One of the big telecom honchos (a very nice guy and a firstnamesake) in Latvia had a "round figure" birthday and an open house at the posh offices in Riga. So I was delegated to take a present from newspaper XX and express our warmest greetings (we have around 100+ of this company's ARPU machines, thank you :)) and all that.
That being done, after several minutes of wandering around (tieless, the half-Swedish legacy, half Latvian "lubraks"* journalist style of dress) I sidled up to some other lesser and different honchos from the IT&T sector for to shoot the shit while sipping some wine and munching various rather tasty canapes.
Some interesting matters came up. Regarding TeliaSonera, the idea was tossed around that the Swedish group has a considerable cash war chest. As I mentioned earlier on the blog, Dagens industri's commentator Michael Törnwall mentioned a few cases of how TeliaSonera has failed to spend this – notably in its abortive efforts to buy Turkcell and Megafon, but also in earlier attempts to get a stake in Denmark's TDC and the fiasco with Telenor. Nor did the Swedish "middleweight" telecom "spend it all" buying the Danish unit of Orange.
My discussion partner and I thought of a new angle– keeping all that cash for too long could make TeliaSonera an attractive acquisition object just for that reason.
I am not a financial engineer, but it is possible to do a deal (swapping shares, etc. ) where TeliaSonera shareholders, Swedish investors, Finnish widows and orphans, whatever, get a share of Humungous Telecom AG (don't take that suffix as a wild guess :)) which trades for something more like Swedish lunch today (say SEK 50 instead of the mid-30s where the TeliaSonera share is hovering). HT AG then gets TeliaSonera (now HT Nordicum -- from Norden and Balticum) with a pretty big stash of cash. In effect, as Dire Straits (?) sang - you get your money for nothing and your (not to be sexist) your gigabits for free. The cash can then be tossed into a still larger war chest or spent on various investment programs, for instance, building a regional extension of some terabit speed optical network so fast the bits in gigbit ethernet kill themselves by stepping off the fiber since they think they are standing still and wonder why the datastream has stopped.
Of course, by the time this happens, we will be several steps along toward the weirdly simply but experience-rich world where there is just "the net", "the grid" "the infosphere" that we and our devices of choice are on, always, anywhere, anytime. Talking to someone, even in Zanzibar is a trivial feature of "it". Ask Niklas Zennstrom, the Skype man. Having a little fun, say, putting on a VR helmet to hunt ultrareal dinosaurs with a bazooka-- EUR 5 an hour?
Which brings us around to the questions of what telecoms operators will do when that happens. Their purpose will be just to keep "Electricity 2.0" on 99.99 % of the time for us ordinary folks and say, 99.9999 for business customers who can afford a four figure monthly QoS fee.
Unless we are running a basement, family steel mill (or making aluminum in five kilo lots), most of us don't really freak out at the monthly electricity bill. That's not where the money is made because electricity exists. Think TV, DVD, appliances, etc – but you seldom see the local electrical utility selling you a $ 100 electric drill. The same problem faces Electricity 2.0.
In that sense, the recent purchase of IT services company MicroLink was a largely smart move by Lattelekom and its half-sisters in Estonia and Lithuania.
The problem is -- what next? The nature of IT services changes month to month, and one of the honchos I spoke to (with more than trivial connections to the whole deal) said that the best hope is if Lattelekom and its partners leave MicroLink to run itself. A big worry is that MicroLink, if Lattelekom's past experience is a guide, will be broken while being fixed because it is not broken. There were references made to Verdi, a stillborn Lattelekom IT services project. Also, Lattelekom, who has TeliaSonera as only a half-mother, is still regarded as a politicized company where the loonies (you MUST digitize by dragging fiber to the shack in the woods) can show up at any time.
I think this fears are a bit exaggerated. Nils Melngailis seems to know what he is talking about when he speaks of business process outsourcing and some things have already gotten off the ground. Maybe this time around, the Lattelekom and regional IT effort will fly. However, in terms of size, whatever does fly will be a pigeon among condors, and that may be the main problem...
So much for the buzz of the day.
* Oh yes, a lubraks is well, casually carelessly dressed to the point of slovenly. Loses a bit in the translation, but sounded nice when a friend with teenage sons admonished them not to go somewhere like lubraki.
Monday, May 30, 2005
Thursday, May 26, 2005
Mikke on the sickly halfmother of Lattelekom
One of the blog's (possible) readers, Mikael Törnwall (Swedish nickname Mikke), a journalist with the business daily Dagens industri has written an interesting analysis of what's happening at TeliaSonera, the parent (or as Swedes and Germans would say, mother) of Lattelekom and the other Baltic telecoms and mobile companies (for Lattelekom, Telia Sonera is actually a half-mother, a bizarre term I used before on this blog).
Since not many of the readers of this blog read Swedish, here's the gist of what Mikke said:
TeliaSonera's efforts to grow outside its Nordic/Baltic "home market" have been less than a success and this has tarnished the company's image, not the least as expressed by its share price. Two hoped-for deals to take over Megafon, the Russian mobile operator, and Turkcell, the Turkish mobile, have, as Latvians would say, "gone to the Devil's mother. On the domestic market, TeliaSonera's daily bread and butter (telephony and broadband) is being eaten by competitors. In a great turn of phrase, Mikke says "Customers stubbornly want to call and surf more cheaply, and competitors stubbornly meet this demand." TeliaSonera's efforts to expand in the Nordic region by courting Norway's Telenor and Danish TDC have also failed (the merger attempt between Telia and Telenor was a black comedy, this blogger recalls, with Norwegian executives throwing punches at Norwegian radio journalists. Sonera was picked after that fiasco).
The most interesting thing Mikke says, sort of between the lines, is that the only hope left for TeliaSonera is some kind of pan-European affair. Now I may have mentioned this on the blog before (I think there was a rumor of France Telecom looking at TeliaSonera), but my standard answer to all the moaning and groaning in Latvia about the "Nordic supermonopoly" is that "you ain't seen Jack Shit yet" because TeliaSonera is a small fish compared to Deutsche Telecom, the French, Vodafone and others who could, if they wanted to, have TeliaSonera for lunch.
Speaking of lunch, the share price Mikke mentions in his May 25 is SEK 37.20. This a very nostalgic price for me, because it is what the standard lunch cost when I started working in Sweden in the 1980s. Today -- God knows... But lunch at that price, I'll take it. So let us see what happens to Lattelekom's half mother. Will she be married off as the poor Nordic orphan girl whose income from the domestic farmstead (Sweden) dried up? Or will she make money humming "I feel best in open landscapes..." millions and millions of times? (Mikke notes that entertainment is a possible new source of revenue, and that phrase is a bad translation of a very popular Swedish tune by Ulf Lundell, the sort of thing you want for a ring tone if you are a true Swede :)).
Since not many of the readers of this blog read Swedish, here's the gist of what Mikke said:
TeliaSonera's efforts to grow outside its Nordic/Baltic "home market" have been less than a success and this has tarnished the company's image, not the least as expressed by its share price. Two hoped-for deals to take over Megafon, the Russian mobile operator, and Turkcell, the Turkish mobile, have, as Latvians would say, "gone to the Devil's mother. On the domestic market, TeliaSonera's daily bread and butter (telephony and broadband) is being eaten by competitors. In a great turn of phrase, Mikke says "Customers stubbornly want to call and surf more cheaply, and competitors stubbornly meet this demand." TeliaSonera's efforts to expand in the Nordic region by courting Norway's Telenor and Danish TDC have also failed (the merger attempt between Telia and Telenor was a black comedy, this blogger recalls, with Norwegian executives throwing punches at Norwegian radio journalists. Sonera was picked after that fiasco).
The most interesting thing Mikke says, sort of between the lines, is that the only hope left for TeliaSonera is some kind of pan-European affair. Now I may have mentioned this on the blog before (I think there was a rumor of France Telecom looking at TeliaSonera), but my standard answer to all the moaning and groaning in Latvia about the "Nordic supermonopoly" is that "you ain't seen Jack Shit yet" because TeliaSonera is a small fish compared to Deutsche Telecom, the French, Vodafone and others who could, if they wanted to, have TeliaSonera for lunch.
Speaking of lunch, the share price Mikke mentions in his May 25 is SEK 37.20. This a very nostalgic price for me, because it is what the standard lunch cost when I started working in Sweden in the 1980s. Today -- God knows... But lunch at that price, I'll take it. So let us see what happens to Lattelekom's half mother. Will she be married off as the poor Nordic orphan girl whose income from the domestic farmstead (Sweden) dried up? Or will she make money humming "I feel best in open landscapes..." millions and millions of times? (Mikke notes that entertainment is a possible new source of revenue, and that phrase is a bad translation of a very popular Swedish tune by Ulf Lundell, the sort of thing you want for a ring tone if you are a true Swede :)).
Wednesday, May 25, 2005
Bite's and Triatel's plans
Back from Cannes, time to blog again:
Bite bids to bite a bit of the Latvian market
Bite Mobile, the recently founded new (third, if you buy that) mobile operator will kick off on the Latvian market by selling prepaid cards and by pushing hard to get national roaming while its network coverage is built out.
The cards will probably be modeled on the Lithuanian Labas (meaning Hi or Hello) card sold by parent company Bite GSM. These come with a started kit loaded with 3 litas of calling time, and can be recharged in amounts ranging from 20 to 99 litas. Calls with Labas start at 0.24 litas per minute within the Bite GSM network.
For business travelers, Bite Mobile hopes to offer more or less the same deal with Vodafone and its partners as Bite GSM in Lithuania. Lithuanian customers can automatically roam with the Vodafone International or Vodafone Eurocall tariff plans, which offer unified tariffs by calling regions.
This may be a relief for travelers from the appearance of an unknown operator when switching on their phones at a foreign airport, then making a few calls only to get a SMS from the home operating showing that the particular roaming operator is the most expensive for calling home. Lithuanian customers also enjoy all their domestic services – mobile internet, calls with short numbers, etc., while roaming abroad.
Bite Mobile sees national roaming – using the networks of Latvian Mobile Telephone (LMT) and Tele2 until its own network is built out – as essential to a quick start. However, the Public Utilities Regulation Commission has not yet received a request for a ruling in this regard.
If a cursory look at some matters that Britain's OFCOM is handling regarding national roaming for 3 is any indication, then the Latvian regulator could be walking into a minefield, even if the decision to promote competition by this means is correct. There appear to be constant disputes over whether 3 is building out its network or continuing to get a partly free ride on investments (in GSM networks) made by others.
As far as competition on international roaming, Tele2 seems better poised to offer a "one Europe" package than LMT, since the Swedish owned group has mobile operations in several European countries, though perhaps not as extensive a network as Vodafone.
LMT has a whole zoo of roaming partners around the world, but some kind of unified scheme only with its Baltic partners (Omnitel and EMT) and, perhaps, with TeliaSonera's mobile units in Scandinavia. It is, however, rightly pointed out that roaming is of concern mainly to business customers.
(Most of this will be published in a certain business newspaper on May 26 :) )
Now as for what didn't make the paper, namely, that Bite Mobile will roll out, at some point, all of the services it has at its Lithuanian parent (with Danish "grandparent" TDC), including GPRS and EDGE. UMTS and 3G services are somewhat on the back burned - the company wants to get a solid customer base in GSM and to see some more takeup of UMTS handsets and services before moving ahead with this technology, although, ultimately, it is supposed to be the most cost efficient for carrying voice.
Triatel your watchman and PBX?
Triatel's video experiment, described earlier here, is actually a clever hack by some of the company's own customers. They found that by attaching a web-cam to a Triatel (probably fixed wireless) phone on the wireless internet, you could have a video-surveillance system. The idea is to put this up in bars and restaurants, where drinking (i.e.pilferage in kind) by the staff seems to be widespread. There are still problems with resolution (is that vodka or water the bartender is sipping?), but the experiments show the possibility for a "plug and play" videosurveillance system using off-the shelf webcams and out of the box Triatel phones.
Another product being developed by the company itself is a software based virtual PBX for small businesses. This will allow the function keys of the desktop phones to be used to reroute calls internally. The system will also allow free "intraoffice" calls (even across town, but not between domestic calling regions).
Look for this to be launched in July. Also, there will probably be a formal announcement that some kind of deal has been reached with China's HuaWei for the further buildout of Triatel's network.
Also look for the company getting more stylish video/photo camera equipped handsets that are more suitable for entertainment and information services. One of the first could be news agency LETA's webcast style Latvian-language news service (also carried on cable TV, it rolls news headlines and sometimes the talking head of a newsreader)
Maybe more on Triatel later.
Bite bids to bite a bit of the Latvian market
Bite Mobile, the recently founded new (third, if you buy that) mobile operator will kick off on the Latvian market by selling prepaid cards and by pushing hard to get national roaming while its network coverage is built out.
The cards will probably be modeled on the Lithuanian Labas (meaning Hi or Hello) card sold by parent company Bite GSM. These come with a started kit loaded with 3 litas of calling time, and can be recharged in amounts ranging from 20 to 99 litas. Calls with Labas start at 0.24 litas per minute within the Bite GSM network.
For business travelers, Bite Mobile hopes to offer more or less the same deal with Vodafone and its partners as Bite GSM in Lithuania. Lithuanian customers can automatically roam with the Vodafone International or Vodafone Eurocall tariff plans, which offer unified tariffs by calling regions.
This may be a relief for travelers from the appearance of an unknown operator when switching on their phones at a foreign airport, then making a few calls only to get a SMS from the home operating showing that the particular roaming operator is the most expensive for calling home. Lithuanian customers also enjoy all their domestic services – mobile internet, calls with short numbers, etc., while roaming abroad.
Bite Mobile sees national roaming – using the networks of Latvian Mobile Telephone (LMT) and Tele2 until its own network is built out – as essential to a quick start. However, the Public Utilities Regulation Commission has not yet received a request for a ruling in this regard.
If a cursory look at some matters that Britain's OFCOM is handling regarding national roaming for 3 is any indication, then the Latvian regulator could be walking into a minefield, even if the decision to promote competition by this means is correct. There appear to be constant disputes over whether 3 is building out its network or continuing to get a partly free ride on investments (in GSM networks) made by others.
As far as competition on international roaming, Tele2 seems better poised to offer a "one Europe" package than LMT, since the Swedish owned group has mobile operations in several European countries, though perhaps not as extensive a network as Vodafone.
LMT has a whole zoo of roaming partners around the world, but some kind of unified scheme only with its Baltic partners (Omnitel and EMT) and, perhaps, with TeliaSonera's mobile units in Scandinavia. It is, however, rightly pointed out that roaming is of concern mainly to business customers.
(Most of this will be published in a certain business newspaper on May 26 :) )
Now as for what didn't make the paper, namely, that Bite Mobile will roll out, at some point, all of the services it has at its Lithuanian parent (with Danish "grandparent" TDC), including GPRS and EDGE. UMTS and 3G services are somewhat on the back burned - the company wants to get a solid customer base in GSM and to see some more takeup of UMTS handsets and services before moving ahead with this technology, although, ultimately, it is supposed to be the most cost efficient for carrying voice.
Triatel your watchman and PBX?
Triatel's video experiment, described earlier here, is actually a clever hack by some of the company's own customers. They found that by attaching a web-cam to a Triatel (probably fixed wireless) phone on the wireless internet, you could have a video-surveillance system. The idea is to put this up in bars and restaurants, where drinking (i.e.pilferage in kind) by the staff seems to be widespread. There are still problems with resolution (is that vodka or water the bartender is sipping?), but the experiments show the possibility for a "plug and play" videosurveillance system using off-the shelf webcams and out of the box Triatel phones.
Another product being developed by the company itself is a software based virtual PBX for small businesses. This will allow the function keys of the desktop phones to be used to reroute calls internally. The system will also allow free "intraoffice" calls (even across town, but not between domestic calling regions).
Look for this to be launched in July. Also, there will probably be a formal announcement that some kind of deal has been reached with China's HuaWei for the further buildout of Triatel's network.
Also look for the company getting more stylish video/photo camera equipped handsets that are more suitable for entertainment and information services. One of the first could be news agency LETA's webcast style Latvian-language news service (also carried on cable TV, it rolls news headlines and sometimes the talking head of a newsreader)
Maybe more on Triatel later.
Tuesday, May 17, 2005
The Prophet Speaks!!!!
This was posted on November 10, 2004:
"Then there are the loonie rumors (although not entirely). The one I heard today from some top folks in the Latvian IT business is that Lattelekom is buying MicroLink. Sorta fits with the Estos mid-range vision of their baby growing up to marry a mid-sized IT & T company. It also fits with the idea that Lattelekom may split into a) a network operator (getting some pan-Baltic assets in the data networks area from MicroLink), b) a service provider (consumer, broadband, cable TV, all that sh**t) and c) a business service provider (heavy into outsourcing your entire IT&T needs, putting in all from the network to the PCs to the rent-an-applications services, just sign here on the SLA...). The latter is going to take a lot of IT competance and weigh. MicroLink has some of it. Rumor also has it that Verdi, the unborn fetus of an IT subsidiary that Lattelekom has been carrying for years is losing folks to international biggies like Accenture. Buying MicroLink might make Lattelekom a more exciting place to work (well, with other excitements like "who's getting reorganized this month?")"
"Then there are the loonie rumors (although not entirely). The one I heard today from some top folks in the Latvian IT business is that Lattelekom is buying MicroLink. Sorta fits with the Estos mid-range vision of their baby growing up to marry a mid-sized IT & T company. It also fits with the idea that Lattelekom may split into a) a network operator (getting some pan-Baltic assets in the data networks area from MicroLink), b) a service provider (consumer, broadband, cable TV, all that sh**t) and c) a business service provider (heavy into outsourcing your entire IT&T needs, putting in all from the network to the PCs to the rent-an-applications services, just sign here on the SLA...). The latter is going to take a lot of IT competance and weigh. MicroLink has some of it. Rumor also has it that Verdi, the unborn fetus of an IT subsidiary that Lattelekom has been carrying for years is losing folks to international biggies like Accenture. Buying MicroLink might make Lattelekom a more exciting place to work (well, with other excitements like "who's getting reorganized this month?")"
A quickie on MicroLink and the Telekom sisters
What a time to be in f**king Cannes instead of Riga. My quick take on the Telekom Sisters (Lietuvos Telekomas, Lattelekom and Elion) buying MicroLink is this:
Most telekoms is going to look and feel like an IT application (VOIP, video on demand, etc), so why not?
The Hansabanka data network account comes with the territory (I think).
Telekoms is merging with IT services, so that the three sisters (and daughters of TeliaSonera, more or less), have got a major regional IT services company.
Outgoing MicroLink founder and chairman Alan Martinsson was saying years ago this would happen (I quoted him in some article somewhere, I think both in that pink newspaper and a defunct publication called Northern Enterprise).
I think this blog may even have touched on the idea of Lattelekom getting MicroLink but then dismissed it as far fetched...he, he...
My only question is are we too far ahead of the game here on telecoms and IT convergence.
My final thought -- are we possibly seeing the seeds of Balttelekom -- a pan Baltic IT/Telekoms organization that will be a subsidiary of TeliaSonera. I think we will see this by 2007, on the eve of the euro. There is no problem registering pan-European corporations now.
Cannes, to my Latvian readers, is one huge balagāns. Watch the pink paper for more.
Most telekoms is going to look and feel like an IT application (VOIP, video on demand, etc), so why not?
The Hansabanka data network account comes with the territory (I think).
Telekoms is merging with IT services, so that the three sisters (and daughters of TeliaSonera, more or less), have got a major regional IT services company.
Outgoing MicroLink founder and chairman Alan Martinsson was saying years ago this would happen (I quoted him in some article somewhere, I think both in that pink newspaper and a defunct publication called Northern Enterprise).
I think this blog may even have touched on the idea of Lattelekom getting MicroLink but then dismissed it as far fetched...he, he...
My only question is are we too far ahead of the game here on telecoms and IT convergence.
My final thought -- are we possibly seeing the seeds of Balttelekom -- a pan Baltic IT/Telekoms organization that will be a subsidiary of TeliaSonera. I think we will see this by 2007, on the eve of the euro. There is no problem registering pan-European corporations now.
Cannes, to my Latvian readers, is one huge balagāns. Watch the pink paper for more.
Monday, May 16, 2005
F**k You! Amigo
One of the most intrusive and offensive popups on the Latvian web is the thing that the mobile phone card company Amigo has put up on www.one.lv. It blocks you from signing into you e-mail account with some flashing picture of Amigo's evil little mutant dwarf. The little m**therf**ker has shown up every time I try to access a one.lv account here in Cannes (where I am on "vacation" with my filmmaker wife, hence almost no posts until after May 20). I have a regular LMT subscription, but this piece of shit has totally put me off from buying an Amigo card should one of my grown sons come to Latvia and need a local phone card. I'll get them a Golden Fish (Tele 2) or an Okarte instead.
Friday, May 13, 2005
Seeing Bill, flogging Ericsson, decisions, decisions..
Aigars to meet Bill
It can now be said that a visit to the US West Coast by Latvian Prime Minister Aigars Kalvitis, specifically to Microsoft and Bill Gates, is being planned for August. This may be the long awaited, often postponed visit of high Latvian government officials and probably an IT business delegation to Silicon Valley and Silcon Grundge, Raincloud, Fogbank or whatever they call the Seattle area :).
Ericsson comes to town
Ericsson is meeting customers and presenting its 3G platform to Latvian operators and the government (who own a good slice of Latvian Mobile Telephone). There is a bit of nervousness in the air, since China's HuaWei has been here, too, and is looking hungrily for both 3G wireless (Triatel, Ericsson customer Bite GSM on WCDMA) and wireless local loop (cdma 450 for Lattelekom) action in the region.
Lattelekom's decision matrix
These are the times when Lattelekom's top management earn their keep on behalf of the company and their vision of how it should develop. CEO Nils Melngailis is forging ahead with his vision of how the company should look in the future and he has to make it look credible to the stakeholders.
The issues are how independently can Lattelekom pursue revenue and profit in the Nordic region without stepping on one of it's half-mother's toes. A sub-issue is whether the other, slightly bigger half-mother is still on the same wavelength, same planet. Considering it's the government of Latvia, such a reality check is always in order. Under former Prime Minister Indulis Emsis, things were looking a bit extraterrestrial (though the pre-former Martian had fixed the big row with the smaller half-mother) again.
Now, the bigger half mother has a Minister of Economics indirectly responsible for Lattelekom's future who passes the Mad Magazine Alfred E. Neumann test (the funny little character whose picture was always captioned Not Insane). Krisjanis definitely passes the Alfred test and is better looking. So with at least part of the Government being on Alfred's side of the fence, there is hope..
Another issue is the relationship with Exigen, where the American-based Latvian company (in terms of who does 90 % of the brainwork, the Russian Americans in San Francisco run and sell the brand) has some differences about how the partnership signed late last year should go ahead. Lattelekom has to draw some lines here (it probably has) to fend off an "indecent" proposal by Exigen to take custody of many young ladies (and some men) in the manner in which it is accustomed. Hint: these people give the most chaste and decent phone.
Even bringing up the subject will make that part of the big half mother who isn't sure whether they can handle the Alfred test go totally batshit. This is not good for anyone. The Alfred-test borderliners are also probably not too keen on the restructuring of Lattelekom, making it a sort of holding company with small and nimble affiliates doing network operations, giving phone and BPO, delivering TV and broadband and maybe installing a phone or two.
This also threatens the smaller half-mother because this kind of Lattelekom could run off with some of her suitors. Tough times, tough decisions for the Black Rooster.
Lots of things happening!!
After a spell in which I was reduced to making bizarro guesses about why Siemens is wildly rumored to be after MicroLink or barely disguised stories of visits planned to some rich nerd with glasses in Redmond, things have started happening. In fact, a shitload of stuff. That's American slang for "a lot" (for my Latvian readers, well, sūdukrava has a different flavor of meaning, but it may apply to what has been made of the Electronic Communications Law).
So let's start with the exclusive, deep-background stuff I picked up while in London at a seminar partly sponsored by TeliaSonera. Mostly it was academic leaning stuff, like whether entrepreneurship was happening according to the whatshisname model or the Schumpeterian model (the latter is dead, is he?). Anyway fucktozin as I would say in my amalgam of English and Latvian at this late hour (background earphone music, Quicksilver Messanger Service «Who Do You Love» live 1960-something concert cut).
The Baltic IP TV master plan
So this is the deal -- IP TV is coming to the Baltics on some kind of an extension of TeliaSonera's platform being used in Sweden. It makes sense, why invent the wheel again? As I understand, the core network runs on its own Unix-based whatever, the delivery to households will be with ADSL2+, something that is one fast m***f***ker (24 Mbps if done right and you live on the same block as the switch) except that 2 Mbps was the fast m-f of yesteryear, wasn't it?
This might be a hint that the IBM-Ericsson-Cisco package being fronted by IBM here some weeks ago isn't the front runner, although Ericsson is already putting in the fast m-f DSLAMs and other stuff, at least for Lattelekom in Latvia. Since Swedish momma already controls the Estonian operations and Lietuvos Telekomas, it should be no problem to do the deal. Then there would be one core network, one core set of content alternatives – and here is what would be a very good thing – the need to subtitle the non-local content in whatever language the viewer chose. No more mutterers attempting to mumble the dialog over the English or Swedish or German soundtrack (although the Latvian dubbed softpornos one accidently channelcruises across on TV5 should get the bizarro shows of the year award, the perfect combo of the strange and inadvertently funny).
Having said that, content and getting the audience to come watch is going to be the really hard part. There has be some way to get the folks who watch Russian language free to satellite channels (well, free to the distributor, you pay Mr. Sharashkin LVL 1.25 a month for the wire from his dish on the roof), as well as to get a good value for money package of news, entertainment, movies, video on demand, etc. Plus all of that has to be packaged as triple play, because there aren't many other ways of doing it. That means the price is going to be significantly higher than your cheapo cable connection and it will have to compete with and draw customers away from both Baltcom TV and TeliaMulticom. Between them, these companies have close to 200 000 subscribers, probably most of the audience that is willing to pay LVL 5 and upwards for a cable TV selection that is, to be honest, mediocre. So there's the challenge...
Lattelekom links up with T-Systeme
Lattelekom signed a memorandum of understanding (some kind of German Verständnis -thing) with T-Systeme, the IT and systems integrator of Deutsche Telekom, one of the mothers-of-all telecoms giants with turnover of EUR 50 billion in 2003, or around six times the GDP of Latvia.
The idea is that Lattelekom will be T-Systeme's partner for their customers seeking business process outsourcing, telecoms and other related services here in the Baltic/Nordic region. Initially it will be a lot of public sector stuff, EU funded e-government, e-health, e-brainsurgery and e-dogcatching, you get the picture.
While I can't be serious at this time of the night while listening to Iron Butterfly, believe me, this is a serious connection for Lattelekom. Just hope that a certain paper doesn't shitcan this story simply because it is about Lattelekom. Well, one can always find some f**kwit to comment that this is somehow bad or that they don't see whatever...
Sūdukrava?
That means a load of shit. Various sources are saying this is what has been made of the Electronic Communications Law, where some 70 revisions were slipped in under the guise of amending it to ensure that all electronic communication service providers can be subject to eavesdropping by the security services. Now apparently this can be done with GSM operators, since there is a kind of rotten Easter egg in most switches (Easter eggs being cute features or animations that programmers hide in applications just for fun) that can be turned on when the spooks ask for it. What it then does is tap whatever conversations are of interest. With internet service providers, it gets harder. Basically, you have to tap and analyze the whole datastream and pluck out the suspect packets. This, I am told, requires gigantic storage and fantastic datamining resources, especially if one is doing some kind of near-realtime analysis. That's what it is all about unless you want to end up as a nasty footnote in some future 9/11 report, indicating that Security Agency X actually detected the how-to-make nukes e-mail two days after the bomb went off (because of a backlog).
Not too many neighborhood ISPs, nor even the spooks in Latvia can afford a cluster of Crays or Deep Blues to do what is needed. Plus there are seven flavors of encryption, proxies, etc. Only a moron would send criminal messages in the clear.
However, this extra cost is not what is upsetting the local organizations. It is also the fact that the amendments (so I am told) give a lot of clout to VITA, the State Information Network Agency, which will given a tighter grip on state and municipal data services, apparently in contravention of EU directives, etc. The Saeima passed the revisions with a two-thirds majority, so apparently not even the president can stop them from coming into force.
I have to look at this revised law more closely. I actually printed the whole f**ker off the Saeima homepage. I'll try to get back to this, but I am going to Cannes all of next week, where my wife is showing her film at the Film Market.
***
Other music behind the rant -- Lou Reed, Peter Tosh, Jefferson Airplane.
"Standin' on the corner, suitcase in my hand..." headin' for Cannes...
P.S. This post was slightly edited for spelling and obscene (though hopefully appropriately funny) expressions at 0830 Friday -- the 13th!
So let's start with the exclusive, deep-background stuff I picked up while in London at a seminar partly sponsored by TeliaSonera. Mostly it was academic leaning stuff, like whether entrepreneurship was happening according to the whatshisname model or the Schumpeterian model (the latter is dead, is he?). Anyway fucktozin as I would say in my amalgam of English and Latvian at this late hour (background earphone music, Quicksilver Messanger Service «Who Do You Love» live 1960-something concert cut).
The Baltic IP TV master plan
So this is the deal -- IP TV is coming to the Baltics on some kind of an extension of TeliaSonera's platform being used in Sweden. It makes sense, why invent the wheel again? As I understand, the core network runs on its own Unix-based whatever, the delivery to households will be with ADSL2+, something that is one fast m***f***ker (24 Mbps if done right and you live on the same block as the switch) except that 2 Mbps was the fast m-f of yesteryear, wasn't it?
This might be a hint that the IBM-Ericsson-Cisco package being fronted by IBM here some weeks ago isn't the front runner, although Ericsson is already putting in the fast m-f DSLAMs and other stuff, at least for Lattelekom in Latvia. Since Swedish momma already controls the Estonian operations and Lietuvos Telekomas, it should be no problem to do the deal. Then there would be one core network, one core set of content alternatives – and here is what would be a very good thing – the need to subtitle the non-local content in whatever language the viewer chose. No more mutterers attempting to mumble the dialog over the English or Swedish or German soundtrack (although the Latvian dubbed softpornos one accidently channelcruises across on TV5 should get the bizarro shows of the year award, the perfect combo of the strange and inadvertently funny).
Having said that, content and getting the audience to come watch is going to be the really hard part. There has be some way to get the folks who watch Russian language free to satellite channels (well, free to the distributor, you pay Mr. Sharashkin LVL 1.25 a month for the wire from his dish on the roof), as well as to get a good value for money package of news, entertainment, movies, video on demand, etc. Plus all of that has to be packaged as triple play, because there aren't many other ways of doing it. That means the price is going to be significantly higher than your cheapo cable connection and it will have to compete with and draw customers away from both Baltcom TV and TeliaMulticom. Between them, these companies have close to 200 000 subscribers, probably most of the audience that is willing to pay LVL 5 and upwards for a cable TV selection that is, to be honest, mediocre. So there's the challenge...
Lattelekom links up with T-Systeme
Lattelekom signed a memorandum of understanding (some kind of German Verständnis -thing) with T-Systeme, the IT and systems integrator of Deutsche Telekom, one of the mothers-of-all telecoms giants with turnover of EUR 50 billion in 2003, or around six times the GDP of Latvia.
The idea is that Lattelekom will be T-Systeme's partner for their customers seeking business process outsourcing, telecoms and other related services here in the Baltic/Nordic region. Initially it will be a lot of public sector stuff, EU funded e-government, e-health, e-brainsurgery and e-dogcatching, you get the picture.
While I can't be serious at this time of the night while listening to Iron Butterfly, believe me, this is a serious connection for Lattelekom. Just hope that a certain paper doesn't shitcan this story simply because it is about Lattelekom. Well, one can always find some f**kwit to comment that this is somehow bad or that they don't see whatever...
Sūdukrava?
That means a load of shit. Various sources are saying this is what has been made of the Electronic Communications Law, where some 70 revisions were slipped in under the guise of amending it to ensure that all electronic communication service providers can be subject to eavesdropping by the security services. Now apparently this can be done with GSM operators, since there is a kind of rotten Easter egg in most switches (Easter eggs being cute features or animations that programmers hide in applications just for fun) that can be turned on when the spooks ask for it. What it then does is tap whatever conversations are of interest. With internet service providers, it gets harder. Basically, you have to tap and analyze the whole datastream and pluck out the suspect packets. This, I am told, requires gigantic storage and fantastic datamining resources, especially if one is doing some kind of near-realtime analysis. That's what it is all about unless you want to end up as a nasty footnote in some future 9/11 report, indicating that Security Agency X actually detected the how-to-make nukes e-mail two days after the bomb went off (because of a backlog).
Not too many neighborhood ISPs, nor even the spooks in Latvia can afford a cluster of Crays or Deep Blues to do what is needed. Plus there are seven flavors of encryption, proxies, etc. Only a moron would send criminal messages in the clear.
However, this extra cost is not what is upsetting the local organizations. It is also the fact that the amendments (so I am told) give a lot of clout to VITA, the State Information Network Agency, which will given a tighter grip on state and municipal data services, apparently in contravention of EU directives, etc. The Saeima passed the revisions with a two-thirds majority, so apparently not even the president can stop them from coming into force.
I have to look at this revised law more closely. I actually printed the whole f**ker off the Saeima homepage. I'll try to get back to this, but I am going to Cannes all of next week, where my wife is showing her film at the Film Market.
***
Other music behind the rant -- Lou Reed, Peter Tosh, Jefferson Airplane.
"Standin' on the corner, suitcase in my hand..." headin' for Cannes...
P.S. This post was slightly edited for spelling and obscene (though hopefully appropriately funny) expressions at 0830 Friday -- the 13th!
Monday, May 09, 2005
Heading for the West Coast?
Plans are afoot for a high level official Latvian delegation to meet with the top executives of a major US software company on the US West Coast, probably in August. The visitors will probably land somewhere north of San Francisco. This blogger may get details later this week. It's anybody's easy guess what we are talking about :).
This, hopefully, will be, at least in part, the long heralded visit to the US IT industry that the higher circles in Latvia have been planning for a long time (since the Skele administrations of the late 1990s). The government jaunts to Silicon Valley didn't come off because the falling apart horizon of these various governments was closer than the planning horizon for the visits :). Now, there may have been some event I missed, commentators correct me if I am wrong...
This, hopefully, will be, at least in part, the long heralded visit to the US IT industry that the higher circles in Latvia have been planning for a long time (since the Skele administrations of the late 1990s). The government jaunts to Silicon Valley didn't come off because the falling apart horizon of these various governments was closer than the planning horizon for the visits :). Now, there may have been some event I missed, commentators correct me if I am wrong...
Thursday, May 05, 2005
Siemens: Fattening the bride?
In some cultures, Rubenesque ladies are more appreciated than those who are thin. I can't say whether this is true in Latvia, but after reading a recent Business Week, I wonder whether rumors of Siemens Business Systems in Latvia wanting to acquire pan-Baltic MicroLink might not have to do with putting some attractive curves on at least one unit of the German-based megacorporation.
Business Week names Siemens Business Systems as one of the IT services companies that could be up for merger or aquisition as the business consolidates globally. The idea behind buying MicroLink would be to get at its SAP competence with the hope of building it into a European-wide, moderate-cost SAP center for Siemens. Getting at least part of that strategy in place might make Siemens Business Systems a slightly more attactive partner in any coming merger with some other giant of the IT services industry.
This is just an interesting thought that occured to me and a reminder to look into that Siemens-MicroLink thing again.
Business Week names Siemens Business Systems as one of the IT services companies that could be up for merger or aquisition as the business consolidates globally. The idea behind buying MicroLink would be to get at its SAP competence with the hope of building it into a European-wide, moderate-cost SAP center for Siemens. Getting at least part of that strategy in place might make Siemens Business Systems a slightly more attactive partner in any coming merger with some other giant of the IT services industry.
This is just an interesting thought that occured to me and a reminder to look into that Siemens-MicroLink thing again.
Tuesday, May 03, 2005
Unsecure WiFi widespread in Riga
The Latvian-language weblog www.hackers.lv reports on a wardrive through the center of Riga that revealed around 200 WiFi networks, many of them open and unsecure. The drive was conducted on the afternoon of Sunday, May 1. The bloggers note that there are probably many more office WLANs that are shut down after office hours. Some appear to be in private residences. The blog links to a uploaded file generated by the wardrivers' software that gives the names and various technical parameters of the WLANs they encountered (those who don't read Latvian can click on the amusingly named green/on my browser/ links that say shiten – meaning "here", nothing else). Several seem to be named Lattelekom, others after companies or people (perhaps systemadmins' nicknames). The "hacker" blog also links to a map showing the route of the wardrive. I suspect that this blogger's wireless link, with the name default, (there are several on the list with this imaginative name) may have appeared, since the Sunday afternoon drive passed my place on Caka Street. Now I wonder how they managed to detect the signal on the street when I sometimes have trouble connecting from my G4 Powerbook in the living room to the wireless router in a cubby-hole behind the kitchen.
"The peasants will suffer"
Laucinieki cietīs or "The peasants will suffer" (as one bizarre but valid translation) is the headline my paper put on a story about the numbering reform proposed by the Communications Department of the Latvian Ministry of Transport. It was one of the few cute things the old pink sheet has done for me recently after a pile of minor headaches.
Anyway, the gist of the story is a proposal to reduce the number of area codes in Latvia from 26 to 9 (a variation on Lattelekom's proposal of a few weeks ago, thereby preserving the seven digit system for a few more years and freeing up around 2.7 million numbers, which should do for the de-facto fourth mobile operator and any other comers.
The changes would exclusively affect areas outside of Riga, the Riga rajon and Jurmala, where around half of Lattelekom's more than 600 000 customers live and where most businesses are concentrated. In the rest of the country, the holders of some familiar numbers will have to settle for having them changed. So the peasants will suffer.
Anyway, the gist of the story is a proposal to reduce the number of area codes in Latvia from 26 to 9 (a variation on Lattelekom's proposal of a few weeks ago, thereby preserving the seven digit system for a few more years and freeing up around 2.7 million numbers, which should do for the de-facto fourth mobile operator and any other comers.
The changes would exclusively affect areas outside of Riga, the Riga rajon and Jurmala, where around half of Lattelekom's more than 600 000 customers live and where most businesses are concentrated. In the rest of the country, the holders of some familiar numbers will have to settle for having them changed. So the peasants will suffer.
Sunday, May 01, 2005
The blog speaks to Ericsson CFO Karl-Henrik Sundström
Karl-Henrik Sundström is Executive Vice President and Chief Financial Officer of the Swedish telecoms systems company Ericsson.
From May 2002 to April 2003, Karl-Henrik Sundström held the position of Vice President and General Manager of Business Unit Global Services.
From 1999 to 2002, Mr. Sundström was Managing Director of Ericsson Australia.
He joined Ericsson in 1985 as a trainee in financial management.
(the above is excerpted and adapted from Ericsson's homepage www.ericsson.com)
NOTE THIS HAS BEEN EDITED MONDAY MORNING at 0800 TO ELIMINATE SOME GARBLED TEXT
This blogger talked to Sundström in Stockholm recently. The following is an excerpt of approximate transcript of the interview, as conducted and recorded in English. I have selected the parts where he talks specifically about the telecoms industry, changing technologies and some thoughts about Ericsson and the Baltics. A longer Latvian version of this interview may appear you-know-where, but knowing them it will be published when, or shortly before, as the Latvians say "the owl's tail blossoms" /kad pūcei aste ziedēs.)
You’ve been with Ericsson for 20 years. 20 years ago, you were selling advanced circuit switched networks, now it is all moving toward IP based systems. Companies such as IBM are facing the customer in the same manner as the traditional telecoms suppliers and saying to the operators that we and our partners can give you the same services as traditional telecoms…
Karl-Henrik Sundström: The thing is, they are coming from the enterprise area, where you can control the environment. The fact is, the for over 100 years, Ericsson (and its competitors) has been able to deliver, regardless of the technology, what we call real time communication. That is what we call telecom grade, you lift the phone, get a dial tone, and there is somebody on the other side. That is regardless of whether the technology was crossbar, mechanical, digital circuit-switched or voice over IP. The IBMs of the world are coming from another world, they are coming with internet technology and they are coming from the batch world. Which is no quality of service. They are coming from datacoms,where if there is a byte that is lost, you resend it. Telecom grade, telecom service, the five 9s is our core competence. Ericsson and our competitors have changed underlying bearer technology all the time, and we did not invent the silicon chip but are using for certain things in our switches and other things. So they (the IBMs) will be there, but they are not the ones controlling the real time service and the quality of service. That is our core competence.
That’s on the fixed side. On the mobile side, VOIP on the radio interface is coming, but the (packet) header is bigger than the voice carried, so it is uneconomical at present. But it is coming. We haven’t been able to compress it, even though we have advanced algorithms, The header remains bigger than the content (the packet) carries.
I may be out of my depth technologically here, but I recall circuit-switched establishes a point to point connection…
KHS: hat’s where IMS (IP Multimedia Subsystem) comes in. It came from the 3G world, but the first ones using it are wire line operators, because they have to guarantee the quality of service. So if you want to have guaranteed 8 megabits, not best effort, you go up here (the IMS level) and you simulate signaling. IMS allows you to dedicate. Then you can charge for it. You need that for applications, voice, and high quality video. You can do it within an enterprise, but when you go outside into the uncontrolled public network, you need to.
But isn’t it a software solution?
KHS: It is. It is the traditional signaling capability, which you use in the new IP world with IP version six, where you can have the header that allows you to dedicate.
But won’t the IBMs be able to hack or reproduce it. They’ll say just give us the standards, and we will write something that performs…
KHS: It is the same in the AXE, the circuit switch. The software opens the circuit. In an AXE, say for the Latvian network, its one million man-years to fix all those variances of a call set up. They would have to reinvent those million man-years and start from scratch. We have this knowledge; it is part of our spine. It is the same as if I wanted to be a baker. I can make cakes at home, but I don’t have the knowledge to run a bakery.
So you are saying you have a legacy, translated to state-of-the art, of setting up circuits, that the IBMs and HPs cannot match?
KHS: They are coming from the batch-oriented world, which is not real time. The equipment is from different vendors, I am not sure they have their own IMS, so the brain has to come from some telecoms vendor. So you cannot earn big margins.
They are competing with us on the services side but may be a partner. When it comes to the technology behind it, they are not in there.
Niklas Zennstrom, the inventor of Skype, will scoff at all this quality of service stuff and say that look, this works, almost all of the time… So you can call anybody in the world for free.
KHS: There are issues of regulation and fairness of competition. This is basically an arbitrage. When I lived in Australia, my family used to call me using IP telephony. The circuit was good enough. Bit it is a little unfair competition. On the fixed side, you have to have, often by regulation, the emergency numbers (911 in the US), if the electric current fails, the phone must work. We did a study that if you build all these features into VOIP, the price difference is not that big. But if the authorities allowed an arbitrage, a service that doesn’t run on mainstream rules and regulations, then it cheap. It was good enough. My parents couldn’t afford to call Australia once a week.
So if you want to be something like a full service telecommunications service provider, then maybe it is best to have your systems delivered by someone like Ericsson?
KHS: We were the first one actually delivering voice over IP for RSL, six years ago. But the thing is, that if everything was voice over IP, you can’t guarantee emergency services to people out in the forest in Sweden. In Australia, there was a case against Telstra because a child died when its parents were unable to get an ambulance over the mobile phone, which is subject to different regulation. So there are these national interest and security factors. In a marginal arbitration, Skype is cheap and good.
So Skype is a toy and you have to build a serious telecommunications network if you are worried about these safety and national security issues…
KHS: Another thing to remember is that tariffs are set in a reverse way from costs. The biggest investment is in the local network, second biggest in the transit layer and the international switch is cheapest. But the tariffs are set so that the international calls pay for the local. For around USD 5 million I could route all the international traffic in Sweden through one switch, but one is not allowed to without agreements, etc.
Another thing we see these big companies doing is outsourcing. How does Ericsson see this? You are running the network you just sold in Italy. Are operators happy to have you offer to run most or all of what is their core business? What are the risks and rewards for the operator?
KHS: First of all, investment in most GSM operations is around 40 % of cash outlay. Of which, we can sell about 20 %. Opex (operating expenses) are by far the largest outlay. That is running the network and guaranteeing the quality service. Operators are moving down the value chain closer to the customers. So we follow them behind. We are now managing 38 million subscribers around the world. We have economies of scale and coordinate on a regional scale. We run three networks from one place in Australia, several in Poland, now the Hi3G network in Italy with some 750 people. We can eliminate functional overlaps; you can reduce costs 15 to 25 %.
The other thing is competence in how to manage advanced systems, networks, how to tune 3G networks and manage hybrid networks with an advanced service layer. This competence is scarce.
So while the operator moves forward to manager the customer and the market, we move forward to manage an area where he doesn’t have competence. . Plus the staff has to be constantly retrained for new things
The challenge for many operators is that they are delivering a channel to customers with new services that will have to be billed several times per week.
In the US, for example, we have hosted services, such as MMS, that we run for a number of 3G players. They sign a subscription with Ericsson and we run it for them.
So for Latvian alternative operators, as certain issues are resolved, such as interconnect, and when the new third mobile operator settles in, there may be a time to build out and one option would be to let Ericsson both build and run the operation…
KHS: Yes, if it is in their strategy to move toward the customer. Earlier I was in charge of Services at Ericsson, and in the US, someone said to me “Son how can we be called a mobile operator if we don’t operate or own network?” But a few months later, they were buying hosted services from us. That means in all new areas, we are doing it for them. It is a matter of strategy, do you want to focus on the market and let someone else run your network for you.
In some markets, in the early days, coverage is important and is an early competitive tool, so you might want to control that.
Lattelekom is going into this, they hope to set up network operations centers for customers. So what happens when they start competing with Ericsson?
KHS: That would be a bit of a threat, but also an opportunity. We already run Telia International’s network out of an operations center in Holland, where it was cheaper to add on another customer rather than build a center just for them. If TeliaSonera wanted to do certain things, it could put certain things, like inside engineering and data transcripts (IADT) in Latvia, where the engineering costs are lower.
But Lattelekom is looking to Scandinavia as a business process outsourcing market, and the hell with whose turf we are on…
KHS:The only thing Lattelekom has to think about is what do they want to be. Do they want to focus on telecommunications or on network operations. I have been in big companies, mostly Ericsson, for my whole life, and I know that the only time we got into trouble was when we didn’t know what we wanted to do.
But Ericsson isn’t an operator?
KHS: Oh no. In the 1920s and 1930s, setting up a telephone company was the only way to get customers for our equipment. After World War II, we decided we wanted to be an equipment maker and we got out of our last operator (in Argentina) in 1992. Now we have a strict rule not to compete with our customers.
Getting back to some global questions, aren’t we seeing the defacto disintegration of the company? I mean, you see a telecoms operator and Ericsson runs their network, the billing is done in Bangalore, someone else helps with sales. Where’s the company?
KHS: I think that is natural progress. Ericsson used to do all its plastic itself, We had the biggest plastics factory in the Nordic area. We did our own nuts and bolts. That is how it is when you start early and there is no supplier, but as we moved up the value chain, we manufacture 70 % of our products outside Ericsson. We control the software, the final assembly and guarantee that the system works. We design but don’t manufacture.
We do the blueprint, we do the software to make it work, design the printed circuit board, have it manufactured.
We started this a long time ago, this virtualization of the company, 10 years ago with AXE. You work with a limited number of specialized partners and put it all together.
What opportunity does this open for us in the Baltics?
KHS: We do much work with Elkoteq in Estonia, but nothing in Latvia. If I were to hypothetically look at what other things one could in the Baltic, it would be in software engineering. You have good education and knowledge and are close to our R &D centers. Also we would look at installation work, bringing temporary installers to work with customers.
From May 2002 to April 2003, Karl-Henrik Sundström held the position of Vice President and General Manager of Business Unit Global Services.
From 1999 to 2002, Mr. Sundström was Managing Director of Ericsson Australia.
He joined Ericsson in 1985 as a trainee in financial management.
(the above is excerpted and adapted from Ericsson's homepage www.ericsson.com)
NOTE THIS HAS BEEN EDITED MONDAY MORNING at 0800 TO ELIMINATE SOME GARBLED TEXT
This blogger talked to Sundström in Stockholm recently. The following is an excerpt of approximate transcript of the interview, as conducted and recorded in English. I have selected the parts where he talks specifically about the telecoms industry, changing technologies and some thoughts about Ericsson and the Baltics. A longer Latvian version of this interview may appear you-know-where, but knowing them it will be published when, or shortly before, as the Latvians say "the owl's tail blossoms" /kad pūcei aste ziedēs.)
You’ve been with Ericsson for 20 years. 20 years ago, you were selling advanced circuit switched networks, now it is all moving toward IP based systems. Companies such as IBM are facing the customer in the same manner as the traditional telecoms suppliers and saying to the operators that we and our partners can give you the same services as traditional telecoms…
Karl-Henrik Sundström: The thing is, they are coming from the enterprise area, where you can control the environment. The fact is, the for over 100 years, Ericsson (and its competitors) has been able to deliver, regardless of the technology, what we call real time communication. That is what we call telecom grade, you lift the phone, get a dial tone, and there is somebody on the other side. That is regardless of whether the technology was crossbar, mechanical, digital circuit-switched or voice over IP. The IBMs of the world are coming from another world, they are coming with internet technology and they are coming from the batch world. Which is no quality of service. They are coming from datacoms,where if there is a byte that is lost, you resend it. Telecom grade, telecom service, the five 9s is our core competence. Ericsson and our competitors have changed underlying bearer technology all the time, and we did not invent the silicon chip but are using for certain things in our switches and other things. So they (the IBMs) will be there, but they are not the ones controlling the real time service and the quality of service. That is our core competence.
That’s on the fixed side. On the mobile side, VOIP on the radio interface is coming, but the (packet) header is bigger than the voice carried, so it is uneconomical at present. But it is coming. We haven’t been able to compress it, even though we have advanced algorithms, The header remains bigger than the content (the packet) carries.
I may be out of my depth technologically here, but I recall circuit-switched establishes a point to point connection…
KHS: hat’s where IMS (IP Multimedia Subsystem) comes in. It came from the 3G world, but the first ones using it are wire line operators, because they have to guarantee the quality of service. So if you want to have guaranteed 8 megabits, not best effort, you go up here (the IMS level) and you simulate signaling. IMS allows you to dedicate. Then you can charge for it. You need that for applications, voice, and high quality video. You can do it within an enterprise, but when you go outside into the uncontrolled public network, you need to.
But isn’t it a software solution?
KHS: It is. It is the traditional signaling capability, which you use in the new IP world with IP version six, where you can have the header that allows you to dedicate.
But won’t the IBMs be able to hack or reproduce it. They’ll say just give us the standards, and we will write something that performs…
KHS: It is the same in the AXE, the circuit switch. The software opens the circuit. In an AXE, say for the Latvian network, its one million man-years to fix all those variances of a call set up. They would have to reinvent those million man-years and start from scratch. We have this knowledge; it is part of our spine. It is the same as if I wanted to be a baker. I can make cakes at home, but I don’t have the knowledge to run a bakery.
So you are saying you have a legacy, translated to state-of-the art, of setting up circuits, that the IBMs and HPs cannot match?
KHS: They are coming from the batch-oriented world, which is not real time. The equipment is from different vendors, I am not sure they have their own IMS, so the brain has to come from some telecoms vendor. So you cannot earn big margins.
They are competing with us on the services side but may be a partner. When it comes to the technology behind it, they are not in there.
Niklas Zennstrom, the inventor of Skype, will scoff at all this quality of service stuff and say that look, this works, almost all of the time… So you can call anybody in the world for free.
KHS: There are issues of regulation and fairness of competition. This is basically an arbitrage. When I lived in Australia, my family used to call me using IP telephony. The circuit was good enough. Bit it is a little unfair competition. On the fixed side, you have to have, often by regulation, the emergency numbers (911 in the US), if the electric current fails, the phone must work. We did a study that if you build all these features into VOIP, the price difference is not that big. But if the authorities allowed an arbitrage, a service that doesn’t run on mainstream rules and regulations, then it cheap. It was good enough. My parents couldn’t afford to call Australia once a week.
So if you want to be something like a full service telecommunications service provider, then maybe it is best to have your systems delivered by someone like Ericsson?
KHS: We were the first one actually delivering voice over IP for RSL, six years ago. But the thing is, that if everything was voice over IP, you can’t guarantee emergency services to people out in the forest in Sweden. In Australia, there was a case against Telstra because a child died when its parents were unable to get an ambulance over the mobile phone, which is subject to different regulation. So there are these national interest and security factors. In a marginal arbitration, Skype is cheap and good.
So Skype is a toy and you have to build a serious telecommunications network if you are worried about these safety and national security issues…
KHS: Another thing to remember is that tariffs are set in a reverse way from costs. The biggest investment is in the local network, second biggest in the transit layer and the international switch is cheapest. But the tariffs are set so that the international calls pay for the local. For around USD 5 million I could route all the international traffic in Sweden through one switch, but one is not allowed to without agreements, etc.
Another thing we see these big companies doing is outsourcing. How does Ericsson see this? You are running the network you just sold in Italy. Are operators happy to have you offer to run most or all of what is their core business? What are the risks and rewards for the operator?
KHS: First of all, investment in most GSM operations is around 40 % of cash outlay. Of which, we can sell about 20 %. Opex (operating expenses) are by far the largest outlay. That is running the network and guaranteeing the quality service. Operators are moving down the value chain closer to the customers. So we follow them behind. We are now managing 38 million subscribers around the world. We have economies of scale and coordinate on a regional scale. We run three networks from one place in Australia, several in Poland, now the Hi3G network in Italy with some 750 people. We can eliminate functional overlaps; you can reduce costs 15 to 25 %.
The other thing is competence in how to manage advanced systems, networks, how to tune 3G networks and manage hybrid networks with an advanced service layer. This competence is scarce.
So while the operator moves forward to manager the customer and the market, we move forward to manage an area where he doesn’t have competence. . Plus the staff has to be constantly retrained for new things
The challenge for many operators is that they are delivering a channel to customers with new services that will have to be billed several times per week.
In the US, for example, we have hosted services, such as MMS, that we run for a number of 3G players. They sign a subscription with Ericsson and we run it for them.
So for Latvian alternative operators, as certain issues are resolved, such as interconnect, and when the new third mobile operator settles in, there may be a time to build out and one option would be to let Ericsson both build and run the operation…
KHS: Yes, if it is in their strategy to move toward the customer. Earlier I was in charge of Services at Ericsson, and in the US, someone said to me “Son how can we be called a mobile operator if we don’t operate or own network?” But a few months later, they were buying hosted services from us. That means in all new areas, we are doing it for them. It is a matter of strategy, do you want to focus on the market and let someone else run your network for you.
In some markets, in the early days, coverage is important and is an early competitive tool, so you might want to control that.
Lattelekom is going into this, they hope to set up network operations centers for customers. So what happens when they start competing with Ericsson?
KHS: That would be a bit of a threat, but also an opportunity. We already run Telia International’s network out of an operations center in Holland, where it was cheaper to add on another customer rather than build a center just for them. If TeliaSonera wanted to do certain things, it could put certain things, like inside engineering and data transcripts (IADT) in Latvia, where the engineering costs are lower.
But Lattelekom is looking to Scandinavia as a business process outsourcing market, and the hell with whose turf we are on…
KHS:The only thing Lattelekom has to think about is what do they want to be. Do they want to focus on telecommunications or on network operations. I have been in big companies, mostly Ericsson, for my whole life, and I know that the only time we got into trouble was when we didn’t know what we wanted to do.
But Ericsson isn’t an operator?
KHS: Oh no. In the 1920s and 1930s, setting up a telephone company was the only way to get customers for our equipment. After World War II, we decided we wanted to be an equipment maker and we got out of our last operator (in Argentina) in 1992. Now we have a strict rule not to compete with our customers.
Getting back to some global questions, aren’t we seeing the defacto disintegration of the company? I mean, you see a telecoms operator and Ericsson runs their network, the billing is done in Bangalore, someone else helps with sales. Where’s the company?
KHS: I think that is natural progress. Ericsson used to do all its plastic itself, We had the biggest plastics factory in the Nordic area. We did our own nuts and bolts. That is how it is when you start early and there is no supplier, but as we moved up the value chain, we manufacture 70 % of our products outside Ericsson. We control the software, the final assembly and guarantee that the system works. We design but don’t manufacture.
We do the blueprint, we do the software to make it work, design the printed circuit board, have it manufactured.
We started this a long time ago, this virtualization of the company, 10 years ago with AXE. You work with a limited number of specialized partners and put it all together.
What opportunity does this open for us in the Baltics?
KHS: We do much work with Elkoteq in Estonia, but nothing in Latvia. If I were to hypothetically look at what other things one could in the Baltic, it would be in software engineering. You have good education and knowledge and are close to our R &D centers. Also we would look at installation work, bringing temporary installers to work with customers.
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