Spotify comes to TV in Finland

Spotify, the darling of the online music market, has expanded its presence in the Nordics through an exclusive deal with Finnish carrier TeliaSonera that will see the Spotify service deployed on a number of devices from mobile phones to TVs.

The deal builds on a similar agreement struck with Swedish operator Telia in October last year, with both Telia and TeliaSonera given exclusive rights to market and sell Spotify Premium in Sweden and Finland respectively.

The two year deal struck this week will see Spotify and TeliaSonera work together to provide a range of offerings on computers, mobile phones and TVs and comes as Finland’s Sonera launches a new IPTV service, Sonera Home TV.

Sonera Home TV will give around 1.6 million customers access to a range of free and pay TV channels as well as Spotify on the TV and a movie rental service.

That is, until you take a step back from the hype and talk to hardened pay-TV executives, who say OTT players are in for a mighty shock if they think that getting subscribers to part with their hard-earned dollars in return for access to video content is anything but hard work.

“This idea that some of the OTT players are going to come in and part the waves and suddenly start pulling in billions of dollars in online-subscription revenues is laughable,” an executive at a successful local IPTV operator told Informa Telecoms & Media.

For a start, the operator says, the likes of You Tube and other global video sites have been able to make a name for themselves only by giving away content, a large amount of which they don’t own, to viewers.

“If we went out into the market and gave our product away for free with virtually no revenue model in place, then we would go out of business,” the executive says.

“The hard part about pay TV …. is getting people to pay for the content, and none of these guys, with the obvious exception of Apple, have been able to do that or even look like they have any idea of how to do it.”

“People hate paying for things online,” he says, adding that the young people who consume the most video are the most resistant to paying for content – assuming they can pay at all.

The executive says that, despite the hurdles, OTT players will nonetheless have no alternative but to pursue subscription-based rather than advertising-based business models, because “we have already seen that advertising-based OTT players do not work.”

As a result, the executive says, OTT players are gradually getting pushed into an area where they are “just another pay-TV operator” and will experience the same frustrations that have been felt by pay-TV operators since the industry’s inception.

Rude awakening

Another local pay-TV executive, this time from a cable-TV operator, also says that OTT players face a rude awakening once they get down to the hard work of extracting money from subscribers.

“The only way to really run a pay-TV operation is to have a guaranteed level of income every month – and that means getting subscribers to pay a set monthly subscription over a fixed term,” the executive says.

“That is not an easy thing to do because people are naturally resistant to getting drawn into contracts. But you have to figure out a way to do it or you won’t have a business.

“If people have to try and survive mainly on a VOD revenue model, then it becomes very difficult, because you will have very little idea what your revenues are going to be from month to month, and that creates uncertainty.”

The executive says that this is where the physical assets employed by a pay-TV operator, such as retail stores and trained sales staff – neither of which is available to OTT players – are invaluable in helping build subscribers’ trust enough so that they take out annual contracts.

“We spend an awful lot of money on sales and marketing to bring subscribers on board,” the executive says. “Are the OTT players really willing to do that? I don’t think so.”

In addition, the pay-TV operators say that in a market environment in which subscribers increasingly want to be able to access content on multiple viewing platforms, only operators with established technical resources will survive.

“It costs us an awful lot of time and money to make our content available across all of our different delivery platforms,” the IPTV executive says.

“There is a huge amount of back-end technical work that goes on to make sure that content appears in the best-possible quality across the different platforms, and that is not something that can be done by just anyone.”

Let’s be friends

The bottom line for those grizzled executives of the pay-TV industry is that OTT players are kidding themselves if they think they can generate more subscription revenues online than pay-TV operators already do over cable, DTH and IPTV.

“This business is all about capturing exclusive content, which costs a lot of money, and then packaging it right so that people become willing to pay for it,” the cable-TV executive says.

“What kind of content do these guys [OTT players] really have on board that they think people are going to pay for on a regular basis?”

Instead, say the operators, OTT players should acknowledge the hurdles they face and seek to work with pay-TV operators by looking at building their offering into a pay-TV operator’s platform and hammering out a revenue-sharing deal with the operator.

Such a deal would obviously be problematic given the different backgrounds and competitive needs of OTT players and pay-TV operators. But it is clear that collaboration between pay-TV operators – the gatekeepers of the market’s pay-TV riches – and expansion-hungry OTT players might be worth considering for all parties.

Healthy opportunities in the m-health sector

Opportunities in the global mobile healthcare market are estimated to be worth between $50bn and $60bn in 2010, prompting operators to step up their initiatives in this emerging sector.

The figures come from a global market survey from management consultancy McKinsey & Company, and suggest that mobile health (m-health) opportunities in 2010 could be worth $20bn in the US alone.

To test consumer demand for m-health services, McKinsey conducted a global market research survey of 3,000 consumers in six countries (500 each in Brazil, USA, Germany, South Africa, India and China). The findings indicate that a large proportion of the four billion people using mobile phones today struggle to gain access to good quality and affordable healthcare, both in emerging markets and more developed societies.

According to the research, almost 70 per cent of respondents were extremely or very interested in at least one m-mealth product, with Indian and South African consumers having the highest levels of interest (40-60 per cent across all products). However, US consumers expressed high levels of interest in PhoneDoctor (60 per cent) and HealthWatch (35 per cent) services.

Willingness to pay for such services was also surprisingly high for several products across geographies, with Indian customers willing to pay ten times airtime rates, and US consumers 20 times airtime rates to be able to speak to a doctor via PhoneDoctor. Brazilian and Chinese consumers meanwhile were willing to pay equivalent to a new mobile phone subscription for HealthWatch.

These two sectors – PhoneDoctor and HealthWatch – were found to hold the greatest opportunities, with almost 50 per cent of the market opportunity likely to be captured by connected biosensor devices, representing almost $30bn of incremental opportunity globally. HealthWatch services might include a SIM embedded biosensor watch that monitors vitals, and is connected to the emergency services. PhoneDoctor, which was estimated as a $10bn global market opportunity, allows customers call to speak with a qualified physician for remote diagnosis and advice.

“Mobile healthcare is clearly an opportunity to improve healthcare, manage costs and at the same time drive growth. We believe it is something that mobile operators, hospitals, pharmaceutical and medical device manufacturers, technology players, health insurance companies and governments too should all be looking at closely,” said Alessio Ascari, director at McKinsey’s Milan office.

Vodafone, a founding member of the mHealth Alliance, already has an m-health initiative up and running and Orange recently announced that it too had joined the Alliance – a partnership which uses mobile technology to improve public health and patient care in the developing world.

Orange said it will work on projects focused in West Africa, where it has a mobile presence, including Botswana, Kenya, Senegal, Burkina-Faso and Mali.

While last week, O2 UK appointed Keith Nurcombe, a former executive at GlaxoSmithKline, to head up its new mobile healthcare division. The new department will launch in May and will examine and develop m-health and M2M initiatives that could be applied to Telefonica’s operations in Europe and Latin America.

Mike Short, vice president of public affairs at Telefonica O2 Europe, recently spoke to telecoms.com about the future of the mobile operator, and said that m-health would be a main focus going forward. ”

If you look at healthcare, national health services cannot deliver all the care we need. It will cost a fortune and, with the ageing population in Europe, there are not enough carers. So we need new ways of looking at healthcare and an understanding of how communications can help these evolve, We think there will be more focus on prevention rather than cure, on health rather than illness. That means wearable devices, or self measurement. It’s about taking some ideas from the sports field and making them mass market,” Short said.

The iPad arrives in the US on April 3

Apple’s crack at the e-reader market, the iPad, will become available in the US on April 3 as a wifi only version, and then in late April for the wifi and 3G model.

The device will hit European shores (Germany, Italy, Spain, Switzerland and the UK) as well as Australia, Canada and Japan late in the same month.

The iPad, dubbed as a ‘magical’ device by chief exec Steve Jobs, will sell for $499 for the 16GB, $599 for the 32GB, and $699 for the 64GB versions. The 3G-capable models will be available at $629 for 16GB, $729 for 32GB and $829 for 64GB. International pricing will be announced around launch time in late April.

Apple will open up a new section in the App Store to cater to the iPad, although the device is also able to use 140,000 existing iPhone and iPod Touch applications. However, some have noted that once some of these apps scale up to the available resolution of the iPad (1024 by 768 pixels at 132 pixels per inch) they look a bit like the blocky graphics of the Commodore 64.

Taking the e-reader market head on, the iPad will feature an iBooks app that allows users to browse, purchase and download e-books to read on the device. The screen isn’t up to the same standards as electronic ink, but that’s because it’s being pitched as a jack of all trades when teamed with the iWork suite of office tools, Safari browser (with the same lack of support for Flash and Java that the iPhone suffers from), email client, and photo, video and music player apps.

The iBookstore will be available as a free download and will feature books from the New York Times Best Seller list from both major and independent publishers, including Hachette Book Group, HarperCollins Publishers, Macmillan Publishers, Penguin Group and Simon & Schuster.

In related news, an Android-based, dual screen e-reader made by US-based Spring Design seems to be having some launch delays. The Alex, which features a 3.5″ colour LCD screen with virtual keyboard as well as a paper-like 6″ EPD screen, and connectivity provided via wifi, GSM and EVDO/CDMA, was due to go on sale at the end of February for $399.00. However, the online store has still not launched, but a company spokesman told telecoms.com that the units are ready to go, the firm is just waiting for the website to be completed and some issues with the back-end e-commerce.

Skype makes quick exit from US Ovi Store

Internet telephony player Skype has demonstrated the importance of its newfound relationship with Verizon Wireless, by pulling the Symbian version of its VoIP app from the US Ovi Store.

Just last week, Nokia highlighted the power of consumer brands, by hopping into bed with Skype to make the client available to some 200 million smartphone users worldwide, allowing users to make VoIP calls possible over either a wifi or mobile data connection. The app is downloadable for free from the Ovi Store, but should also work on Symbian devices from other manufacturers, like Sony Ericsson.

However, the app is not available to Ovi Store browsers in the US, presumably because of the recently struck deal between Skype and US carrier Verizon.

From March, US consumers will be able to get Skype on a wide range of Verizon phones, including the BlackBerry Storm 9530, Storm2 9550, Curve 8330, Curve 8530, 8830 World Edition and Tour 9630 smartphones, as well as Droid by Motorola, Eris by HTC and the Motorola Devour.

The service will allow users to make and receive unlimited free Skype-to-Skype voice calls and send and receive instant messages.

Commenting on the announcement at the time, Dario Talmesio, senior analyst at Informa Telecoms & Media, said: “The Skype/Verizon announcement demonstrates that mobile operators are beginning to change their attitude towards VoIP providers, they have gone from blocking to managing what they consider to be an issue. However, the majority of mobile operators have yet to make a firm decision, but market forces are such that mobile operators can’t avoid Internet-based VoIP.”

The Skype app can still be installed and used on Symbian handsets in the US, it’s just not available as a direct download from the Ovi Store.

Take books for example. The Informer favours the heft of a weighty tome and the aesthetic appeal of a full bookcase but he supposes these phenomena will at some point receive the same wry glances as the waxed canvas cape he wears when cycling through the British drizzle. In the news this morning were reports that Penguin Books, one of the world’s biggest publishing houses, is developing an interactive e-book platform, to benefit from the growing interest in the e-reader market.

Targeting devices such as the Apple iPad, and a flurry of Android-based gadgets, the Penguin platform will introduce e-books with embedded audio and video, as well as interactive capabilities. It’s a space the Informer has been watching with interest, since Amazon jumped on the app store bandwagon in January, with a shop front catering to its own e-reader platform – the Kindle.

Late last year Amazon pushed the Kindle global, validating the initiative’s nascent business model with some Wall Street analysts and prompting predictions that the Kindle will quickly grow into a $1bn business. Penguin’s move is a huge vote of confidence for the consumer-electronics device and related service, showing that a wireless product can be a revenue generator even if the end-user is not a direct subscriber to the mobile network that serves the device.

Moving on to newfangled services that probably won’t turn into a $1bn business anytime soon – micro social network Twitter has just passed the ten billion tweet mark, after hitting one billion tweets in late 2008. That’s ten billion probably mostly pointless tweets about what people had for breakfast and Twitter is now rumoured to be rolling out an advertising platform to go along with its service. According to reports however, we may be spared 140 character length ads showing up randomly in twitter feeds as they will only be pushed out in search results. Web curmudgeon that he is, this shouldn’t prove too much of an issue for the Informer but he supposes he should move with the times.

Embracing the new, on the other hand, turned out to be a bit of an industry trend this week. Finnish vendor Nokia hopped into bed with Skype to make the VoIP client available to some 200 million smartphone users worldwide. The two companies have jointly developed a Skype app for the Symbian platform, making VoIP calls possible over either a wifi or mobile data connection. The app is downloadable for free from the Ovi Store, but should also work on Symbian devices from other manufacturers, like, er, Sony Ericsson?

Meanwhile, Orange threw its weight behind the Nokia-Intel founded Linux initiative MeeGo, anticipating the creation of a new channel for the delivery of consumer multimedia services. MeeGo was unveiled at Barcelona in February as a merger of Intel and Nokia’s respective Linux initiatives, to create a software platform spanning a range of consumer electronics from mobile phones to netbooks.

Intel is contributing its Moblin platform, which will be merged with Nokia’s Maemo platform and the Nokia-owned cross platform application environment, Qt. With the operator’s backing, Intel and Orange will work to increase the availability of Orange Signature Services, such as Orange TV and Orange Maps, to be supported by the MeeGo and Intel Atom environment. The companies aim to establish a common software framework across multiple devices, ranging from smartphones and tablets to netbooks. An ambitious initiative, but as Ovum analyst Tony Cripps noted in Barcelona, the real win is in tying developers to the MeeGo platform.

“Turning MeeGo into a mainstream platform for CE will be no mean achievement in its own right. However, it will ultimately be largely meaningless how many devices it is deployed on if the consistency provided by the underlying OS is not matched by its ability to provide a true multi-screen application platform for developers,” he said.

Sticking with Linux, which seems to be having its heyday, mobile Linux evangelist group the LiMo Foundation extended an olive branch to the recently formed Wholesale Applications Community – an alliance designed to build an open platform for delivering applications to all mobile phone users.

The alliance plans to initially use both the JIL and OMTP BONDI requirements, evolving these separate standards into a common standard within the next 12 months. LiMo sees itself as a perfect fit here, having already produced standardized white-label SDKs for the LiMo platform in both native and OMTP BONDI-compliant forms, while a number of LiMo’s key stakeholders also hold leadership roles within the JIL initiative. In an open letter to the Wholesale Apps Community, Morgan Gillis, executive director of the LiMo Foundation, offered “full support, committed participation, and immediate practical assistance” to the strategy.

There was coming together of another kind in the UK as the mobile subsidiaries of Deutsche Telekom and France Telecom got the green light from the European Commission to go ahead with their proposed merger. Integration measures are expected to start immediately, with the closing of the transaction expected before the spring is out. The deal, announced in August 2009, is to be conducted as a merger of equals, with T-Mobile and Orange folded into a 50:50 joint venture. This move will create a new market leader, with over 34 million subscribers and a 43 per cent share of the UK market, compared to current leader O2’s 22.4 million strong user base and 28.5 per cent market share, according to the latest figures from Informa Telecoms & Media’s WCIS.

By way of concessions, the companies have agreed with the EC to divest 2×15MHz of their joint GSM spectrum in the 1800MHz band by the end of 2011. Of the divested spectrum 2×10MHz needs to be cleared by September 30 2013 at the latest and further 2×5MHz need to be cleared by September 30 2015.

T-Mobile’s existing network sharing deal with 3UK was also reinforced. Through Mobile Broadband Network Ltd, formed by 3 and T-Mobile UK in 2007, the two firms share their masts and 3G access networks. 3UK is supportive of the proposed merger between T-Mobile and Orange, and is expected to want to share in the synergies afforded by the agreement. It should be noted that Orange UK already hosts 3’s 2G traffic and, in a statement released shortly after the merger announcement, 3UK said: “Our network infrastructure joint venture with T-Mobile inevitably makes us an interested party.”

A combined brand is ultimately expected, but this week the companies said the T-Mobile and Orange UK brands will continue to operate in the UK for at least 18 months after the completion of the transaction.

The chief of UK telecoms regulator Ofcom was also looking into competition issues, promising to investigate web traffic control measures later this year as the net neutrality debate rumbles on. Ed Richards, who gave a keynote speech at the Cable Congress conference taking place in Brussels this week, said that in light of Europe’s move to adopt region-wide telecoms legislation, national regulators needed to assess the ‘openess’ of the internet and decide whether action needed to be taken to preserve it.

Traffic management measures are now commonly used by service providers to prevent bandwidth hogging by heavy users of services. But there is great concern that bandwidth throttling could be used anti-competitively to restrict rival services. Richards also said that service providers need to be more transparent in explaining what measures they use to their customers.

Google, as one of the world’s biggest generators of web traffic, often pops up in conversations about net neutrality, and both Telefonica CEO Cesar Alierta and Vodafone CEO Vittorio Colao have recently made statements that suggest they are thinking about charging Google and other search engines to use their networks.

Alierta implied that it was unfair that search engines were using mobile bandwidth for free while Telefonica’s operations provided the network, product sales, customer care, installation and maintenance for them, claiming that search engine companies would need to start paying for some of the infrastructure, possibly through the introduction of monthly fees in accordance with the amount of data generated by each site. Meanwhile, Colao said search engines such as Google and Yahoo should pay for preferential access to the company’s networks.

Google was also, albeit indirectly, in Apple’s crosshairs, as the Californian firm hit Taiwanese manufacturer HTC with the legal stick for infringing on iPhone related patents. In a suit filed with the US International Trade Commission (ITC) and in the US District Court in Delaware, Apple alleges that HTC has infringed on 20 Apple patents related to the iPhone’s user interface, underlying architecture and hardware.

Patent lawsuits are commonplace in the mobile industry – Apple is presently embroiled in a lawsuit with Nokia, over allegations from the Finnish firm that the iPhone infringes upon ten of its patents. HTC is leading the charge on Android adoption with the production of such devices as the G1 and Google Nexus One and the move from Apple prompted Google to leap to HTC’s defence even though the web giant was not named in the suit. “We stand behind our Android operating system and the partners who have helped us to develop it,” Google said.

Nevertheless, the success of the iPhone’s exclusivity model has resulted in some imitators. US carrier Verizon Wireless has teamed up with Microsoft to launch two exclusive, Microsoft branded handsets aimed at the teen market in the summer.

Meanwhile, on a final note, having missed the executive exodus that took place last week, Phuthuma Nhleko, group president and chief executive of African carrier MTN announced plans to depart after eight years at the helm.

Nhleko said he will not be renewing his long term contract which ends June 30, standing down as group president and CEO. Nhleko has, however, agreed with to continue in his role up to March 2011 to enable a transition to his as yet unnamed successor.

Nhleko did not give a detailed reason for his decision, saying only that it is the “Right time to secure the next generation of leadership for the group – and the right time for me personally to start thinking about the next phase of my career.”

And that about wraps it up for this week,

Take care,

The Informer

Ofcom to investigate net neutrality

The chief of UK telecoms regulator Ofcom has said the authority will investigate web traffic control measures later this year as the net neutrality debate rumbles on.

Ed Richards, who gave a keynote speech at the Cable Congress conference taking place in Brussels this week, said that in light of Europe’s move to adopt region-wide telecoms legislation, national regulators needed to assess the ‘openess’ of the internet and decide whether action needed to be taken to preserve it.

Traffic management measures are now commonly used by service providers to prevent bandwidth hogging by heavy users of services. But there is great concern that bandwidth throttling could be used ant competitively to restrict rival services.

Richards also said that service providers need to be more transparent in explaining what measures they use to their customers.

UK ISP Virgin Media, which is a vocal opponent of net neutrality (in fact CEO Neil Berkett once referred to the concept of net neutrality as “a load of bollocks”) just last week implemented web traffic management software from Zeus to ensure its customers receive a decent web experience even during spikes in demand.

Alex Brown, senior product manager for internet products at Virgin Media, said: “We wanted to offer customers better email and web services but at the same time ensure we can deliver them without impacting service levels or compromising security. Since we are dealing with massive volumes of traffic, reliability and performance is of paramount importance.”

When asked if Virgin was introducing throttling – one of the functions of the Zeus implementation – by stealth, we received no reply.

Google, as one of the world’s biggest generators of web traffic, often pops up in conversations about net neutrality, and Vodafone and Telefonica have recently made statements that suggest they are thinking of charging search engines to use their networks.

Both Telefonica CEO Cesar Alierta and Vodafone CEO Vittorio Colao have said that they are thinking about charging Google and other search engines to use their networks.

Alierta implied that it was unfair that search engines were using mobile bandwidth for free while Telefonica’s operations provided the network, product sales, customer care, installation and maintenance for them.

Alierta said that he was sure this situation would change and that search-engine companies would need to start paying for some of the infrastructure, possibly through the introduction of monthly fees in accordance with the amount of data generated by each site. Colao used his keynote speech at Mobile World Congress to say that search engines such as Google and Yahoo should pay for preferential access to the company’s networks.

However, Informa analyst Paul Lambert asserts that for now, the arguments are unsound, and in strategic terms they point to a misreading by the operators of the balance of power between Google and them.

“Why? Let’s take the “wrong in principle” argument first: Why should Google pay operators to allow mobile users to access its services? And why should Google – but not the BBC, Spotify, The New York Times, Facebook, HSBC or any other content/service provider – be required to pay operators for access to networks?” Lambert said.

“At the moment, Vodafone and Telefonica need the big search engines more than these companies need them. People expect to use Google and other popular Web sites on their mobile phones. The balance of power lies with Google and co., not any individual mobile operator. Unless Vodafone and Telefonica actually block Google and other Web sites from their networks, the majority of their customers will find a way to use them, because that’s exactly why they signed up to data plans in the first place – to use these Web sites while on the go.”