The discussion started with a little tour de table, in which everyone had to explain his/her view of the law. I used the standard Alcoholic Anonymous introduction: “I’m Frederic, and I’ve been downloading for several years. I started with the seven seasons of The West Wing, and I keep downloading at a sustained rate. Worse, my kids inherited my reprehensible habit and I failed to curb their bad behavior. Even worse, I harbor no intent to give up since I refuse to wait until next year to see a dubbed version of Damages on a French TV network… I can’t stand Glenn Close speaking French, you see…” It turned out that everybody admitted to copious downloading, making this little sample of the anti-Sarkozy media elite a potential target for HADOPI enforcers. (Since then, parliamentary filibuster managed to emasculate the bill.)

When it comes to digital piracy, there is a great deal of hypocrisy. One way another, everyone is involved.

For some large players — allegedly on the plaintiff side — the sinning even takes industrial proportions. Take the music industry.

In October 2003, Wired ran this interesting piece about a company specialized in tracking entertainment contents over the internet. BigChampagne, located in Beverly Hills, is for the digital era what Billboard magazine was in the analog world. Except that BigChampagne is essentially tracking illegal contents that circulates on the web. It does so with incredible precision by matching IP numbers and zip code, finding out what’s hot on peer-to-peer networks. In his Wired piece, Jeff Howe explains:

BigChampagne’s clients can pull up information about popularity and market share (what percentage of file-sharers have a given song). They can also drill down into specific markets – to see, for example, that 38.35 percent of file-sharers in Omaha, Nebraska, have a song from the new 50 Cent album.

No wonder some clients pay BigChampagne up to $40,000 a month for such data. They use BigChampagne’s valuable intelligence to apply gentle pressure on local radio station to air the very tunes favored by downloaders. For a long time, illegal file-sharing has been a powerful market and promotional tool for the music industry.

For the software industry, tolerance of pirated contents has been part of the ecosystem for quite a while as well. Many of us recall relying on pirated versions of Photoshop, Illustrator or Quark Xpress to learn how to use those products. It is widely assumed that Adobe (NSDQ: ADBE) and Quark have floated new releases of their products to spread the word-of-mouth among creative users. And it worked fine. (Now, everyone relies on a much more efficient and controlled mechanism of test versions, free trials, video tutorials, etc.)

There is no doubt, though, that piracy is inflicting a great deal of harm on the software industry. Take Microsoft (NSDQ: MSFT) and the Chinese market. For the Seattle firm, the US and the Chinese markets are roughly of the same size: 75 million PC shipments in the US for 2010, 68 million in China. There, 78 percent of PC software is pirated, vs. 20 percent in the US; as a result, Microsoft makes the same revenue from the Chinese than from… the Netherlands.

More broadly, how large is piracy today? At the last Consumer Electronic Show, the British market intelligence firm Envisional Ltd. presented its remarkable State of Digital Piracy Study (PDF here). Here are some highlights:

—Pirated contents accounts for 24 percent of the worldwide internet bandwidth consumption.>

—The biggest chunk is carried by BitTorrent (the protocol used for file sharing); it weighs about 40 percent of the illegitimate content in Europe and 20 percent in the US (including downstream and upstream). Worldwide, BitTorrent gets 250 million UVs per month.

—The second tier is made by the so-called cyberlockers (5 percent of the global bandwidth), among them the infamous MegaUpload, raided a few days ago by the FBI and the New Zealand police. On the 500 million uniques visitors per month to cyberlockers, MegaUpload drained 93 million UVs. (To put things in perspective, the entire US newspaper industry gets about 110 million UVs per month). The Cyberlockers segment has twice the users but consumes eight times less bandwidth than BitTorrent simply because files are much bigger on the peer-to-peer system.

—The third significant segment in piracy is illegal video streaming (1.4 percent of the global bandwidth.)

There are three ways to fight piracy: endless legal actions, legally blocking access, or creating alternative legit offers.

The sue-them-untill-they-die approach is mostly a US-centric one. It will never yield great results (aside from huge legal fees) due to the decentralized nature of the internet (there is no central servers for BitTorrent) and to the tolerance in countries in harboring cyberlockers.

As for law-based enforcement systems such has the French HADOPI or American SOPA/PIPA, they don’t work either. HADOPI proved to be porous as chalk, and the US lawmakers had to yield to the public outcry. Both bills were poorly designed and inefficient.

The figures compiled by Envisional Ltd. are indeed a plea for the third approach, that is the creation of legitimate offers.

Take a look at the figures below, which shows the peak bandwidth distribution between the US and Europe. You will notice that the paid-for Netflix service takes exactly the same amount of traffic as BitTorrent does in Europe!

US Bandwidth Consumption:

Europe Bandwidth Consumption:

Source : Envisional Ltd

These stats offer a compelling proof that creating legitimate commercial alternatives is a good way to contain piracy. The conclusion is hardly news. The choice between pirated and legit content is a combination of ease-of-use, pricing and availability on a given market. For contents such as music, TV series or movies, services like Netflix, iTunes or even BBC iPlayer go in the right direction.

But one key obstacle remains: the balkanized internet (see a previous Monday Note Balkanizing the Web), i.e. the country zoning system. By slicing the global audience in regional markets, both the industry (Apple, for instance) and the local governments neglect a key fact: today’s digital audience is getting increasingly multilingual or at least more eager to consume content in English as it is released. Today we have entertainment products, carefully designed to fit a global audience, waiting months before becoming available on the global market. As long as this absurdity remains, piracy will flourish. As for the price, it has to match the Average Revenue Per User (ARPU) generated by an advertising-supported broadcast. For that matter, I doubt a TV viewer of the Breaking Bad series comes close to yielding an advertising revenue that matches the $34.99 Apple is asking for the purchase of the entire season IV. Maintaining such gap also fuels piracy.

I want Netflix, BBC iPlayer and an unlocked and cheaper iTunes everywhere, now. Please. In the meantime, I keep my Vuze BitTorrent downloader on my computer. Just in case.

Based in Paris, Frédéric Filloux is the GM of the French ePresse consortium. He also edits the Monday Note, where this was first published. It is posted here with his permission.

Related

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• Leaders In House And Senate Postpone Anti-Piracy Efforts
• Europe Says It Won't Adopt 'Bad' Digital Policy Like SOPA
• Over 9,000 Hackers Join Anonymous DDoS SOPA/Megaupload Protest
• SOPA Blackout, Anonymous-Style: FBI, DOJ Sites Downed In Megaupload Protest
• Updated: Day After Piracy Bill Collapses, Feds Shut Down Megaupload
• Tech Industry Breaks Back Of SOPA As Republicans Jump Ship On Black-out Day

This 4G auction—covering unused spectrum in the 800MHz band, along with higher-frequency airwaves in the 2.6GHz band—had previously been scheduled for the first quarter of 2012, and for those keeping track was talked about as early as 2009. Ofcom had to delay that when major operators protested Ofcom’s proposals for how it would allocate spectrum (the combined JV of Orange and T-Mobile and their existing spectrum presented one issue; another was how Three, the smallest of them, would get a fair shake). The regulator’s priorities are to make sure that there are four strong competitors, but it also wants to ensure that it raises the highest amount of money possible from those operators in exchange for the licenses.

The 3G auction in UK in 2000 raised a ridiculous amount of money for the UK government: £22.47 billion ($35.4 billion), with Orange, Vodafone (NYSE: VOD) Airtel (now just called Vodafone), O2 (then owned by BT (NYSE: BT) and called Cellnet), One2One (now known as T-Mobile) and new entrant Hutchison Whampoa (now called Three) all winning spectrum. Operators in the UK and elsewhere in Europe ended up having to write down some of the value of those costly 3G projects.

The advantage of a delay is that it has given Ofcom a chance to revisit some of the requirements that it will put on would-be 4G operators. It should be noted that so far it is staying out of saying what kind of services should run on those 4G networks, although it looks like LTE is the most-preferred technology among those operators.

And the disadvantage of the delay? Despite the UK government’s constant claims of being a digital leader, the UK is not very trailblazing in this case. Ofcom notes that mobile data demand in Europe is expected to grow by more than 500 percent in the next five years. For those in the UK who like to use mobile services, hopefully this delay to 4G auctions and commercial rollouts will be the last.

Some of the highlights from the consultation released by Ofcom today (full documentation can be found here):

—98 percent cover: Ofcom proposes that 4G services will cover “at least” 98 percent of the UK population. That’s higher than 3G today, and represents an increase on the 95 percent requirement originally laid out in Ofcom’s first consultation. The UK government is investing £150 in building out coverage to “not-spots”, and one option Ofcom lists is to potentially link up one of the bidders with this government scheme to support that rollout. It will effectively mean that more remote parts of the UK will be using mobile broadband in place of fixed broadband to be connected.

—Competition: This time around, Orange and T-Mobile are bidding as one in their Everything Everywhere venture, bringing the existing mobile network operators down to four, not counting the possibility of another company emerging and bidding for spectrum. Ofcom said today that it believed “at least four” was the right number of operators in 4G to ensure effective competition.

What’s interesting is that Ofcom proposes keeping aside some of the 2.6GHz spectrum for a group of new entrants to use for new services (such as those on educational campuses). It’s not clear whether that group would count as one of Ofcom’s “at least four” operators and what other allowances they might get.

—New deadline: Interested parties now have 10 weeks to comment on these proposals with a final decision coming in 2012 and the auction starting a few months later.

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• Linear TV Consumption Is Growing, But Is Ad Spend?
• Smartphone Penetration Approaching Tipping Point As PC Usage Declines

Orange today is introducing a new Android tablet, the first to come with Orange’s own branding instead of that of the tablet-maker. Called the Tahiti, the device, Orange tells me, was built by Huawei, sports a seven-inch screen and runs on Android Honeycomb, Google’s tablet-optimized version of the platform.

Possibly the most unique selling point—or at least the one that Orange is touting above others—is its price point. The 3G and WiFi-enabled tablet will cost users a mere £69.99 ($108), in addition to a commitment to a 24-month, £25/month contract. That sounds potentially reasonable until you work out the total cost: £669.99 ($1,036). That includes two gigabytes of data, 1 GB of which is during “quiet time” when fewer people use Orange’s network.

Prior to this, Huawei had developed two of its own-branded tablets to-date; both have seven-inch screens like the Tahiti. The IDEOS S7 is marketed as a content-friendly device, while the higher-specced MediaPad was the company’s first foray into using the Honeycomb OS.

By comparison, the Tahiti looks very much like the MediaPad (pictured) in its button-free face and camera positioning in the upper corner of the device. It may well be the MediaPad but under a different name. That would be a clever way for Huawei to shift stock further than its own retail steam might allow.

Orange tells me this is the first time it has launched an own-branded tablet in the UK, and the first time that it is selling this specific product. But that does not mean that it is new to the game. The company launched another own-branded tablet last year, which it distributed through its operations in Spain, Poland, Romania and Slovakia around the concept of offering inexpensive tablets against pricier branded products like the iPad.

That first tablet was a rebranded IDEOS S7, Orange told me at the time. Clearly that did well enough for them to try the concept out again with a more expensive tablet in a more developed market.

The Tahiti looks anything but exotic, so why the name? It could be a play on a type of fruit, the Tahiti Orange, AKA the Persian Lime. The other connection: Orange already has a line of own-brand handsets named after various destinations (San Francisco, Rio, Monte Carlo, Barcelona and Atlanta).

Orange says the Xbox service will include 30 channels via the Xbox live platform, including its on-demand and premium channels that it offers through its Orange TV service. It will be available initially only in France. Meanwhile, the Dailymotion service will see Orange launching a new, free 3D channel on the Dailymotion platform. That will be available everywhere, although the content is all in French.

The Xbox service will include the ability for those who have Kinect for Xbox to use voice and gesture controls with Orange’s TV service—perhaps the biggest way that this differs from the other ways you can already access Orange TV via set-top boxes, connected TVs and the Internet.

While there have been a lot of 3D services and devices launched in the last year or so, it remains to be seen whether this is a gimmicky add-on that comes and goes, or whether consumers really have the appetite for such products. The Kinect enablement, however, is a keeper: the technology has provided a huge boost for Microsoft in the past year and it’s likely we will see more competing TV services entering the market in the year ahead.

For that reason, Microsoft has been busily ramping up its own Xbox/Kinect TV offerings: not only is it enabling TV services itself, but it is signing up IPTV providers, in addition to Orange, to the service—most notably, Verizon and Microsoft have announced that FiOS will also be on the platform.

Gaming consoles are a good channel for pay-TV providers to keep tapping: a survey from Nielsen yesterday revealed that video is already a very popular use of these consoles. In the U.S., 14 percent of Xbox 360 time, 15 percent of PS3 time and 33 percent of Wii time is being spent on video viewing, watching channels like Hulu, Netflix (NSDQ: NFLX) and ESPN.

And IPTV providers really need all the help they can get: they launched services relatively late compared to other pay-TV products from satellite and cable providers, in addition to all the OTT competition. Pyramid Research forecasts that IPTV will be installed in only one percent of all broadband enabled homes worldwide by 2012.

Of course, the Xbox service will also give Microsoft a boost in marketing its consoles in the French market, where France Telecom (NYSE: FTE) is the IPTV leader and will be selling the console in its stores as part of the deal. It looks like it is the only IPTV provider in the market to team up with Microsoft exclusively for the Xbox/Kinect service, at least for now.

Meanwhile, the Dailymotion channel shows how Orange is also using the OTT route to market its own services, and possibly grow its traffic there as well.

The service includes what looks like a selection of content from the carrier’s existing paid 3D channel—which incidentally is also available via the Xbox service. It includes Mag3D, a 30-minute 3D gadget program, as well as some TV and film content. It will also be featuring user-generated content: Dailymotion users have the option of designating their videos as 3D for them to appear in the channel.

As this line-up is designated as “for launch”, there is a chance we’ll see Orange launching more, and possibly paid, services on the channel. It already notes that it will have a mobile version of the service available by February 2012.

Orange, which is a 49-percent owner of Dailymotion, has used the investment to further its business reach online before, including an advertising deal announced earlier this year.

Related

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• Orange Duets With Spotify Competitor Deezer On New UK Mobile Music Service
• Microsoft Shifts Strategies To Expand Xbox Live TV, Go Global
• Orange Links Up With Dailymotion For Ads, Seeks The Next Don Draper
• Orange Bets Big On Video, Buys 49Pct Of 'French YouTube' Dailymotion

According to this report from Nikkei Business (in Japanese; translation here), the Japanese carrier NTT Docomo is gearing up to release a new iPad and iPhone next year that will work on its LTE network by this fall.

The article cites officials close to the matter, and says the details were ironed out in at meeting in mid-November.

If the report is true, this could be one of the biggest boosts for LTE yet. This is why: LTE offers users network speeds that carriers like AT&T claim can be ten times faster than those of 3G data network. That translates into a much better experience on data-heavy streamed services like video, games and music. Given Apple’s track record for making devices that get people using a lot of mobile content, this could be a match made in wireless heaven.

This is not the first time that we have seen reports that Apple is gearing up to include LTE capabilities in its devices. Among the more recent, a report in MacRumors back in August highlighted that there was code for LTE in iOS 5 and that Apple was hiring experts in the technology.

This is, however, possibly one of the first times that we’ve seen Apple and LTE linked up with a specific operator for deployment.

DoCoMo (NYSE: DCM) is not likely to be the only operator working with Apple towards and LTE phone, but it is definitely a good one to have on side. The Japanese carrier is a veritable granddaddy as far as the technology goes—it has been deploying LTE commercially as far back as 2005, although it only launched it first LTE-enabled smartphone in November 2011. That was the Samsung Galaxy II S.

Other markets like the U.S. are showing a big appetite for LTE. A recent report from NPD noted that one in every five smartphones purchased in the U.S. is now 4G-ready. That could include LTE devices, but also those that work on HSPA networks (the “4G” promoted by T-Mobile USA).

If this report turns out to be true, it’s worth asking how Apple is going about incorporating LTE capabilities into its devices. As IntoMobile and others have pointed out, different countries and carriers are not using the same frequencies for their LTE services. Each device has to be tooled to work in those different bands. Will Apple be the first to go with a chipset that can handle multiple LTE flavors, or will it take the route more travelled and work out LTE on a country-by-country basis?

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• Europe Marches Its Airwaves Toward 4G By 2013
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• UK Launches LTE Trial, But Is It Falling Behind In The 4G Race?
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In the UK, Ofcom has laid out areas that ISPs need to address to make it clearer to consumers how internet traffic is managed on those ISPs’ networks.

They included the requirement that ISPs will need to provide details to users on actual average network speeds, rather than peak speeds at optimal times; disclosure to users about when broadband speed may get intentionally reudced, for example, when a subscriber is using peer-to-peer downloading software (eg, BitTorrent); disclosure about any specific services that might get blocked.

In other words, the kind of information that ISPs should have been giving consumers for years already, but have not.

Although this sounds like bad news for ISPs, I actually think this can only be a good thing: some consumers will not pay attention to these details anyway, but those who do will have more information to make the right choice not about about which internet provider they choose to use, but also clarity on what kinds of services might be more difficult to use, and why.

ISPs should probably get on the case with this so that they can manage their messages well, before the regulator, probably more unflatteringly, does it for them: Ofcom says if ISPs do not start to disclose this information themselves, it will use its powers to “introduce a minimum level of consumer information under the revised European framework” that the UK accepted into law in May 2011.

Interestingly that very same European framework came up in a separate matter this week, when the European Commission named and shamed the 16 member countries that had yet to implement the new framework.

That framework (more details here) covers not only the kind of consumer information on broadband usage that Ofcom is now tackling in the UK, but also requirements for how users can switch mobile operators more quickly and easily, more requirements about safeguarding consumer privacy and details about growing infrastructure, including refarming radio spectrum to use it for wireless services.

The Commission says that it has now embarked on legal proceedings against 16 countries—Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, France, Germany, Greece, Hungary, Italy, The Netherlands, Poland, Portugal, Romania, Slovenia and Spain—that have to implement the rules, and will likely fine them for being late, although that can take years to work through the system so is perhaps not too much of a threat to those countries that have yet to do anything.

That list is a mixed bag: it includes both countries that you could classify as “mature” markets for broadband as well as those that are still at an earlier part of their growth and—in the case of some such as Greece, Italy, Portugal and Spain—have much more significant economic issues to worry about at the moment. Incidentally, the seven that have approved that framework include the UK, and those European rules are now providing the backbone to the regulations that Ofcom has now set out for UK ISPs.

In truth, it’s not all that surprising to see both France and Belgium on that list. For one, France has enacted some of the most stringent rules in Europe around the prosecution of private users based on their consumption of unlicensed media content, and is actually seeking to extend them. The so-called “Hadopi” law in France is a three-strikes-style system aimed at those who download illegal media files (eg free music or films that have not been licensed by their rights owners), and just the other day French president Nicolas Sarkozy said that he would like those rules extended to users who also stream such content.

Belgium, meanwhile, has been at the center of a heated legal case that people have been likening to the SOPA directives currently making their way through legal hoops in the U.S.

The specific case in question had to do with Belgian ISP Scarlet, which had been sued by Belgian content rights-holding group Sabam for allowing its subscribers to download unlicensed content on its network.

The case has been making its way through the courts for years already, but this now seems to be the definitive ruling: Sabam wanted Scarlet to implement a filtering system to block illegal content; but the court ruled that this would interfere with Scarlet’s business and also violates consumers’ privacy, based on the European directives that are being applied in the UK right now, and are being enforced by the Commission to implement elsewhere.

That seems to put an end to one way for rights holders to go after those who consume unlicensed, free content, but it doesn’t end the discussion altogether. According to the New York Times, the ruling does not affect whether ISPs can outright block certain sites on their network (as long as they tell consumers what they are)—as BT is currently being requested to do over the site Pirate Bay—or for specific violators to be cut off from their internet services (a la Hadopi).

That leaves the door wide open for years more of struggles between consumers, rights owners and broadband providers over the best way of making sure that when a song gets heard, or a film gets downloaded, someone, somewhere gets what’s coming to them.

Related

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• Update: BPI Asks BT To Block BitTorrent Site Pirate Bay, Or It's Court Time
• Belgian ISP Escapes Copyright Fine For P2P File Sharing
• @ Midem: U2 Manager Backs Sticking P2P Culpability On ISPs
• Belgian Court Finds EU Loophole In ISP File-Sharing Culpability
• Music Labels Go To Court To Force Irish ISP To Monitor P2P
• Subscribers Must Be Allowed To Circumvent Content Filters, Europe Says
• ISPs Monitoring For Illegal Downloads Breaches Privacy, EU Official Says

Under the terms of the deal, GetJar will be distributing QQ browser, which is available for iOS, Android, Symbian and Java devices, as part of Tencent’s strategy to take its products to a more global audience. The move comes as we are seeing more activity from Western companies to expand their business in China, too. Most recently, Apple (NSDQ: AAPL) finally started to accept payments in Yuan on its Chinese App Store.

The deal is not exclusive as such: Tencent already offers its QQ browser through the Apple App Store, for example, although it is in Chinese so fairly unapproachable for those who don’t speak the language.

Tencent claims that its QQ browser is one of the fastest on the market. Because it is run as a cloud service, on Tencent’s XCloud architeture, users can also use the browser to securely store software, pictures and other files as part of the offering. Mobile QQ browser is built for mobile through cloud services.

In China, QQ browser is the second most-popular mobile web browser, according to November figures from Ai Media Consulting (via China News). It has a 27 percent share of the market, with the UC Web browser at 65 percent. (Opera is in third with six percent, and the browsers that are dominant in the West such as Safari on iOS, or Android’s web browser, don’t even seem to register.)

That share in China alone gives QQ significant penetration. As of last month, China had 1 billion mobile users, with 102 million on smartphones, according to the Ministry of Industry and Information Technology.

That means that if the market share estimates are accurate, QQ has potentially 270 million users, since the browser is also available for feature phones on networks slower than 3G.

It will be interesting to see if the QQ browser will be able to get much traction in Western markets, where people largely default to using mobile web browsers that are pre-loaded on to devices: meaning iOS users use Safari, Android users use Android, WP7 users take Internet Explorer and so on.

Possibly because China is one of those places where mobile internet growth is outpacing that of fixed growth (fixed lines are actually in decline; and there are currently 150 million broadband lines), we’ve seen a lot of innovation—probably more than you get in the West—from tech companies in the country to target mobile users.

It’s not unusual for an internet portal like Tencent to make and distribute mobile phones, app stores, games, payment systems, messaging apps and mobile browsers. Others that have also followed this route include Baidu (NSDQ: BIDU) and Alibaba. On the Android platform alone, there are dozens of companies operating app storefronts distributing apps for the OS.

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According to reports in the French press (here, here and here are three links), Sarkozy, during a speech in Avignon during a culture confab with European politicians, laid out plans to create a national center of music that would be funded by taxes on ISPs.

He also discussed the possibility of a new extension to the country’s Hadopi laws to cover streaming.

The speech follows on from a proposal sent to the Minister of Culture, Frederic Mitterand, in September for the tax and creation of the Centre National de Musique.

This is not the first time that France has proposed taxes on online business to fund the music industry. Last year, the Zelnik report, masterminded by music industry executive Patrick Zelnik, proposed taxes on online ads and ISPs, with the proceeds to be used for special cards to be distributed to the French public to spend on “legitimate content.”

In both the current tax proposal and Zelnik’s, the idea is that traffic across the internet to consume streamed music and other forms of free content, both legal and illegal, are making it impossible for the originators of that content to monetize it properly.

The Zelnik report did not seem to get very far, although France did go ahead with its content card proposal.

This more recent proposal seems to have a closer, existing precedent: There is already an arrangement between TV channels and the film industry in the country, in which revenues from commercial TV operators are funnelled into film production.

In that case, many TV channels produce their own films, while in the case of ISPs and the music industry, the money would go to a new organization that would distribute those funds to musicians and music performances.

Hadopi. Later in the speech, Sarkozy turned his attention to Hadopi. He noted that since the introduction of three-strikes law, piracy in France had been reduced by 35 percent.

But since the law was introduced, the growth of fast broadband, and better streaming technology, has given rise to a new piracy threat, from the likes of Megavideo and other streaming sites that distribute unauthorized premium content for free online.

The mention of policing streamed content is only that so far—a mention. At this point it is not illegal in France to watch pirated streamed content, and according to this report from the AFP, apparently it is still hard to track, too.

For starters, it would require cooperation from ISPs, something that we are already starting to see in some countries like the UK.

Related

• Update: BPI Asks BT To Block BitTorrent Site Pirate Bay, Or It's Court Time
• Sacre Bleu! France Mulls Tax On Web Ads To Bail Out Old Media
• French Anti-Piracy Agency Tracks Millions Of File-Sharers--Investigates 10
• French 'Three Strikes' Anti-Piracy Law On Hold After Data Breach
• France Will Buy Its Citizens Digital Music Worth €50 Million

Telefonica reported that quarterly sales grew by 3.7 percent compared to the three months ended September 30 last year, to a total of €15.8 billion ($21.6 billion). But in that time the company saw a drastic decline in its net income: down by 108.5 percent to a net loss of €429 million ($585 million) compared to a profit of €5 billion last year. The first loss in nine years for the company—Europe’s biggest carrier—was also due in part to job cuts. In countries like Spain, an employer has to pay significant charges when making employees redundant.

In Spain, which makes up nearly a quarter of the company’s sales, Telefonica saw its revenues decline by 8.8 percent to €4.3 billion, with subscriber declines in almost every single retail service except for contract mobile subscriptions and pay-TV.

In Europe, where Telefonica has holdings in the UK, Ireland, Czech Republic, Germany and Slovakia, the news was somewhat brighter: subscribers grew in every category except for narrowband fixed access, although the company still posted an overall revenue decline for the division: down five percent to €3.9 billion ($5.3 billion).

Telefonica says that growth at the moment is being driven by two things. The first is its holdings in Latin America—which like other emerging markets are still in the early stages of mobile data and broadband adoption (a trend we saw also driving growth at Vodafone earlier in the week). Revenues in LatAm rose by more than 18 percent compared to a year ago.

The second is mobile data: Telefonica says that mobile data across its footprint has grown by 19.6 percent, and now makes up 30 percent of the company’s mobile service revenues—significantly more than its nearest telecoms rival, Vodafone (NYSE: VOD), which earlier this week reported that data accounts for 14 percent of its service revenues in mobile.

Within the category of mobile data, Telefonica says that 50 percent of its revenues are coming from text messaging, with the rest accounted for by services like email, mobile web access and app usage on mobile data networks.

Telefonica, which stole a march on several of its competitors years ago when it became the first to offer the iPhone in Europe (via its O2 operation in the UK), has tried to continue its mobile data and smartphone momentum with a similarly aggressive line of devices and plans to use them. It did not break out what the penetration of smartphones are among its wider mobile user base although it pointed out that in the UK smartphone penetration now stands at 36 percent.

So now that Telefonica’s pinpointed mobile data as one of its key growth drivers, it will be worth watching to see whether it can further capitalize on that in the future. Telefonica’s new digital division is being headed up by Matthew Keys, the ex-O2 executive who has now been moved over from his most recent job as head of Telefonica Europe, and it will serve as an umbrella group to develop and commercialize all things new, from mobile advertising to NFC and IPTV services.

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Update: As expected, BT has confirmed it will wait for a court order before proceeding. More details below.

This morning, the BPI released a statement saying that it has sent a letter to BT to request it to block Pirate Bay. “If BT will not agree to block voluntarily, then it has been asked to consent to a court order,” the statement read.

The BPI, which says it is teaming up with other organizations representing the creative industries, is banking on a precedent set by a case decided in October in which BT was ordered by the courts to block another site, Newzbin2, that facilitates illegal downloads.

That was the first time that a UK ISP has been ordered to block a pirate site, although such actions have been in place in other countries like Denmark, Ireland, Italy, Belgium and Sweden since 2009.

We have reached out to BT for comment on the situation, and we will update this post as we learn more. The operator is expected to put out a statement later today.

But we understand from sources that it’s not likely BT will comply with the initial, voluntary request because that could imply a dangerously slippery slope. “BT cannot block web sites willy nilly,” said the source.

Furthermore, BT has said as much itself. During the Newzbin2 case brought by the Motion Picture Association, BT had this to say: “This is a helpful judgement, which provides clarity on this complex issue. It clearly shows that rights holders need to prove their claims and convince a judge to make a court order. BT has consistently said that rights holders need to take this route.”

Update: BT’s response, as we wrote, will be to wait for a court order, not do it voluntarily. “We can confirm we are now in receipt of a letter from the BPI [ requesting that BT block the Pirate Bay site]. BT is considering its response. In line with the Newzbin judgment, a court order will be needed before any blocking could begin. BT is currently focused on implementation of that order.”

Given the clear proof that the BitTorrent site is helping distribute thousands of pieces of content, with no royalties paid to the rights owners, it is likely that BT will work with the BPI in getting the court order to close the site through legal means. The precedent of the Newzbin2 case is likely to make that process relatively easy, depending on who comes to Pirate Bay’s defense.

“We would not tolerate Counterfeits “R” Us on the High Street – if we want economic growth, we cannot accept illegal rip-off sites on the internet either.  We hope that BT will do the right thing and block The Pirate Bay,” the CEO of the BPI, Geoff Taylor, said in a statement today.

BT, if ordered by the court, will have 14 days to block the site and foot the bill for the change.

Related

• UK Judge: ISP Must Block File-Sharing Site In 14 Days, Foot Bill
• UK Won't Enact Site-Blocking Laws, May Finally Legalise Format-Shifting
• UK Court Agrees With Hollywood: BT Should Block Newzbin2
• Hollywood In Court To Force Piracy Blocking On UK's Largest ISP

The TVGuide.com Fall 2011 survey generated more than 5,800 responses from TVGuide.com’s 10,000-member research panel and is being released today at paidContent Entertainment in LA.  According to Christy Tanner, EVP and GM of TV Guide Digital, the panel’s demos and habits usually correlate with mass market general studies and tend to reflect the general U.S. population.

Overall, it found that the number of people watching more than 30 hours of TV per week (that’s more than four hours per day) has rocketed up to 32 percent of the population, a rise of 14 percent over the last year. In general, 93 percent of respondents said they were watching more than before.

That growth is largely coming from the rise of new technology, with some 55 percent of users said that they are watching TV online. The amount of time that people are spending watching online is growing fast: 15 percent of people are watching six or more hours of online video per week these days, a big spike on the four percent a year ago. Overall some 62 percent said they were watching for more hours than before.

That could be a reflection of user habits, but it’s also a testament to the growing amount of content that is available for them to view: the rise of services from Amazon (NSDQ: AMZN), as well as the existing offerings from the likes of Netflix (NSDQ: NFLX) and Hulu, will be joined by more programming offerings from Google (NSDQ: GOOG)—giving users potentially a far richer catalog of content via the internet than they have through their traditional TV sets.

That’s not to say that TV-based viewing is disappearing, but it is shifting—time-shifting, that is… Some 71 percent of respondents said they were watching more time-shifted content, using their own DVRs or those from their pay-TV providers, than they were a year ago.

Time (NYSE: TWX) shifting has been great news for those of us who are not able to keep to the timetables set by networks, but as many expected would happen, the technology is also leading to another inevitable problem: decreasing attention being paid to advertising.

An astounding 96 percent of respondents say they fast-forward through ads on DVR content these days—although some 44 percent did point out that they “don’t mind” ads as a general rule. Still, the number of people skipping ads on time-shifted content, and that growth of time-shifted content consumption seem set for some kind of collision course in the future.

Ad industry aside, there are other business models emerging to finance content and make revenues as a content owner: the survey revealed that 19 percent are paying more for their TV content than before, and that model is also translating to the growth of online and streamed video content: some 34 percent said that they pay for these.

But even so, the big challenge remains: how do premium providers get people to pay when there is so much on offer that is free? The survey showed that some 81 percent watch streaming and online services for “free” (not counting their broadband bills), even if 69 percent also use paid content or subscription services.

And pay-TV providers have opportunities in enabling new services like time-shifting to viewers. Today, 41 percent are paying for time-shifted viewing, although it’s not clear from the survey whether that represents much growth over the last year.

Just as technologies are enabling new kinds of consumption habits, new devices are also having a big impact on usage.

Tablets present one of the biggest opportunities for TV consumption—with their large screens and improved processing power, they have effectively taken the place of the smartphone as the key wireless TV device. (The smartphone, of course, does drive lot of video usage but it has not proven to be the ubiquitous TV-viewing device that everyone thought it could or would become by now.)

The survey found that 27 percent of consumers planned to buy a tablet in the next year, and that the iPad is still the device of choice—77 percent said they would get Apple’s tablet if price weren’t a factor. That could leave the door open for the cheaper alternatives out there, such as the new Kindle Fire from Amazon (NSDQ: AMZN). The survey notes that 30 percent said they were likely to buy a Kindle Fire, with 47 percent like to buy the iPad.

And two endnotes that alternately point to a challenge ahead, and a big opportunity for those opting for the Apple (NSDQ: AAPL) product universe to distribute their TV content: only 14 percent of respondents knew what Ultraviolet was, while 44 percent recognized the term “iCloud.”

Full slide deck below:

The UK regulator, Ofcom, said last week that auctions for 4G spectrum—originally scheduled for the first quarter of 2012—will now likely be delayed until Q4 2012. LTE networks at their best can deliver data at speeds of 150Mbps, compared to the 1.5Mbps of current 3G networks. More realistically, early LTE services are likely to deliver speeds of around 10Mbps.

The news—which Ofcom slipped into an update to “stakeholders” rather than in a straight news release, noted that the regulator had received “a number of substantial and strongly argued responses” to its original auction consultation on 800MHz and 2.6GHz spectrum, conducted between March and May of this year. The 800MHz and 2.6GHz spectrum bands are the two bands that operators would use for LTE services.

The upshot? More government red-tape, it seems. “In light of these responses, and the significance of the decisions that we need to take - decisions that are likely to shape the future of the mobile sector in the UK for the next decade or more - we have decided to undertake a further round of consultation on these issues,” Ofcom notes.

That second consultation will likely come out later this year. Stakeholders—that is, operators, vendors, municipal bodies and others impacted by the auction—will then have at least two months to respond to the consultation. Ofcom will then assess the responses and issue dates for the auction, “perhaps starting in Q4 2012.”

Perhaps sensing that people would assume this means “big delay”, Ofcom points out that the spectrum would not have switched over, in any case, for new use until 2013, “so this step is unlikely to have a material impact on the timeline for the availability of new services to consumers.” But as Mobile Today points out, the delay will mean that new services will not likely come online until 2014. That’s a full three years (and possibly more) after the first LTE services went live in the U.S., with Verizon Wireless.

Ofcom does not go into details about what exactly stakeholders have flagged up that has led to it delaying the auction. Separately, though, mobile operator Three has been outspoken how it would fare in an auction against the other three, much larger operators, especially if the others were allowed to use spectrum that they already owned to extend those services, rather than simply bidding for new spectrum.

There may also be questions about whether the government will be favoring the highest bidders, or whether there will be other considerations: when operators bid for 3G spectrum in 2000, it raised £22.47 billion ($35 billion) for the government’s coffers.

What’s ironic with these delays is that there seems to be a clear sign from operators in the UK that they want to get the ball rolling with 4G.

This week, BT (NYSE: BT), working with Everything Everywhere (the JV between France Telecom’s Orange and Deutsche Telekom’s T-Mobile in the UK), kicked off services on an LTE trial in Cornwall that it announced back in May of this year. The trial covers some 200 households and focuses only on dongles to use with fixed and portable PCs rather than mobile devices.

It’s not clear whether collaboration between BT and Everything Everywhere will be on the cards in the commercial game as well, but Everything Everywhere today took one more step towards merging their networks more completely: the two announced that subscribers on the two networks will now be able to access each other’s 3G networks, which will improve overall coverage.

The Cornwall trial aims to show the government that LTE can be used in remote areas where building out fixed broadband would be cost-prohibitive. The government has earmarked £530 million ($829 million) in subsidies to build out broadband in remote areas—but of course if the funds are used for LTE, that could be useful to the operator for more than just remote-area coverage.

Although the UK government has set ambitious targets to be a leader in mobile broadband services in the region, other countries in Europe are quite a way further along the road to realizing 4G rollouts. At the end of September, Italy completed its 4G auction (raising nearly €4 billion); Germany and Spain have also completed their auctions; and France is in the process of allocating its spectrum. Meanwhile, Sweden already has 4G services in place.

Related

• Superfast Broadband Gets Ready To Go UK-Wide
• The LTE Ship Finally Docks In The UK, Led By BT And Everything Everywhere

Now Everything Everywhere—the JV of Orange and T-Mobile in the UK—is looking to take another stab at the medium.

It has announced plans to launch a new live mobile TV platform that its hopes will increase the number of its customers using mobile TV six-fold over the next three years.

The as-yet unbranded service will be produced in conjunction with Red Bee Media, the digital entertainment technology company that was spun off from the BBC. Red Bee will be powering the service using its RedPlayer digital TV delivery platform. Before today, the operators were using in-house solutions for their video services.

This is only the announcement of the changeover: no date yet on when services using the platform will come online.

One of the big gating factors in mobile TV services up to now has been the quality of the broadcasts: they have been too dependent on shoddy network connections, have only worked on a limited range of devices, and don’t necessarily give consumers the choice of content they want to justify the price for the service.

Everything Everywhere looks like it is trying to address that issue head on: it says that the new platform will be able to deliver mobile TV services to a much bigger range of devices than ever before, including tablets, and content will be automatically optimized for the device that is being used. The service will automatically seek out the best network connection for the service, whether it is WiFi or 3G.

Will a redoubled effort on improving quality be enough to drive customer usage? It’s not clear yet—but since those early days of mobile TV a lot has changed, including the rise of apps and the mobile web and how they get used by consumers on their smartphones and tablets. Today, a user can get a range of apps for iOS, Android and other devices—or go right online—to not only view live television but also get on-demand video content.

In terms of actual content, the focus of Everything Everywhere’s service looks like it will be live broadcasts: covering more than 40 channels, including premium channels like Sky Sports and National Geographic. The company says it is also looking at how to implement new TV technologies, such as 3D content.

This is not Everything Everywhere’s first foray into mobile TV: Orange was the first operator in the UK to offer these services, in a partnership with the US-based MobiTV, back in 2005. In those days before the smartphone boom and limited 3G access, though, the service failed to attract a critical mass of users. T-Mobile has been offering mobile TV since 2007.

Everything Everywhere declined to give mocoNews any numbers on how those current services are faring: no details on subscribers nor on how much they actually get used.

The announcement from Everything Everywhere comes on the heels of several other news developments in the realm of mobile TV and mobile entertainment offerings from operators:

Last week, MobiTV last week filed documents with the SEC to announce its intent for an IPO, from which it hopes to raise some $75 million.

Virgin Media inked a £100 million ($160 million) with the Mobile Broadband Network Consortium (Everything Everywhere and Three’s network joint venture) to beef up mobile data backhaul, aimed specifically at improving the delivery of data-intensive services like mobile video.

And just yesterday Orange announced that it would be launching a new mobile music service in partnership with Deezer.

But it also comes after some high-profile closures, such as Qualcomm (NSDQ: QCOM) deciding to ditch its FLO-TV mobile TV service after finally admitting low subscriber takeup.

Related

• MobiTV Files For $75 Million IPO To Fund Its Growth [Video]
• Orange Duets With Spotify Competitor Deezer On New UK Mobile Music Service
• Qualcomm Sells FLO TV Wireless Spectrum to AT&T For Nearly $2 Billion

If plans go ahead, white spaces would present a way of offloading traffic from congested 3G networks as mobile data services continue to grow in popularity, fuelled by the rise in smartphone and tablet use. White spaces services could support speeds of up to 22 Mbps.

Although many other countries (including the U.S.) have considered white spaces broadband services, the UK looks like it may be the first country to actually follow through on this. Today’s announcement is the result of a consultation that started back in November 2010, and focuses only on unused TV spectrum. A separate look at unused FM radio spectrum is being considered by Ofcom.

White space services rely on special routers, and corresponding radios in devices, that are able to find the best frequency for service in a given area.

Taken together, Ofcom estimates that the amount of “white space” that exists in the UK today is equivalent to all the spectrum currently being used for 3G services, “and significantly more in some locations,” given that 3G coverage is not universal and particularly bad in rural areas. By one estimate, White Space services could be generating $100 billion in revenues by 2016.

The spectrum that would be used for white space services is of a low frequency (between 470MHz and 790MHz), which means that the distance it can travel is much further, similar to television or radio services, rather than the WiFi we know today.

Challenges: While Ofcom is laying the groundwork for this service, there is bound to still be some dissent from those already using the spectrum for their own commercial services.

And there is still the issue of making radios for devices to actually be able to use the spectrum. The UK may be getting a leap on other markets, but that might also mean that device makers will not be able to catch up in time, in a way that is cost-effective for them. (Remember the non-starter of DVB-H mobile TV services?) One vote in favor of white spaces broadband is that the IEEE in July published a wireless standard that can now start to get used to build corresponding devices.

More details from Ofcom’s statement issued this morning:

» Applications named by Ofcom for the white space spectrum include “enhanced WiFi” the works over longer ranges than existing WiFi; rural broadband services, especially in areas currently not served by fixed networks or 3G; and machine-to-machine communications.

» Frequencies: Ofcom will let “multiple third parties” keep and update a databases that routers would “consult” in order to find the best frequencies for service, which would not interfere with existing TV services or other users of the spectrum, such as wireless microphone users.

» The spectrum being proposed for white spaces is unlicensed, meaning anyone can use it as long as they do not cause “harmful interference” to other users of the spectrum.

Ofcom says it is now drafting a Statutory Instrument to make white space devices licence exempt, and is continuing to work with TV broadcasters and would-be database providers.

Related

• Ofcom Sets Out White Spaces Rules While Skype Offers Free WiFi
• White Spaces Will Be Worth $100 Billion In 15 Years By One Estimate
• Broadcasters Sue FCC Over Perceived 'White Spaces' Threat

The figures underscore how much smartphones and advanced feature phones, combined with low-cost data plans and WiFi, are transforming how the internet is consumed. It looks like the UK is standing out as one of the leaders in this sense. It’s not a 100 percent, like-for-like comparison but as a point of reference, comScore yesterday released figures that showed that in the U.S. some 41 percent of consumers used the mobile web browsers on their handsets in the last three months.

But despite how long we have been able to access the mobile web on our devices—the first data networks came into place a decade ago, as did the first phones to browse the Internet—mass market growth has come only recently. The ONS notes that in the last 12 months, six million people accessed the Internet for the very first time on their mobile phones.

Other key points:

» Overall, the UK has some 37.7 million Internet users at the moment. That means that nearly 17 million of us have used our mobile phones to access the mobile internet.

» Other “mobile” devices such as laptops and tablets are also making a big impact: 38 percent of people say they have used these kind of devices to access the internet. That’s on top of mobile phone usage, by the way.

» WiFi is big: usage of hotspots has doubled in the last year to 4.9 million users (13 percent of internet users).

» People over the age of 65 are the least likely to use a mobile to access the internet—only eight percent of internet users in that age group have used mobile devices to do this. (A market opportunity?)

» In terms of what it is that people are doing when they go online, it looks like social networking is a key driver of usage. Among adults, 57 percent say they have used social networks online, compared to 43 percent a year ago. Among that much-coveted demographic of 16-24 year-olds, the number is amazingly high: 91 percent. To compare to the comScore (NSDQ: SCOR) figures from yesterday, in the U.S., around 30 of mobile phone users in the country used their devices to access social networks.

» The digital divide: now 77 percent of all UK households have access to the internet, a rather small rise on the 73 percent from a year ago. Of those, 93 percent are using broadband to go online.

The full report is here.

Related

• comScore: Just Over One-Third Of U.S. Consumers Use Smartphones

The news, aptly enough, was announced via a tweet from Alexander Macgillivray, the company’s global counsel: “Very happy to welcome longtime user advocate @colin_crowell as @Twitter’s Head of Global Public Policy.”

Later, Crowell himself later noted that he would be starting in mid-September.

Crowell is a long-time DC player in telecoms and technology regulation. Crowell served as a senior aide to Congressman Ed Markey, a Democrat from Massachusetts, where he worked for more than 20 years on telecom and technology issues. That covered the time when Markey was chairman of the House Telecommunications Subcommitte and was ushering through such big pieces of legislation as the Telecommunications Act of 1996.

In 2009, he became an adviser to FCC Chairman Julius Genachowski focusing on broadband policy. More recently he has been running his own consultancy, Crowell Strategies, working with clients like Sprint (NYSE: S) and Google.

With his remit covering global public policy, it will be interesting to see how and if Crowell also gets involved in some of the recent issues that have been hitting Twiter outside of the U.S., too.

Those have touched on some of the issues that affect Twitter in the U.S.—such as privacy and cybersecurity.

In the last month, officials have been meeting with executives from Facebook, Twitter and RIM’s BlackBerry Messenger group to discuss the social networks’ role in the riots earlier this month across England: critics said that they were used to help organize attacks. One big point of debate has been around whether the police has a right to shut down these kinds of social networks in times of crisis to better control situations.

Twitter was also in the legal spotlight in the UK earlier this year around the topic of superinjunctions, and whether those who post tweets that are in violation of them can get prosecuted, and identified if they are posting under names that cannot be easily tracked.

This is the second major hire Twitter has made in DC in the last 12 months. Last November it hired Adam Sharp to serve as a government liaison.

Hunt is expected to announce how the money, diverted from the BBC to create a digital Britain, will be shared among 40 areas including English councils, Scotland and Northern Ireland. A further £300 ($489.48)m has been promised after 2015.

The government wants all 25 million UK homes to have access to a minimum speed of 2Mbps (megabits per second), which would mean that reading web pages, making Skype phone calls or watching TV catch-up services, such as the BBC’s iPlayer, will all be possible from the most remote cottage. If all goes to plan, 90 percent of homes will be able to get even faster speeds of over 24Mbps, enough for several computers to download video simultaneously on a single line.

The BT Group has already promised to spend its own money getting superfast, fibre-optic broadband to two thirds of households by 2015, without government help. This will cover the towns and cities, where BT can quickly recoup its £2.5 ($4.08) billion investment. Getting broadband to those villages and valleys will be less economical, however, with lines having to stretch longer distances to reach fewer people. So will the two tranches of public subsidy, totalling £830 ($1354.22)m, be enough to reach the final third?

Where BT wins council contracts backed by the government, it is offering to match the money and it expects councils to as well, by securing other subsidies, so that just under £2.5 ($4.08) billion should be available for the final third. The BT executive responsible for leading 19,000 engineers in building what will be the UK’s largest fibre network is Olivia Garfield, chief executive of its Openreach division, which rents out BT’s network to other internet providers such as BSkyB (NYSE: BSY) and TalkTalk. She believes universal broadband access can be achieved, but only if a mix of technologies and every available resource is used, from telegraph poles to mobile phone masts and Virgin Media’s cable network – which unlike BT’s infrastructure is currently off-limits to rival companies.

“It’s whether you believe that the most important thing is to roll out fibre at speed in the UK to help recover from economic recession,” says Garfield.

The problem is that even in neighbourhoods where BT does not have to dig up the road to lay fibre, because it already has ducts carrying its copper wires, many of those ducts are blocked or broken. If those ducts happen to serve one of the 12 million homes where Virgin Media (NSDQ: VMED) has cables, Garfield says BT will not lay its own fibre. This means many homes will have only one choice of high-speed internet supplier, which in turn threatens higher bills.

Allaying fears that Hunt’s announcement will not go far enough, some regions are ensuring that government subsidy will not have to cover every rural area in the UK. Cornwall has already raised £132 ($215.36) million to reach up to 90 percent of homes by 2014. BT is building the network and providing £79 ($128.9) million of the funding, the rest is coming from Europe. Northern Ireland is well on its way, also with BT (NYSE: BT). Some smaller areas, such as the Angus Glens, have attempted to go it alone (see box).

But there are dangers for those who decide to build without BT. Hull is one of the few areas in the UK where the phone network has always been owned by the council, not BT, and broadband penetration there is lower than the national average.

For an internet service provider such as TalkTalk or BSkyB to link in to the local network requires an outlay for equipment and software, and a separate negotiation over price. Many prefer the simplicity of dealing with one network nationally, which means BT.

Of the government’s £530 ($864.74) million pot, around £150 ($244.74) million has already been committed to Wales and a number of English counties including Wiltshire, Norfolk, North Yorkshire and Cumbria. A further 40 areas, as well as Northern Ireland and Scotland, are likely to hear this week how much they will be allocated.

BT is not guaranteed to win all the new contracts. Fujitsu, the Japanese electronics firm, has offered to reach 5m homes in three to five years, if it beats BT to secure around £500 ($815.8)m in government subsidy. Both BT and Fujitsu will be hoping that councils club together to appoint one main contractor, allowing for economies of scale. Declaring his interest earlier this year, Fujitsu managing director of network solutions Andy Stevenson said: “We don’t want to end up with 40 fragmented networks so it makes sense for regions to come together.” However, fibre cannot reach everywhere. Tim Watkins, head of sales for western Europe at Chinese telecoms firm Huawei, which would like to supply equipment for the network, says the final 10 percent will be reached by a combination of satellite and mobile phone masts. “If you want to deliver high-speed broadband services to rural areas with six farmers, it’s never going to be achieved with just fibre.”

But carriers will have to take a mature approach and agree to share equipment in remote locations. Broadband expert Ian Watt at Enders Analysis believes the government funds will only get broadband to three-quarters of homes. “It’s more likely that high-speed broadband will be available to the centre of the village, for example to a school, library or post office. We don’t see the subsidy being enough to get it to everyone.”

Garfield doesn’t claim to know what will trigger demand, but believes it will come. “There is evidence that once you have access to it, the minute you’ve seen the new world, you would never go back. So, I don’t believe there is a lack of desire, but it is a premium product, it will never be the de facto normal product,” she says. Speed can be addictive. It is also of the essence if the government’s dream of creating Europe’s first extensive fibre network by 2015 is to become a reality.

Case study: going it alone

Nestling at the foot of the Cairngorm mountains on the east coast of Scotland, the inhabitants of the Angus Glens tend to make their living from hill farming and gamekeeping. But some commute to Dundee, where hi-tech industries, like biotechnology and computer games, are among the biggest employers. With 2,400 properties across a 500 mile area, and the more remote telephone exchanges serving fewer than 100 lines, there is little likelihood of BT or another major carrier building a fibre broadband network.

When lecturer Geoff Hobson moved to the area in 2007, he concluded that if the Glens wanted a fibre network, they would have to install it themselves. The Angus Broadband Co-operative was created to raise money and provide a community ownership model. The need for better broadband infrastructure is acute. A survey last year showed that 9 percent of properties had no internet connection at all, while 5 percent had only a dial-up service. Three quarters had fixed-line broadband but of those 67 percent reported speeds lower than 2Mbps, the minimum needed to allow quality home working. Meanwhile, a third of local homes are used for some form of business activity.Hobson says: “If you try watching a programme online it can just give up, particularly when it’s busy in the evening.” With two school age children, the family’s need for bandwidth will only increase.

A nearby hill farmer, whose wife is disabled, has to shop online, and her husband needs the internet to fill in government forms. But they have only dial-up access, which means no phone calls while they are using the web.

Another neighbour, a games developer who works from home, has to shuttle to and from the office with CD-Roms because he cannot send material online.

“We decided to going for a fibre network because it would be future-proof. We got some funding and drew up a plan for how to lay the cables: £9.5 ($15.5) million is the lowest quote so far. We weren’t expecting such a large figure,” says Hobson. The Co-operative has approached BT about sharing its ducts, which would bring down the cost. “They appear very helpful when you have meetings and run out to be very unhelpful when they send a written response.”

Hobson is waiting to hear whether his area will be included in an east of Scotland bid for government subsidy.

In Hunt’s letter (PDF here), he gives Ofcom a wide berth to lay out any of the concerns it might have with News Corp’s bid to buy the 61 percent of BSkyB that it does not already own. This is a deal that Ofcom had originally given its seal of approval—way before any of last week’s revelations came to light. Here are the three areas Hunt has flagged to Ed Richards, the chief executive of Ofcom:

—How the closure of the News of the World last week—“and/or the events surrounding it”—affects Ofcom’s opinion of the merger;
—Whether there have been any developments related to the letter Ofcom sent last Friday to the house select committe and MP John Whittingdale about NWS’s status as a “fit and proper” owner of BSkyB;
—And, just in case Richards did not get the point with the first two questions, whether there is anything else that Ofcom feels has emerged in the past week has led it to reconsider its original “confidence” (Hunt’s word) in News Corp.

Meanwhile, the OFT letter, which paidContent understands has yet to be sent (we will update this story with the link when it’s available) (link here) also raises similar questions around the OFT’s previous guidance, and how/if it has been affected by the events of the last week, in which we have seen the closure of the major daily newspaper News of the World, and ongoing investigations into criminal activity by those working for News Corp’s UK publishing arm, News International.

In June, the OFT conditionally approved the full acquisition of BSkyB by News Corp, pending a spin off of the news channel Sky News.

The two letters are undoubtedly a setback for News Corp, as they demonstrate an increasing level of skepticism among public sector decision makers, even without a full completion of the investigation.

Shares in the broadcaster, which owns pay-TV and broadcast satellite services, broadband and television channels, dropped below the level of the News Corp. bid but are currently trading just above. More from Guardian. At this writing, the stock is down 4.6 percent.

The news comes as Labour leaders look for cross-party support in the House of Commons to quash the deal. They received some today from Deputy Prime Minister Nick Clegg, a Liberal Democrat, who joined the call for News Corp. to drop the bid.

The specter of scandal over the whole issue spreads across the Atlantic to Les Hinton, now heading up Dow Jones but who had been executive chairman of News International at the time of some of the alleged activities. News Corp could take a big hit when U.S. markets open.

We have contacted News Corp for its response to the news and will update accordingly.

More as warranted.

Related

• Updated: Odds Of News Corp. Winning BSkyB Dim In Face Of Furious Opposition
• Another Digital Twist to the NWS Drama: A Tell-All Blog By Ex-NOTW Journos
• News Corp. And BSkyB: Conspiracy Theories And Other Very Bad Things
• Update: NOTW Redux? News International Registers "SunOnSunday" Domains
• News Corp-BSkyB: 'Fit & Proper' Role Called Into Question On E-Mail Charge
• News Of The World's Closure Brings Abrupt End To One Murdoch Paywall
• News Corp. Seen Weathering Tabloid Scandal Despite Black Eye for News Int.
• News Corp's Bid For BSkyB Up In The Air Again, May Blow Up
• Update 2: Hacked Off Public May Derail News Corp Over Dowler Scandal
• Murdoch Responds To Hacking Claims From Sun Valley

In a speech delivered in Brussels earlier today, Kroes noted that although there have been some price reductions in roaming in areas like dongle-based mobile broadband, they have not gone far enough. “Roaming prices should be no higher than what people are paying in local markets,” she noted. The aim is to make the difference between local and roaming rates “approach zero” by 2015.

Prices proposed range from capping mobile data at 50 euro cents ($0.72) per megabyte by 2014 at the retail level (currently there are no caps) to making it as low as 10 euro cents/MB ($0.14) for wholesale by 2014 (it’s currently at 50 euro cents). The full list:

Kroes says that she envisons these caps to stay in place until 2016, when market forces should have evened out and the prices will be low through competition.

The other major area that she seeks to change is in the area of SIMs. Currently, as with all GSM-based networks, users have to physically change the SIM cards in their devices in order to change operators. That has meant it is much more difficult for consumers to swap one provider for another when prices prove to be better elsewhere. “Consumers should have choice, [but the] competitive market is lacking,” Kroes noted today.

Her solution sounds a modified version of the so-called “soft SIM” idea put forward by Apple (NSDQ: AAPL) at one point earlier in the year, which was apparently quashed by operators alarmed at the idea of customers hopping of their service at the slightest offer of a lower price elsewhere. Kroes’ SIM idea aims to let “consumers choose an alternative provider for roaming services, irrespective of their national provider”:

“Each time the customer crossed a border, they would automatically switch to their chosen roaming provider, without any further action on their part, while keeping the same number and subscriber identity module (SIM card). This would enhance transparency and allow customers to shop around for the best roaming offers and encourage operators to offer more competitive roaming deals.”

The high price for roaming has been a bee in Kroes’ bonnet for years already. She had previously already enacted some measures to cap these prices—reductions that the operators immediately saw impacting their balance sheets—but this newest proposal, hitting all three areas of voice, text and data, and at both wholesale and retail, are the most drastic proposals for price reductions yet. We can therefore expect to see a lot of teeth-gnashing from the bigger operators.

Meanwhile, the proposed changes are a potential boost to smaller operators that do not own extensive network footprints and therefore need to rely on wholesale deals with other operators for roaming services, even if they will ultimately limit how much those operators might hope to make from those roaming services. As with services in home markets, caps have helped the bigger operators lock out the smaller players from decent roaming deals.

In an emailed statement, Three’s new CEO David Dyson noted that while he welcomed the start of more price cuts, they do not go far enough:

“We support the European Commission’s objective of bringing the cost of roaming data down to domestic levels, but to achieve that the Commission needs to go further than the proposed caps.

Our customers use their smartphones across the UK without fear of cost but must dramatically change the way they use their phones when they go abroad due to high data roaming charges.

High wholesale data rates are the problem, but the proposed caps will still leave these charges equivalent to €100 a gigabyte of data by 2014, a hundred-times greater than the current rate enjoyed today by UK consumers.

If the Commission wants to deliver on its objectives to provide a consistent experience for Europe’s consumers it should focus on driving the wholesale rates down to 3c a megabyte or less.”

]]> tag:contentnext.com,2011-07-06:article/419-espns-live-wimbledon-promise-centers-on-tv-mobile-held-hostage 2011-07-06T10:00:23Z 2011-07-06T07:16:24Z Staci D. Kramer http://paidcontent.co.uk/member/3/ paidContent:UK http://paidcontent.co.uk/ Copyright (c) 2011, paidContent:UK

Novak Dkojovic and Petra Kvitova weren’t the only winners at Wimbledon this year. Fans who thinking watching sports live matters won big when the All England Lawn Tennis and Croquet Club went with ESPN (NYSE: DIS) as the exclusive rights holder and its massive live schedule for the next 12 years. But mobile viewers may have more in common with Andy Murray or even Andy Roddick, at least for the next few years, as ESPN leverages the new rights in its own distribution negotiations.

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Novak Dkojovic and Petra Kvitova weren’t the only winners at Wimbledon this year. Fans who thinking watching sports live matters won big when the All England Lawn Tennis and Croquet Club went with ESPN (NYSE: DIS) as the exclusive rights holder and its massive live schedule for the next 12 years. But mobile viewers may have more in common with Andy Murray or even Andy Roddick, at least for the next few years, as ESPN leverages the new rights in its own distribution negotiations.

Meanwhile, broadband-reliant viewers will get a boost next year with semis and finals being streamed live; ESPN3 will expand to 750 hours across the tournament. And if you don’t subscribe to ESPN? No live Wimbledon at all from 2012. ABC will be the all-tape network. For the past nine years, ESPN was the primary cable partner; NBC (NSDQ: CMCSA) Sports owned broadcast for 43 years, routinely tape delaying matches in some time zones to protect revenues for the later hours of The Today Show.

Watch ESPN—if you can: ESPN will rely on its authenticated Watch ESPN apps for mobile access, limiting live matches to streaming linear ESPN and ESPN2, ESPN’s content head John Skipper said in a conference call after the deal was announced Tuesday. On the plus side, that means Watch ESPN doubles as Watch Wimbledon. Not so plus: as of this writing, only two cable operators (Time Warner Cable (NYSE: TWC), Bright House) and one telecom (Verizon FiOS) offer Watch ESPN. Access is via apps on iPad, iPod Touch or iPhone and Android; no mobile browser version.

It’s not clear how much of the 750 hours promised tor broadband network ESPN3 annually will be live streamed or offered only through VOD. Initially, Skipper said the semifinals and finals next year wouldn’t be on ESPN3; ESPN PR clarified that later, saying that those matches will be on ESPN3 in 2012 and that ESPN “will be making future programming announcements closer to the event.”

Why does that matter?: ESPN has far great distribution for ESPN3 than Watch ESPN. I can watch ESPN3 at my home and on the go as a subscriber of Charter Communications (NSDQ: CHTR)—and so can anyone with a provider on this list. Access is covered as part of distribution agreements, with ESPN getting a fee per sub for the broadband network just like it does with its cable networks. It’s free to use from a college campus network or military base in the U.S.

Watch ESPN is a bargaining tool and Wimbledon is added leverage as ESPN negotiates renewals. Time Warner Cable got the rights for itself and Bright House as part of an omnibus content deal that included retransmission rights, access to ESPN3, expanded ABC VOD and more. Comcast’s last deal added ESPN3 but so far the largest U.S. carrier—and one of the biggest proponents of TV Everywhere/authenticated TV—lacks Watch ESPN as an option.

Getting subscribers to complain about lacking access is a tried and true method of gaining carriage. It doesn’t always work but it often does, which is one reason why gaining marquee events like Wimbledon can be so important. NBCUniversal will use the Olympics to do the same for Versus. High-profile events also help ESPN, among the most expensive channels, and others justify rates and rate increases. And, especially in today’s Netflix-Hulu environment, they provide added incentive for subscribers to stay with a service.

As currently set up, it runs counter to the All England club’s ultimate goal of getting the utmost attention for Wimbledon by building the biggest live audience possible. It’s a bit like closing the Centre Court roof on a brilliant day.

This is particularly true if ESPN returns to the idea of retaining live coverage of the men’s and women’s semis and finals for TV after 2012, using ESPN3 for VOD—the online version of tape delay—and removing portability while limiting mobile access.

That shouldn’t be the case for the life of the deal, which ESPN sold as the way to get Wimbledon the most live action possible. When I asked All England Chief Executive Ian Ritchie on the call if he was ok with having a smaller audience at first while ESPN held some matches off live broadband and limited access to mobile, he spoke pragmatically of how long it takes to adapt some technologies and said ESPN is the partner most capable of providing growth in digital and mobile. 

None of this is meant to minimize the feat of making Wimbledon a live event in the U.S. But for those who saw ESPN as potential Olympic nirvana compared to victor NBC Universal, it’s a reminder that multiplatform doesn’t equal simulcast. (Release)

Related

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• ESPN Grabs Expanded Wimbledon Digital Rights; Pay Service Mediazone Out Of The Picture

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