edition of the DigiWorld Yearbook, IDATE is organizing a conference on the perspectives and key trends that will structure the digital economy for the next decade, DigiWorld Future
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Year after year, the economic and financial power of the GAFA quartet of Internet platforms continues to increase. Which brings two questions back to the fore, again and again: what trends might emerge to counter this seemingly inexorable rise? And do we need regulations that apply specifically to platforms?
A quick reminder of what economists mean by platform economics (digital or not): multi-sided markets (i.e. involving interactions between two or more parties) with reciprocal “network effects”. So the more iPhones that Apple sells, for instance, the more attractive its app store becomes to developers (and so to users), and vice-versa. In digital sectors, this characteristic is typically combined with a reduction in fixed costs (software), generating increasing returns as the platform becomes more successful.
Network effects usually go hand in hand with another property: asymmetrical prices. If Apple is starting to earn substantial income from the App Store, its business model and profits are rooted chiefly in the high price of its iPhones. With ad-funded models, one side of the market operates as a free service. As we have seen with Apple, digital platforms are a very efficient means of fostering open innovation, and capitalising on innovations from third parties. All of these aspects, which go some way to explaining why “winner takes all” when it comes to platforms, naturally need to rely on the ability to maintain the role of intermediary, and continue to become more proficient at it. Otherwise, the platform’s customers and suppliers will begin to adopt multiple homes, before eventually moving on to another, better platform. The efficiency of the leading platforms is the very reason for the current ambivalence over how much they are serving the greater good. On the one hand are concerns that a dominant OS will abuse its position while, on the other, this popularity can also mean an opportunity for developers, and can have positive repercussions for consumers.
The dichotomy needs to be resolved by taking account of the Internet’s dynamics as a whole. Windows has been through a number of anti-trust investigations but, today, this is the mobile Internet which has moved down the priority.
Worth reading on this topic is the recent IDATE report on "The future of the Internet: 2025". It takes a detailed look at the key technologies for the coming years, and especially at how development scenarios will be shaped by key variables, such as the openness of the Internet ecosystems, or the impact of restrictive privacy or security-related public policies. Here, we will add two other events that take us beyond a GAFA-centric environment. First, 2014 saw a number of Internet powerhouses emerge from the shadows of the GAFA quartet: in China (Alibaba, Weibo…) and in Asia’s leading markets in general (Rakuten, Line…).
We cannot entirely discount the possibility of these players gradually coming to compete head on with their Western peers. Second, we need to consider the position held by new players moving into vertical markets, many of which have carved out a place of sector-specific intermediary – Uber and Airbnb being two prime examples – and which have no intention of being taken over by Google or Apple or the like.
Nevertheless, faced with the realisation that GAFA continue to become increasingly powerful, the inefficiency of antitrust laws and the regulatory asymmetries compared to those imposed on other players along the chain, the idea of regulation that applies specifically to platforms is gradually coming to the fore. It may not be a good idea. Competition law, even ex post, is not necessarily ineffectual.
Plus it will be no simple matter to define the contours of the platform sector. And extending existing sector-specific laws, such as those that apply to electronic communications, to make OTT companies and telcos subject to the same principles, would take us down a path where, as businesses become more and more digitised, every economic sector would be more or less governed by electronic communications laws. Keeping in mind that the upcoming review of the EU regulatory framework for electronic communications is expected to focus on network access conditions and interconnection – and probably put more emphasis on symmetrical regulation. Should voice and SMS products not be removed from the scope of the telecom sector’s ex ante regulation, rather than adding in competing OTT products such as Skype, Viber, WhatsApp, etc.?
It nonetheless remains that in sensitive areas for digital industry players, such as those governing contract law, taxation, public safety and privacy, we can very easily identify laws that should apply across the board, such as what we find in consumer products and the retail industry. Without having to produce laws that are specific to platforms, the current juncture could provide an opportunity to merge national legal provisions with regional (EU) and global ones, and to ensure that they apply equally to all players along the value chain
For the publication of the last study about "the future Internet in 2025" and the 15th edition of the DigiWorld Yearbook, IDATE is organizing a conference on the perspectives and key trends that will structure the digital economy for the next decade, DigiWorld Future
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Published in COMMUNICATIONS & STRATEGIES No. 97
Chief Economist at Google;
Emeritus professor at the University
of California, Berkeley
C&S: What are the biggest challenges for governance/regulation created by growth of the big data market? Are there big differences between the US/Chinese and European approaches to big data opportunities?
Hal VARIAN: There are policy issues relating to data access and control that arise constantly. This generates a lively debate, to say the least. As an economist, I would like to see serious benefit-cost analysis guide regulatory policy.
What are the most important skills sets for those who need to make sense of results of big data analytics?
Statistics and machine learning are most obvious. But in order to put analysis to work, communication skills are critically important. To be effective, a data analyst needs to turn data into information, information into knowledge, and knowledge into action. You can't do this without communication.
What are the biggest opportunities for business and are businesses able to make effective use of big data to improve their margins?
As in every business, it is imperative to understand your customer. When you can draw on computer mediated transactional data, it is possible to gain a deeper understanding of the customers' needs than was previously the case.
What has big data analytics to learn from mainstream econometrics and what can big data analytics contribute to mainstream econometrics?
Econometrics can draw on some of the powerful techniques of predictive analytics that have been developed by the machine learning community. These tools are particularly helpful when dealing with data involving nonlinearities, interactions, and thresholds.
Econometrics, on the other hand, has focused on causal inference from its very early days. Techniques such as instrumental variables, regression discontinuity, and difference-in-differences have been widely used in econometrics but, to date, have not been used in the machine learning community.
Finally, the statistical field of experimental design will be valuable to both communities, as computer mediated transactions enable true randomized treatment-control experiments, which are the gold standard for causal inference.
What should be added to standard US Ph.D. programs in economics to make the students big data literate?
There are now very good textbooks, online tutorials, and tools that make it relatively easy to put together a course on machine learning. In addition virtually all computer science departments and many statistics departments offer such courses.
Hal R. VARIAN is the Chief Economist at Google. He started in May 2002 as a consultant and has been involved in many aspects of the company, including auction design, econometric, finance, corporate strategy and public policy. He is also an emeritus professor at the University of California, Berkeley in three departments: business, economics, and information management. He received his S.B. degree from MIT in 1969 and his MA and Ph.D. from UC Berkeley in 1973. Professor Varian has published numerous papers in economic theory, econometrics, industrial organization, public finance, and the economics of information technology.
The Communications & Strategies No. 97 "Big Data : Economic, business & policy challenges" is now available !
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Il décolle ! Le marché du Serious Gaming en forte progression pour atteindre les 12 milliards d’Euros d’ici 2018.
L’innovation est au coeur des préoccupations des entreprises qui développent des Serious Games. Elle porte sur des aspects technologiques (accessoires, terminaux, interfaces, réseaux, logiciel et cloud), sur les contenus (gameplay, graphisme, stratégie éditoriale), et également sur les services d’accès aux SG (conditions d’accès, add-on, modularité de la plateforme, fonctionnalité sociales).
Cette progression du marché offre donc des perspectives très prometteuses aux développeurs de Serious Gaming (SG) sur le territoire français, comme le confirment les cinq sociétés que l'IDATE a invitées à collaborer à ce rapport : Daesign ; KTM Advance ; Groupe Interaction ; Manzalab et Dassault Systèmes.
Aussi, sur la période, on observe une croissance à deux chiffres à partir de 2015 et un pic de croissance sur 2016-2017. Ce pic correspond à un phénomène d’accélération de l’adoption du SG comme outil de formation et d’information par des PME. Aujourd’hui, ces dernières commencent à vouloir adopter ces outils vendus sur étagère.
La formation initiale et continue représentera plus de deux tiers du marché en 2018
Le segment de marché de la formation initiale et professionnelle représente le premier segment de marché du SG. Ce segment offre l’avantage d’avoir des modèles économiques compris et acceptés des commanditaires, de la production à façon à l’acquisition de licences utilisateurs.
Pour rappel, en 2014, ce segment représentait plus de 60% du marché global. Il gagnera 10 point jusqu’en 2018.
À l’image du marché mondial, le pic de croissance concernera davantage les années 2016-2017.
Ainsi, Dans les trois années à venir, le défi des acteurs offrant leurs services dans le SG sera de convaincre les entreprises de plus de 500 salariés, soit près de 2 700 en France. Les experts de l’IDATE s’accordent à dire que ce défi pourra être relevé tant les preuves du concept ont été faites auprès des grands comptes nationaux. Il s’appuiera donc sur différents facteurs clés de succès :
Pour retrouver toutes les informations concernant l’étude Serious Gaming et les études associées, cliquez-ici
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IoT : The Internet of Things
Connected objects were everywhere and IoT is now becoming the Internet of everything.
Connected cars attracted a lot of attention with connected vehicles on most of equipment manufacturers’ and MNOs’ booths.
Renault’s CEO made a keynote where he presented the timetable for assisted driving. According to Mr. Carlos Ghosn, despite their numerous initiatives and some acquisition rumours, Internet giants are not rivals to car manufacturers but allies, as they consider electric cars and they help car makers to promote electric cars.
Ford had even its own booth presenting the electric vehicles (both passenger and entreprise cars) with dedicated solutions. In the meantime, Vodafone presented a Porsche Panamera model equipped with its new Telematics solution since the Cobra acquisition.
Smart is also getting traction in the IoT space. In the “innovation city” hall (space dedicated to the connected objects), through the AT&T offering (Digital life) where the home could control through the smartphone and even through the connected car (equipped with an AT&T SIM card). When approaching the home, the car can trigger the opening of gate by itself for instance (pre-programmed distance).
While 5G is already in the tracks, very low throughput network technologies are also under the spotlights. After the recent release of its 100 MEUR fundraising campaign among telecom operators, Sigfox was also on everyone’s lips at the MWC. Among the main new shareholders, Telefonica confirmed its strategic investment and its willingness to integrate the technology into its portfolio to address additional verticals and applications.
The GMA (Global M2M Association) also announced a strategic collaboration with Gemalto and Ericsson to provide a Multi-Domestic Service based on a single SIM (using the eUICC technology) helping global enterprises (chiefly from the automotive and consumer electronics segments) capitalize on the growth of connected devices.
Growing market but still key challenges though
During his keynote, if AT&T Wireless CEO predicted that the smart phone will be the remote control of everything in the next few years, he also pointed out the key challenges to address in order to make the IoT market grow significantly:
• Privacy concerns
• Effortless (ease of use)
Data about devices and their users is generated in real-time, often by default and without the user being aware or having choice (especially for free apps). There is a need for a different approach to giving users transparency, choice and control over their data and privacy.
Generally user has a single choice : accept or not using the service, there should be gradual approach (like sharing some id attributes but not all of them).
Privacy could be a competitive stick for service providers, as users are becoming more aware of privacy.
Facebook in emerging countries
• Airtel: “Operators and Facebook are like the beauty and the beast, but the beast (facebook) is becoming more human nowadays”. Airtel was reluctant to introduce Facebook because of VoIP threat. Is looking at it like the “boiling milk”.
• Millicom, Telenor: have seen ARPU rise thanks to facebook launching, very promising for them.
• Wikipedia has the same approach of “Wikipedia zero”, dealing with operator to provide data access for free.
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Nouveau cycle de conférences de prospective numérique sur les enjeux de l’Internet, de la télévision et des télécoms à 2025
A l’occasion de la sortie de la nouvelle édition de son DigiWorld Yearbook, l’IDATE présente son nouveau cycle de conférences de prospective numérique sur les enjeux de l’Internet, de la télévision et des télécoms à 2025 !
A partir des analyses des experts de l’IDATE, les débats seront animés par Marjorie Paillon, Journaliste, Tech 24, Philippe Escande, Rédacteur en Chef, Le Monde et Gilles Babinet, avec les contributions exceptionnelles de :
IDATE announces 2.3 billion LTE subscriptions worldwide by the end of 2018, generating revenue of close to €700 billion
IDATE forecasts than more than 500 million LTE subscriptions worldwide, representing 7% of total SIM cards (Q4 2014):
- Top three countries for LTE subscriptions: USA, Japan, South Korea at end of 2013 and June 2014.
- China jumps into fourth place mid-2014, expected to rank second at end 2014.
- USA represented 45% of the total in 2013 and will account for 38% end 2014.
Total LTE revenues are expected to more than double in 2014. They tripled in 2013:
- IDATE expects 160 billion EUR in 2014, 11% of total mobile revenues.
Country leaders have now reached (or almost reached) nationwide LTE population coverage: Japan, Korea, Hong Kong, Singapore, Australia and USA.
By the end of 2018 we forecast, overall, there will be more than two billion LTE subscriptions worldwide (2.3 billion) or 29% of total SIM cards.
In terms of technology, 2014 is the year of:
- LTE-LTE-Advanced features deployment, especially carrier aggregation (LTE-A launched in June 2013 by SK Telecom);
- VoLTE services introduction;
- First LTE broadcast deployment.
LTE subscription forecasts, 2014-2018 (million)
Top 10 LTE markets by subscriber numbers (million, estimates in italics), mid-2014
LTE coverage (% of the population, mid-2014)
Source: IDATE, in World LTE market, December 2014
IDATE publishes a range of reports on the core issues surrounding mobile market technologies and services around the globe:
- LTE USA
- World Mobile Spectrum
- New Frequency Band Spectrum
- World LTE market
- Mobile Advertising