Archive for March, 2001

SATELLITE DOMINATES CABLE WORLDWIDE – MARCH 2001

Thursday, March 1st, 2001

Across the globe, the satellite industry continues to dominate the emerging digital television market, according to the latest research from Strategy Analytics.

The London-based firm said 65% of all new digital television customers worldwide chose a satellite-delivered service in 2000, compared to only 31% who opted for cable. Cable operators, particularly in Europe, are still failing to respond to the growing threat from satellite-based multichannel and interactive services, Strategy Analytics said.

While overtime, the continued restructuring and consolidation of the cable industry will help to speed the digital transition, right now, satellite appears to be continuing its momentum.

In total, 20.5 million homes switched to digital TV in 2000. Satellite’s share of new digital customers increased slightly in 2000, to 65% from 64% the year before, while cable’s share fell from 32% to 31%.

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DO NOT LET THE KNOWLEDGE WAVE GOODBYE (NEW ZEALAND) – MARCH 2001

Thursday, March 1st, 2001

By Keith Newman (wordman@wordworx.co.nz)

Over the past 20-years there have been many calls to diversify and shift the economy onto a basis more in keeping with the 21st century. Lack of action to back up all the revolutionary ideas put forward in the past has created a scepticism about state-run talkfests.

Promotional material for the Catching the Knowledge Wave project to be run by the government and Auckland University in August is full of hype and rhetoric and has left many wondering how real world outcomes can be achieved without some serious visionary leadership and financial investment.

Successive governments asked Harvard Business School alumni Michael Porter to come up with a prescription for our economic ills. He warned our 1950s economy would continue to decline unless government and business took notice of the march of technology, entered the free market and became more responsive.

Many business leaders took to his ideas while the government took us through the painful process of privatising, reducing subsidies and opening up our markets to the world. Nearly a decade on Porter returned telling us we’d done the difficult things but beaten ourselves up in the process, taking the ideology of the free market to the extreme. He said the government should have been stimulating our thinking, retraining the workforce, investing in science and technology, encouraging innovation and capitalising on our uniqueness. Instead we got the hands-off treatment. What we need, he told us is an ‘energising national vision’ of what New Zealand could be. We must invest in clustering establishing technology incubators where like-minded people work together benefiting from each other’s contributions and fostering innovation.

In the five years since, venture capital industry has come into its own and even the government is considering backing its own investment vehicle. Earlier this year to the surprise of the entire industry science minister Pete Hodgson promised to ask the government for ‘tens of millions of dollars’ for a venture capital fund to back great Kiwi innovations, in tandem with private sector funding.

However the other key factor tax writes off and incentives to invest in research and development so international firms are more likely to locate here, continues to fall on deaf ears. The banking fraternity also remains unconvinced that there is any security in intellectual property and continue to propagate the myth that only bricks and mortar have any lasting value.

In recent months we’ve been on the talkfest track again with the Labour Alliance government giving the hands-off philosophy of the previous party the old heave ho. The new focus on removing the roadblocks to the knowledge economy kicked off with the e-Commerce Summit last November and continues through a series of roadshows around the country to inspire the private sector to get with the program. The summit made it appear as if the Government was leading the way into a new era. But the technically literate present at the Aotea Centre may as well have been at an Amway conference. Our politicians who’re mostly still struggling to come to terms with e-mail, were preaching to the converted.

While echoing industry concerns and attempting to make peace with the business community, much of what was said simply picked up the old pieces and threw them up in the air again. We’d heard the platitudes often enough: Venture capital must be encouraged, changes made within education and the immigration policy overhauled. To ease the way for e-commerce activity the Government is however, pushing through a raft of legislation, which has been in the too hard bin for too loo long. This will make hacking a crime, recognise electronic documents and provide consumer, intellectual property and privacy protection.

A private sector-based e-Commerce Action Team is currently being put together to oversee business initiatives and advise the government on how the nation’s e-commerce plans can be streamlined.

The knowledge economy is about like-minded individuals and organisations creating virtual communities and marketplaces. The e-word cuts out the paper chain, reduces queues and bureaucracy and results in efficiency and profitability. More haste means less waste. Smaller businesses must learn to use the Internet and intranets, and partner with likeminded firms to gain access to the tools, Web exposure and buying power with suppliers and distributors. Successful companies of the future will form tight electronic clusters with their supply chains. They will be reluctant to do business with those unable to order, invoice and settle on-line. Pretty soon the Government will make similar distinctions as it seeks to become ‘a model user’ of e-commerce. Any company wanting a slice of public sector business must be e-commerce capable.

Proposals and suggestions on how to get the nation up and running with the e-commerce vision are being posted on the Ministry of Economic Development e-commerce Web site. The future of e-commerce and the knowledge economy depends on equitable access to high-speed communications throughout the country not just in selected central business districts. Competition is the key and without a firm directive from the government and a heavy hand ready to come down on those who abuse their dominant position in the market we all suffer.

While some positive things have come from the government’s Telecommunications Inquiry, many of its more inspired recommendations were ultimately sidelined. The position of Telecommunications Commissioner will be advertised in time for legislation changes designed to provide an improved framework for competition. The industry will fund the Telecommunications Office, housed within the Commerce Commission. The job description and funding process is part of work under way in the Ministry of Economic Development to prepare for the new regime.

Legislation will be introduced in March or April which will require wholesaling of Telecom’s fixed network services and regulation of the interconnection process, enshrine a revised Kiwi Share agreement embracing Internet access and requiring Telecom to upgrade its network to provide a minimum level of service for surfing

We are world leaders in the use of ATMs and eftpos with a unique centralised banking system. We have the Kiwi Share, ensuring free local calling – including Internet access – for all households. Our uptake of the Internet is at critical mass and the cost of access relatively low.

What we haven’t done is invested in winners, created the right support infrastructure, championed the knowledge economy or marketed ourselves to the world. While we have the expertise and the ideas are hi-tech, compared to our OECD peers, the number of technical graduates in engineering and computer sciences and the amount spent on research and development is abysmal.

A survey of 103 scientists revealed 58% would not recommend taking up a career in science. The pay was poor, the funding scarce and the career path unattractive. Meanwhile the number of young people even vaguely interested in a career in science and engineering continued to decline.

We’re still short on supplying the real stimulation, vision and leadership the marketplace needs to inspire growth in leading edge industries. We’ve analysed how Israel, Ireland, Singapore and Finland transformed from flagging economies to success stories. We’ve listened to the experts, had endless input from industry groups and for a decade deliberated, pontificated, puzzled and pondered. In the wake of inaction the top echelon of business leaders has left the nation, uplifted their investments and almost $12 billion of our business assets have been sold off overseas.

We are still at the crossroad when we should have determined a clear direction a decade ago and be well down the track to impressing the world. We need a long- term strategy for e-commerce and the knowledge economy that extends way past any political party’s term of power. Granted the proposed Catching the Knowledge Wave gathering is another step in the right direction if it focuses on what will create the most employment and wealth for the most people.

So who are the 300 invited guests who will listen to the so-called international experts? Will they be the same in-crowd who always turns up to these events? Will it simply be politicians, heads of large corporates and technology company executives patting themselves on the back and feeding on their own hype? Or will the focus be on our struggling small businesses, budding entrepreneurs and innovators who need a lot more than kind words right now? They need action to get the tax department off their back and the government waking up to the potential of their intellectual property and helping to promote their ideas and products to world markets. Rather than clobbering sunrise science, new media and technology start-ups we should be helping them with tax breaks and research and development incentives. The right approach would attract investment, curb the burgeoning brain drain and put something of substance other than ‘lifestyle’ and ‘clean, green and keen’ in the global marketing brochure.

It’s time to get clicking – to invest in the technology, policies and a vision that embraces 21st century business practices and promotes national pride in our creativity and hi-tech know how. The Web is our window on the world, giving New Zealand equal opportunity alongside any competitor anywhere. We pull the blinds at our own peril.

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TELECOM NZ SPEEDING ALONG THE HIGHWAY – MARCH 2001

Thursday, March 1st, 2001

It is good to see that Telecom is moving ahead at great speed along the information highway – they have been actively promoting their high-speed Internet service Jetstream. At the same time several other carriers around the globe, including Telstra in Australia and BT in the UK, are dragging their feet as they don’t want to cannibalise their existing data services.

The company has now 82 ADSL equipped exchanges able to potentially supply a total of 806,000 customers (48% of all residential lines, 64% of all business lines and 71% of corporate customer lines).

Take up of the initial Jetstream service is now over 12,000, mainly business users, which is already well above the uptake in Australia.

The company launched Jetstart in the residential market in January 2001. The price is well geared to this market at $29.95 a month. On top of that are the ISP charges which range on average from $24.95 to $34.95 a month. This means that you can become a (all-you-can-eat) broadband user for just above $50 a month. This is a clear indication that Telecom New Zealand means business. They are using their front position in the market to rapidly increase marketshare and I would not be surprised if they establish a 20%-25% penetration amongst Internet users within the next 18 months.

The increase of users is providing Telecom with the same problems as experienced overseas – a slow down in network performance. However, at any time the service is still at least double the speed of dial-up services.

On another front the company is progressing its information highway activities with the launch in March of combined home entertainment and telecommunications services, SKY-FI and SKY-FI+.

At the heart of the SKY-FI+ offer is the Xtra JetStart fast Internet service and SKY Digital Basic television. For a monthly fee customers can enjoy these plus Telecom’s Call Connect service, combining home phone and 025 mobile messaging services, and Telecoms HomeLine rental.

The two SKY-FI offerings follow a trial of around 6,500 residential customers, mostly in Wellington and Christchurch, involving SKY and a range of Telecom services .The move follows last month’s announcement that Telecom bought itself a seat on the SKY Television board, and a deal for Telecom to resell SKY’s services.

Telecom is making sure this time that it will have a head start in the market, as it is expected that Telstra Saturn will become a major competitor in this field. Telecom has an 18-month window of opportunity to use its first-mover advantage and by the looks of it they are absolutely making the most of it.

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C&W CASH RICH, NO DIRECTION AND NO FUTURE – MARCH 2001

Thursday, March 1st, 2001

Cable & Wireless have hit yet another brick wall. I have lost count but their current restructured business, which was launched in 2000, was number 6 or 7 since the mid 1990s.

In 2000 they decided to quit the residential markets and concentrate on the top 5000 companies in the world and offer them IP based network for e-commerce, Internet and high-speed data services.

C&W closed operations in Europe and Asia, and the Optus sale is a result of that restructuring. True it has generated an enormous cash flow (£4 billion!!!), but as has been over the last few decades the company doesn’t seem to have a business nor does it have a clue where it is going. Tomorrow is another day, they may come up with another flavour and perhaps turn in yet another direction.

Their business, of offering global services to their customers, has not been performing – we warned of this in 2000.There have been many attempts from the various telcos since the mid 1980s in this direction. The current AT&T/BT alliance is far from successful and we have seen the failures of Worldpartners, Unisource and Global One, to just mention the main ones. Apart from that, every single incumbent carrier has seen itself as the potential global operator during that period and has positioned itself alone or in a bilateral arrangement. None of them have been successful. Cable & Wireless however thought that they were different, as they saw themselves as the only player who single-handedly could do the trick, as it already had a global network.

We realised at that time that this was easier said than done, getting customers to then actually use such a network is far more difficult. We analysed the situation at that time as we were very concerned about the future of Optus under the new regime. All of the top 5000 customers already had a myriad of services in place, often established over decades. It is in the more obscure places that these organisations need to operate at full strength. Every carrier in the world can link to London, New York, Amsterdam, Sydney etc. On these routes the deals are very lucrative and the connections are often no-brainer, so most companies go for the cheapest service and don’t need a global carrier to look after them. Furthermore, for these companies, the emphasis has already shifted from networks to e-commerce and none of the global or national carriers for that matter are seen as the experts in this market. For this you need the highly sophisticated applications providers, these are found in the IT&T market and again the top 5000 do already have decade-old relationships with their IT&T providers. These IT&T providers know the ins and outs of the businesses and are far better situated to guide the company into the brave new world of e-commerce. The underlaying networks are often seen as (important) commodities.

It now looks like C&W has also recognised this. Just after 10 months into the new strategy, the company has admitted that it would miss its growth and revenue targets.

So what is the future? The company could buy back the business it just sold, this of course is highly unlikely, but it could perhaps buy other companies, such as IT companies involved in e-commerce and Internet. It might also be a great take-over target for a cash-strapped telco, as C&W could be used for some large-scale broadband-based projects, which are based on a true vision and better strategies.

Paul Budde

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CAN ORANGE CONNECT TODAY WITH TOMORROW – MARCH 2001

Thursday, March 1st, 2001

At the recent 3GSMconference in Cannes, Orange received a battering from industry analysts. The company is relying too much on its brand, which is without a doubt one of the strongest in the industry.

However, as one of the analysts said:

The trouble is, Orange has begun to breathe its brand, and is in danger of hyperventilating.

In Cannes the company was raving about wireless controlled bath taps, voice-activated washing machines and uninterrupted videoconferencing. All this makes one wonder whether Orange is still in touch with reality.

The company has been talking up 3G, GPRS and WAP and still sees the wireless network as the holy grail of the telecommunications world. Others, such as Vodafone, have a far more realistic view of the world.

The comments of colleagues like Mark Newman from Global Mobile made me wonder about Hutchison, who are promoting the Orange brand in Australia. My reports on this service have run along similar lines. Since the major technology will remain GSM for at least this decade, we question the company’s wisdom in selecting the CDMA standard. Why create a marketing nightmare by first having to sell a technology before you can sell your product? The WLL strategy might be a great niche market technology, but wouldn’t warrant the investments made by the company.

Orange is now hyping up its GPRS network, telling us that this will be its next big thing, whereas a reality check will reveal that GPRS also will only support a niche market application. Not that there is anything wrong with that – but it would necessitate a realignment of business strategies, and I again would question whether the company’s current investment commitments can cope with this market reality.

Another line from the conference:

The company will have to connect today with tomorrow.

The Orange company internationally, and Hutchison in Australia, have proved to be strong and effective voice-centric mobile companies and their customer service is recognised as among the best in the industry. This is why customers like the brand, not for its grand visions. They have a great potential if they are indeed able to connect today with tomorrow.

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