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Olympic Games

As the Winter Games kicked off in Sochi, a cable deal of Olympic proportions began brewing in the US. Comcast moved to purchase Time Warner Cable (TWC) for more than $45 billion, a move that would significantly consolidate the pay-TV market in the United States. Comcast says it would divest 3 million customers as an olive branch to the FCC, but battle lines are being drawn and the likelihood of this deal receiving the regulator’s blessing is far from a sure thing.

The Comcast takeover of Time Warner Cable will allow the new c o n s o l i d a t e d company to cut costs by taking advantage of scale, none of which is likely to benefit the consumer, according to industry analysts.

“The position taken by the operators, and especially driven by John Malone, is that consolidation will help reduce costs, which will benefit consumers,” according to Jason Blackwell, Director, Service Provider Strategies, Strategy Analytics. “I don’t believe that consumers will see much benefit financially from the consolidation that will continue to take place in the industry. If operators are able to cut costs and negotiate better content pricing, those benefits will likely never be passed along to the customers in lower subscription fees. It is possible that these deals may slow the increases in monthly subscription fees, but only time will tell.”

He adds that Pay TV subscriber numbers have been falling while content is getting exponentially more expensive, particularly for large, live events, which is driving operators to cut costs at every opportunity.

But beyond cutting costs, boosting the broadband side of the business sets the stage for future services

growth.

“However, on the broadband side of the business, margins are high and subscriber numbers keep growing each quarter,” Blackwell said. “The consolidation in the industry is focusing on trying to reduce the costs on the TV

side of the business, but it also increases the scale for the more lucrative broadband business. With a wider footprint and more subscribers, consolidated cable operators may be able to justify and spread the costs of delivering higher bandwidth broadband services which will drive more revenues along with the opportunity to deliver more advanced services into subscriber homes.”

Jeff Heynen from Infonetics adds that broadband customers are already chronically limited by regulation in their choice of broadband provider, by design. He points out that in North Carolina, for example, Time Warner successfully lobbied the state legislature to restrict municipal broadband networks, ostensibly to limit competition, and AT&T did the same thing in South Carolina.

“I don’t think the DOJ will block the deal, even though it will go through some extended scrutiny, because

www.pipelinepub.com Volume 10, Issue 10

COMET News - March 2014By Jesse Cryderman

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there aren’t enough local market overlaps between the two operators,” Heynen adds. “Anytime a deal restricts competition, it’s never good for consumers. It may make the marketplace more stable for the largest players. But it introduces virtual monopoly-like powers on broadband pricing, broadband data usage caps, and access to content.”

Heynen sees one bright spot that might be a piqued interest in competing, alternative providers.

He adds, “I do believe the deal will spark more long-term interest among alternative providers like Google, utilities, and municipalities in deploying their own fiber networks, despite the regulatory challenges that will involve.”

Chicago Auto Show 2014

The intersection of connectivity and cars is busier than ever, so it’s no surprise that Pipeline was invited to cover the Chicago Auto Show 2014. The show floor opened for media previews on February 6 at the McCormick Place in Chicago, and major manufacturers hosted press conferences every half hour.

Top trends at the show were p e r s o n a l i z a t i o n , connectivity, and s u s t a i n a b i l i t y . Interestingly, these same three trends are percolating through many other c u s to m e r - f a c i n g industries these days.

Personalized options extended from basic color and feature sets options, to vintage throwbacks like the Fiat 1957 edition, and custom auto wraps, like the “artist” car from Smart. A representative from Volvo told Pipeline that the same manufacturing line can turn out four different models without significant re-tooling, and with just-in-time (JIT) manufacturing, warehouse space requirements have significantly diminished.

Many new innovations focused on reducing carbon emissions without impacting performance. This sustainability drive was evidenced by everything from weight reduction, to high performance engines, to more aerodynamic designs and smarter combustion

control. Lots of automakers showcased battery-powered cars, but BMW made perhaps the biggest splash by introducing its first line of electric cars.

The real reason Pipeline was in attendance, however, was to report on the evolution of connected platforms, and the ways in which the automotive industry is leveraging connectivity to improve driver safety and experience. During a panel discussion, one analyst said that the average car coming off the production line in 2015 will be enabled by 30 million lines of code.

In others words, there will be more lines of code written for the average car in 2015 than for an F15 fighter jet, he said.

During the event it became clear that, next to the smartphone, the car is the most connected device on the planet. It also

offers automakers a chance to boost service revenues, which can easily outweigh the product revenue. One manufacturer told me, on the condition of anonymity, that the net profit to the manufacturer on the sale of the average car at the time of sale is around $700. Remaining revenue is generated from financing and services. Connected service revenue, over the life of the car, is a potential gold mine for the car business.

Even the way “life of the car” is defined is changing. A representative from Volvo asked me to imagine a future in which car ownership was essentially virtualized and commercialized as a monthly fee. In this future, as the car communicated its performance back to home base, the components could be replaced as needed

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by the manufacturer, and all normal costs of ownership would be bundled into a monthly fee. Over a decade, every part of the car might be replaced and/or upgraded, which strains the common definition of a single physical object.

Every manufacturer and brand has a connected offering today. Here’s a non-exhaustive list:

• Chrysler: Uconnect

• BMW: ConnectedDrive

• Chevrolet: MyLink

• Nissan: NissanConnect

• Toyota: Entune

• Lexus: Enform

• Ford: MyFord Touch

• Mazda: Mazda Connect

• Mini: Mini Connected

Further emphasizing its universal importance, connectivity is no longer a costly upgrade. Subaru, for example, announced that Aha Radio service, a platform that brings web-based content into vehicles through a smartphone connection, would be standard on all upcoming models. Subaru also had a stellar media event after opening day that offered media some hands-on interaction with the new Legacy while enjoying fine food and drinks and one of Chicago’s top cover bands.

Co-located at the event was the Connected World Conference, sponsored by Raco Wireless, Verizon Telematics, Cycle 30, T-Mobile, and many others. Located in the back corner of the show floor, the Conference was sparsely populated (only one auto manufacturer was in attendance to receive an award during the Connected Car 2014 awards presentation) and plagued by production problems like audio feedback. Still, the content was highly relevant and

valuable, such as an NFC track and a session on wearable technology that brought out experts from Adidas, Lumo BodyTech, Misfit Wearables (makers of Shine), and GTX Corp, makers of GPS-enabled SmartSoles (shoe inserts) that monitor

elderly or mentally impaired patients who have a tendency to wander off. One of the key takeaways: for

connected, wearable devices to take off, they must be either beautiful or invisible.

Who leads in customer care?

Which U.S. mobile service providers deliver the best customer care? This front-facing component of customer experience management (CEM) is more important than ever, according a new study from J.D. Power, and AT&T and MetroPCS are out in front. The most crucial components of customer care, says J.D. Power, are resolving customer issues quickly and within the first contact.

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Ericsson makes moves in video

Ericsson bought its way further into the video ecosystem this week with the purchase of Azuki Systems, a provider of TV-anywhere platforms for content owners, service providers, and broadcasters. The acquisition will extend the capabilities of Mediaroom, which Ericsson purchased from Microsoft last September, to include OTT and out-of-the-home content delivery. Always moving, Ericsson also demoed its LTE Broadcast solution at a cricket match and launched an innovation lab for SDN.

M2M or IoT?

Machine to machine communications (M2M) is being pre-empted by another hot buzzword: Internet of Things (IoT). While they are used interchangeably, M2M tends to refer to devices that communicate with each other, such as manufacturing systems and connected vending machines, and IoT tends to refer to devices connected to humans, like smart watches and fitness monitoring devices.

Leading the pack of recent stories, AT&T and IBM announced a new global alliance agreement to develop solutions that help support IoT. The two companies will initially focus on creating new solutions targeted for city governments and mid-size utilities.

“Smarter cities, cars, homes, machines and consumer devices will drive the growth of the Internet of Things along with the infrastructure that goes with them, unleashing a wave of new possibilities for data gathering, predictive analytics, and automation,” said Rick Qualman, Vice President, Strategy & Business Development, Telecom Industry, IBM. “The new collaboration with AT&T will offer insights from crowdsourcing, mobile applications, sensors and analytics on the cloud, enabling all organizations to better listen, respond and predict.”

Facebook buys WhatsApp

If you’ve been wondering how much over the top (OTT) messaging is actually worth, Facebook has the answer: $19 billion. That’s what Zuckerberg and company paid for WhatsApp. On February 19, Facebook to reached a definitive agreement to acquire WhatsApp, a rapidly growing cross-platform mobile messaging company, for a combination of cash, Facebook shares, and restricted stock units.

“WhatsApp is on a path to connect 1 billion people.

The services that reach that milestone are all incredibly valuable,” said Mark Zuckerberg, Facebook founder and CEO. “I’ve known Jan for a long time and I’m excited to partner with him and his team to make the world more open and connected.”

More than 450 million people use WhatsApp on a monthly basis, and the volume of messaging that travels through the app is on par with SMS messaging globally. The success story in numbers is amazing. WhatsApp has spent zero dollars on marketing and advertising, and yet adds 1 million new users per day. The company’s relies on just 32 engineers to support its user base of nearly half-a-billion subs.

Jan Koum, WhatsApp co-founder and CEO, said, “WhatsApp’s extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide. We’re excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world.”

Do you think the price is inflated, or that carrier-driven RCS-e can unseat these third-party communications platforms? Join in the discussion on Pipeline’s LinkedIn group.

Virtualized networking

NFV has moved beyond hype. The wire was on fire with NFV press releases last month, with stories ranging from Sandvine’s virtual policy control to Alcatel-Lucent’s virtualized EPC, IMS, and LTE RAN. In a unique twist, service providers are driving the market for virtualized network functions, and legacy vendors are rapidly re-tooling to support demand.

Software Defined Networking (SDN) is equally hot. What’s the potential return on investment of SDN in the mobile network? According to new research

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commissioned by Tellabs, the operational expense (OpEx) savings created by SDN in the mobile backhaul network could reach $9 billion. This is more than twice the capital expense (CapEx) reduction predicted in an earlier study.

Mobile World Congress 2014

All eyes were on Barcelona last week as more than 85,000 attendees converged on the Fira Gran Via for Mobile World Congress 2014 and the Fira Montjuic for the concurrent mPowered industries program. During the events the Pipeline team met with leading technology vendors and service providers, and walked away with sore feet and a wealth of information and insight. Grab a café con leche and a bocadillo de jamon and surf on over to read our show coverage.