Tuesday, March 29, 2005

Broadband price and offer war starts

A broadband price and value proposition war seems to be breaking out in Latvia. First Lattelekom doubled the speed of its UltraDSL business class connections (to a maxium 4 Mbps), then Telia MultiCom (TMC) announced it was slashing prices yet again for the consumer sector, making a 1 Mb line at LVL 19.95 a bargain compared to the ca. LVL 18 one now pays for HomeDSL, including renting a DSL modem from Lattelekom. Even if Lattelekom doubles the speed of its HomeDSL connection (as rumored), the TMC deal is pretty attractive.
Now cable TV, internet and telecoms provider Baltkom is slashing its broadband prices (they are still above TMC's) but throwing in a LVL 1 subsidized computer deal. The machines on offer (starting from LVL 25 downwards) are relatively new, refurbished hand-me-downs from the US with some Linux bells and whistles installed. You have to sign up for at least two years of a package of services from Baltkom (presumably, the more, the cheaper your computer).
By adapting the subsidized mobile handset model, Baltkom has gotten the jump on its competitors, since there is not much to do with the internet unless you have a computer.
Watch for Lattelekom coming up with something similar, but more high-end. The killer value proposition here will be IP TV, so if you ask me, the deal should be for a big flatscreen monitor (say, 17 or 2o inches), with the whole Windows Media package (I grate my teeth, I would gladly take an iMac G5 ), payable in installments along with a turboclass DSL line. What it will be in reality is another question. Lattelekom flopped once with a computer and dialup deal, perhaps an exception that proves the rule.
To be sure, there are unanswered quality and coverage issues with most of the offers. TMC says it has a 100 mbps link to the international internet, but will that suffice if lots of folks jump on the 1 mbps offer? Baltkom owns its own optical cable from Latvia to the Swedish island of Gotland with a further link to the mainland and the global networks that terminate there. This means Baltkom has more than enough bandwidth, but so does everyone else, so this is probably not an issue. Both Baltkom and TMC cover only those areas within the reach of their private optical networks, Lattelekom can deliver DSL nationwide, almost in all cities and towns and probably via WiMax or cdma 450 anywhere.
On the business side, Lattelekom will probably look to hosting and "leasing" applications for small and medium sized businesses, perhaps packaging these with a business broadband subscription. The company probably realizes that the more broadband there is, the less pay-by-the-minute voice there will be, so my advice to Lattelekom would be to be skilled at implementing corporate VOIP, perhaps folding a Skype solution into its offer (for intraoffice and most other calls).

Monday, March 28, 2005

Lattelekom preparing to shapeshift

Look for Lattelekom becoming more of an IT services provider for small and medium-sized business and, at the same time, gearing up for IT TV for consumers within the next few months. The Latvian fixed network ex-monopolist's approach to the SMEs is "we can (almost) do it all". That means that Lattelekom actively offers SME business customers to completely wire their facilities - ISDN phone lines, a computer network, broadband internet, VPNs, the works...except for, you guessed it, the mobile phones no SME can operate without.
This blogger has learned that Lattelekom and Latvian Mobile Telephone (LMT) (both owned by the same part-parent, Swedish TeliaSonera have been talking for a couple of years about the obvious – seamlessly integrating their customer offering and essentially becoming a one-stop shop for each other, as is the case in Sweden with the parent's fixed and mobile divisions.
One reason why the talks (involving some powerful managers from Lattelekom) have been dragging on could be that LMT, which has been making huge profits, sees no need to bend to anyone. Also, like any other mobile operator in the world, it can just sit back and wait for more and more voice traffic to come its way. People, as one may have noticed, have been mobile for the past 50 000 years (location-based services and Nokia mobiles would have done wonders for mammoth hunting back then :) ) so that is where, unsurprisingly, they use voice services.
Meanwhile, the business and home side is becoming more and more of an IP-based show, whether for internet, data transmission (company WANs or whatever), entertainment and self-service (Skype) or bundled IP based voice.
In apparent anticipation of IPTV, Lattelekom has or may soon boost the speed of its HomeDSL services to 512 kbps from the current 256 kbps as it did for the business service UltraDSL. For home users, that still may not be the best deal on the block (if the block is near the right optical network), since Telia MultiCom, no longer owned by any Swedes, just doubled its speeds again, LVL 19.95 will get a 1 Mbps line in the home, which is twice as good as the expected HomeDSL on steroids, though one wonders about real end-to-end speeds for both.
In any case, Lattelekom has boosted the basic speed of its DSL link (DSLAM to the user) to 4 Mbps, more than enough to carry state-of-the-art compressed video. As this blogger has hinted, Lattelekom will be launching television services using IP TV over the next few months. Whether this will be fully commercial or just a pilot project remains to be seen.

The auction
This week will also see the March 31 auction of Latvia's third GSM/UMTS licence. Squaring off will be Danish TDC-owned Bite GSM and Peteris Smidre's consortium of SIA Alina and MVC Capital of the US. In a pre-auction announcement, TDC has thrown down the gauntlet to Tele2 by saying that if it wins, it will open its network to virtual operators (i.e. selling their own brand prepaid cards) from the very start. This means that any Latvian Bite (means bee) will first sting the biggest card-based operator on the market, which is Tele2. No surprise that Tele2 has been aggressively pursing corporate customers at the LMT end of the market. It is said to be close to a deal with Hansabanka, which so far has let its several hundred employees choose their own provider within the framework of a business call compensation deal. However, with telecoms expenses of around LVL 1 million per annum, Hansabanka may benefit from having all their mobiles services by one operator. The problem is, there is no official number portability until December 1, by which time the new operator will be up and running, with cdma 450 operator Triatel also making new moves as its network expands and it offers wireless DSL at 2.4 Mbps by the summer (so I am told).
It should be an interesting week. Sorry for not blogging more often, just lots of other stuff going on...

Thursday, March 17, 2005

Licence auction preselect, Huawei coming

The winners of the pre-selection for the March 31 auction of Latvia's third UMTS/GSM mobile licence were announced on March 15, and it was no surprise that Danish TDC owned Bite GSM and Peteris Smidre's consortium (SIA Alina and MVC Capital of the US) were the winners. There was a third, unnamed contender that failed the pre-select. According to some reports, the mysterious International Telecommunications and Technologies (IT&T) sent a letter asking the auction be extended yet again to April 26. The completely unknown consortium failed to file for pre-selection, apparently because of discord among its participants, who apparently are from Lebanon and elsewhere in the Middle East. This, in turn, may be related to political tensions in Lebanon.
The contenders now have to pay a deposit pf 30 % of the minimum bid of LVL 1.3 million by March 22 in order to go on to the auction on March 31.
My guess is that it will be a very hard fight, but the Danes may come out on top. They need the Latvian licence in order to have coverage in all three Baltic states -- Bite in Lithuania, ally Radiolinja in Estonia, and the third licence in Latvia. This will drive up the price, depending on how far Smidre and his US financial backers are willing to go in what is, for the financial side, essentially a venture capital project. MVC Capital, it is my guess, sees that Smidre has done it before, building up Baltcom GSM and then selling it to Tele2 for well over USD 200 million (a sum shared by all the owners, including Metromedia and Western Wireless). Of course, it is a different game now, the potential market for a new operator is small and difficult -- not many new potential users and 1.4 million existing users to be pried away from Latvian Mobile Telephone (LMT) and Tele2. If the new operator goes after LMT, it will have to present an extremely attractive package for the hitherto high revenue business user. If Tele2 is chosen as the main adversary, we will see what is essentially a "battle of the prepaid cards".
This will, in any case, have the effect desired by Minister of Transport Ainars Slesers of cutting mobile tariffs, but it does not present an easy or attractive business model for the newcomer.

HUAWEI coming?

Chinese telecoms infrastructure equipment maker Huawei is advertising for staff in the Baltics, most likely Latvia. While it has hitherto proven impossible to get an answer from Huawei headquarters in China (despite calls and e-mails to an English-speaking person as part of my day job), it is obvious that Huawei will set up some kind of operation here. There is at least EUR 150 million to be spend, in accordance with auction requirements, by whoever wins the third licence, Lattelekom is spending LVL 30 million to finish totally digitizing the whole country (wireless solutions are likely for the last 2 % who live in some corner of the forest or swamp), and Triatel is building up its cdma 450 network. There is no shortage of business to be had. Smidre, too, says he has been contacted by Huawei. Even if he doesn't win the third licence, his fixed line and optical internet services will need equipment upgrades.
Huawei is mentioned everywhere in the business press as a serious challenger to established western equipment suppliers and infrastructure builders such as Ericsson, Motorola and Nortel.

Latvian "friendster" blocked at workplaces
Draugiem.lv, a wholly-Latvian networking and socializing site inspired by Friendster in the US is getting increasingly blocked by workplaces in Latvia. This blogger's newspaper put a content filter on draugiem.lv (which now has more than 210 000 members), as did, reportedly, Hansabanka, the large, Swedish-owned Latvian bank. At the newspaper, the reason was that certain sales staff were staring at the friendship website all day.
Draugiem.lv is actually not all that exciting, little "happens" on it day to day, except when one's friends and friends-of-friends randomly change their thumbnail-sized photos. Also, draugiem.lv has proven to be a spam-free e-mail platform where anyone can be contacted by clicking through on a name rather than using an e-mail address and seperate program, The site has also launched a beta version of chat, something that can actively addict staff at a workplace (indeed, during a "chat craze" some years ago, it was obvious that the IT staff at many Latvian ministries and state institutions had little better to do).

Blogger sucks!

I have been busy and not so much has been happening, hence the sparse blogging for a couple of weeks. However, when I tried to get in all day yesterday, Google's www.blogger.com simply didn't work. This started at home on my Lattelekom DSL line, so it was not an overbroad application of whatever content blocker has been used by the newspaper.

Friday, March 04, 2005

Frequency weirdness threatens mobile operators

The Latvian Ministry of Transport has produced an apparently innocent looking document listing about 20 pieces of radio spectrum that it believes should be considered restricted access. Taken together with article 47 of the Electronic Communication Law, the document, if adopted as policy by the Cabinet of Ministers, would allow all restricted-use spectrum to be auctioned off once present user licences expire.
This could mean that all three Latvian operators – Tele2 and Latvian Mobile Telephone (LMT) on the GSM spectrum, and cdma450 operator Triatel – could have their spectrum useage rights subject to auction in the next couple of years. Triatel, which is just starting to build out its 3G network, could have its frequencies auctioned off as early as next year.
Triatel wrote a letter to the Public Utilities Regulatory Commission warning that the draft document (approved by a meeting of ministerial State Secretaries on February 10) effectively permitted "business theft" should a competitor or speculator win in the bidding and then demand (having paid a significant sum) that the spectrum rights be exclusive. The regulator filed a critical comment urging the document be redrafted allowing for a mechanism for incumbent frequency holders to extend their rights.
The authors of the draft document in the Communications Department of the Ministry of Transport say they had no choice but to word it in a manner that left it open to such interpretation. Indeed, one source close to the drafting process tipped off this blogger in a call describing what had been written as "madness".
Once the possibility that Latvia's GSM network could be disrupted (you can't operate without frequencies) made front-page news, the Ministry of Transport briefed this blogger (in his day job as a reporter) making it clear, yet again, that their intent was not to indirectly put the interests of 1.4 million mobile phone users on the auction block. Indeed, they, too, wanted to achieve an end-result where incumbents could extend their frequency useage rights, where unused frequencies would be auctioned to the highest bidder and where all players would start paying some kind of frequency use fees in accordance with Latvia's long term telecommunications policy principles.
At this point, it is unclear whether this can be done without amending the Electronic Communications Law. At the briefing, the Ministry and Communications Department officials stressed that there was no other way they could have drafted the frequency use document given the way the law is formulated. At the same time they were reluctant to amend the law yet again.
Some interesting observations after all this:
- there are still embarrassing loopholes in the way wireless telecommunications markets are managed in Latvia (the LVL 100 paid, wholly legally by the Triatel brand partners, for cdma 450 spectrum is one example).
-the low intensity conflict between the Ministry of Transport and the Regulator continues, with the latter being blamed for not timely objecting to the draft spectrum use memo (even though the Ministry claims there was no other way they could draft it). Another simmering issue is number resources, with the Regulator urging a rapid swith to eight digit numbers before a severe shortage (due to exploding mobile use and the third/fourth operator) hits. The Communications Department says these alarmist statements are exaggerated.
-an undercurrent of feeling in the Ministry that some mobile operators, such as Triatel, (who are these people, really? – asked one official), should be given a shaking because they, somehow, are dubious. As for the big incumbents, they are making too much money (there is some merit to this, LMT's profitability runs at around 30 % and it has the rec0rd for earnings of any Latvian company).

I have been a little remiss in blogging because I have been recovering from a system crash on my Powerbook G4 which required a so-called clean install of MacOS X. All files burned to CD or an external drive, then recovered. I've also been feeling some kind of late winter lethargy, believe it ir not. The Swedes call it "spring fatigue" but at -19 C during the night in Riga, it's still the middle of the fucking winter as far as I am concerned.