MORE FOR LESS As operators endeavour to squeeze more out of their existing networks, we look at transforming technologies and markets NEWS IN BRIEF 3 Timeline A roundup of some of the major stories reported in our daily news service, www.totaltele.com. CONTENT STRATEGIES 6 Smartphone OS competition Google and Apple are making inroads in the smartphone OS market. A fierce battle now looms in the face of rocketing growth and consolidation. NETWORK STRATEGIES 10 Managed services China’s leading vendors Huawei and ZTE are making strong headway into providing managed services to operators. TECHNOLOGY TRENDS 14 Data centre transformation In part two of our key briefing on data centres, Roy Rubenstein looks at standards transforming data centre networking. BUSINESS AND FINANCE 16 M&A activity Private equity companies are circling as some telcos streamline operations; others are buying into rising service segments. STATISTICS 17 Prime numbers Developing economies’ share of global wireless connections, VoIP growth and wireless backhaul. LEADER CONTENTS Mary Lennighan Editor Total Telecom BUSINESS ANALYSIS FOR TELECOMS PROFESSIONALS November 2010 T elecoms operators share a common problem: end- users are increasingly demanding. As customers call for more capacity and higher speeds, operators are looking for new ways to get the most out of their existing networks and to keep capex down for new rollouts. And these chal- lenges took centre stage at Broadband World Forum (BBWF) in Paris late last month. Fibre access networks will give users significantly greater band- width to their homes, but new figures from iDate presented in Paris show that operators are still dragging their heels, especially in Western Europe. Two of the conti- nent’s biggest economies, Germany and the UK, failed to make it into iDate’s ranking, which lists coun- tries in which penetration of fibre-to-the-home or building is above 1% of households. Deutsche Telekom CTO Olivier Baujard illustrated the quandary for operators. On the positive side, end-users are still willing to spend, he said. However, the “fibre capex wall…is a real wall”. BBWF included much talk of dynamic spectrum management (DSM) techniques that enable telcos to provide high-bandwidth services over their copper networks. AT&T was arguably the most vocal backer of DSM in Paris, having deployed the technology as long ago as 2004 to support its IPTV rollout. iDate’s figures show US FTTH/B household penetration at over 7% and growing, backing up the asser- tion by China’s ZTE that telcos will continue to stretch the life of their copper alongside rolling out fibre for some time to come. ZTE and domestic rival Huawei feature in our analysis on p.10, which charts their rise in global managed IT services. Advances in fixed networks will also provide much-needed backhaul for mobile data services. Europe’s MNOs used the BBWF stage to express their shared opinion that LTE simply will not be enough to solve the mobile capacity crunch. Small cells, such as picocells and femtocells, will be key, they claim. However, the WiFi offload option brings with it another set of chal- lenges, most notably a lack of control over the user experience. Developments in mobile operat- ing systems have enriched that user experience. But our feature on p.6 shows that smartphone OS makers face an uncertain future as calls for consolidation grow. Consolidation is one driver behind renewed M&A activity in telecoms, and on p.16 we round up some of the big recent deals and likely ones ahead. n Telcos will continue to stretch the life of copper networks
Transcript
MORE FOR LESSAs operators endeavour to squeeze more out of their existing networks, we look at transforming technologies and markets
news in brief
3 Timeline A roundup of some of the major stories reported in our daily news service, www.totaltele.com.
content strAtegies
6 Smartphone OS competition google and Apple are making inroads in the smartphone os market. A fierce battle now looms in the face of rocketing growth and consolidation.
network strAtegies
10 Managed services china’s leading vendors Huawei and Zte are making strong headway into providing managed services to operators.
tecHnology trends
14 Data centre transformation in part two of our key briefing on data centres, roy rubenstein looks at standards transforming data centre networking.
business And finAnce
16 M&A activity Private equity companies are circling as some telcos streamline operations; others are buying into rising service segments.
stAtistics
17 Prime numbers developing economies’ share of global wireless connections, VoiP growth and wireless backhaul.
lEadER cOntEnts
Mary lennighan Editor
Total Telecom
BusinEss analysis fOR tElEcOMs pROfEssiOnals November 2010
telecoms operators share a common problem: end-users are increasingly
demanding. As customers call for more capacity and higher speeds, operators are looking for new ways to get the most out of their existing networks and to keep capex down for new rollouts. And these chal-lenges took centre stage at broadband world forum (bbwf) in Paris late last month.
fibre access networks will give users significantly greater band-width to their homes, but new figures from idate presented in Paris show that operators are still dragging their heels, especially in western europe. two of the conti-
nent’s biggest economies, germany and the uk, failed to make it into idate’s ranking, which lists coun-tries in which penetration of fibre-to-the-home or building is above 1% of households.
deutsche telekom cto olivier baujard illustrated the quandary for operators. on the positive side, end-users are still willing to spend, he said. However, the “fibre capex wall…is a real wall”.
bbwf included much talk of dynamic spectrum management
(dsM) techniques that enable telcos to provide high-bandwidth services over their copper networks. At&t was arguably the most vocal backer of dsM in Paris, having deployed the technology as long ago as 2004 to support its iPtV rollout.
idate’s figures show us fttH/b household penetration at over 7% and growing, backing up the asser-tion by china’s Zte that telcos will continue to stretch the life of their copper alongside rolling out fibre for some time to come. Zte and domestic rival Huawei feature in our analysis on p.10, which charts their rise in global managed it services.
Advances in fixed networks will also provide much-needed backhaul for mobile data services. europe’s Mnos used the bbwf stage to express their shared opinion that lte simply will not be enough to solve the mobile capacity crunch. small cells, such as picocells and femtocells, will be key, they claim. However, the wifi offload option brings with it another set of chal-lenges, most notably a lack of control over the user experience.
developments in mobile operat-ing systems have enriched that user experience. but our feature on p.6 shows that smartphone os makers face an uncertain future as calls for consolidation grow. consolidation is one driver behind renewed M&A activity in telecoms, and on p.16 we round up some of the big recent deals and likely ones ahead. n
Telcos will continue to stretch the life of copper networks
Every connection is a new opportunity™
PBINSIGHT.EU/UK >
All organisations need insight at all levels, with their customers and citizens, in their markets and communities. Organisations aspire to acquire new customers, serve existing customers and uncover new growth opportunities—whilst maximising effi ciency, minimising costs and improving customer satisfaction.
Learn more about Pitney Bowes Business Insight solutions, software and services and see how we can help you to acquire serve and grow your customer and citizen relationships.
Solutions for Customer Intelligence, Communications and Care.
Insight = Opportunity
Insurance Financial Services Communications Public Sector
November 2010 www.totaltele.com 3
Mobile launch in South Africasouth African fixed-line operator telkom launched mobile services to become the country’s fourth mobile operator, joining Vodacom, Mtn and cell c.
India demands Vodafone taxthe indian government has told Vodafone essar to pay inr 112.1 billion (E1.8 billion) in taxes within a month for the acquisition of Hutchison’s mobile venture in 2007.
New MVNO in Spainspanish tV broadcaster sogecable has launched MVno cuatro Movil on kPn’s network.
NETWORKS
BT must open fibre networksuk regulator ofcom ruled that bt must give competitive providers access to its new fibre networks, including its underground cable ducts and telephone poles, so they can build their own last mile fibre infrastructure. bt, which already provides wholesale access to its fibre broadband offering, will be able to set its own access prices.
French network sharingnokia siemens networks will upgrade and expand french mobile operator sfr’s HsPA+ radio access network, which will then be available for use by subscribers of rival operators orange and bouygues telecom.
Italy broadband pricing probethe ec asked regulator Agcom to review the prices that telecom italia can charge for wholesale
tiMElinE
value added tax on triple-play bundles of tV, broadband and telephony. operators will now be required to pay VAt of 19.6% on full triple-play service revenues, compared to the current rate of 5.5% on the tV service alone.
TerreStar files for Chapter 11Mobile satellite services provider terrestar networks has filed for chapter 11 bankruptcy protection in the us.
Nitel sale approvedthe nigerian government approved the us$2.5 billion sale of state-run operator nitel to a consortium led by china unicom, following an auction in february. nitel has fast been losing share and is now fifth in the fixed-line voice market.
DVB-H suffers further setbackin another blow for dVb-H mobile tV services, broadcasts in Austria will finish at the end of this year. streamed 3g services
BuSiNESS
Etisalat moves for Zainunited Arab emirates operator etisalat entered into an agreement to buy 51% of kuwait mobile operator Zain, paving the way for one of the biggest corporate transactions of recent times in the Middle east.
Qualcomm axes TV serviceQualcomm confirmed it will shut down its flo tV mobile broadcast service next spring, but will continue to explore strategic options for the network and spectrum. Qualcomm has suspended sales of devices that use the service.
3G launches in Indiatata teleservices said it will launch 3g mobile services in nine circles in india on 5 november, while bharti Airtel said it will launch in its 13 circles by year end. Vodafone essar subsequently said it will launch 3g in the first quarter next year. they will follow the 3g launches of state-owned operators bsnl and Mtnl in 2009.
Hungary next for telecoms taxHungary’s parliament passed a proposal to tax the telecoms sector 61 billion forints (E225 million) per year between 2010 and 2012 to ease budget deficits. but the eu has queried the tax and could rule it illegal, as it did with similar proposals in france and spain this year.
France raises bundling taxfrance’s national Assembly passed a measure to increase
will still be available from 3, telekom Austria and orange.
TI raises stake in Argentinatelecom italia increased its stake in sofora telecommunications, the company that controls telecom Argentina, to 58% from 50%. it follows a long battle with the regulator over the italian operator’s share in sofora.
Jajah opens Facebook callingtelefonica company Jajah launched a mobile application to enable direct VoiP calls from social networking site facebook. the application, called Jajah social call, initially will only be available on blackberry devices.
Verizon faces big payoutVerizon wireless will pay $25 million to the us treasury and refund a minimum $52.8 million to about 15 million customers it wrongfully charged. regulator the fcc says the payment to the government is the largest ever.
A roundup of the major stories in telecoms in the past month, as reported in our daily news service, www.totaltele.com
Source: TeleGeography
— Average Range | Average
Available colocation space in key cities
Amsterdam
Chicago
Frankfurt
Montreal
New York
Los Angeles
San Francisco
Washington
London
New data from TeleGeography shows that colocation service providers are struggling to keep up with demand. Despite significant new construction, some 41% of sites surveyed by TeleGeography were at least 80% full by mid-2010, up from 34% of sites a year earlier. Operators added 1.5 million square feet of new colocation space and 124 megawatts of power in the year to mid-2010, but some key cities are showing less than 25% available space.
0% 10% 20% 30% 40% 50% 60% 70%Average space available
Every connection is a new opportunity™
PBINSIGHT.EU/UK >
All organisations need insight at all levels, with their customers and citizens, in their markets and communities. Organisations aspire to acquire new customers, serve existing customers and uncover new growth opportunities—whilst maximising effi ciency, minimising costs and improving customer satisfaction.
Learn more about Pitney Bowes Business Insight solutions, software and services and see how we can help you to acquire serve and grow your customer and citizen relationships.
Solutions for Customer Intelligence, Communications and Care.
Insight = Opportunity
Insurance Financial Services Communications Public Sector
4 www.totaltele.com November 2010
access to its network. telecom italia had planned to raise its wholesale broadband prices by 24% over two years to fund next-generation network build.
German network sharinggerman mobile operators deutsche telekom, Vodafone germany and o2 germany entered talks to roll out a joint lte network in the country, having acquired spectrum in May. deutsche telekom will also launch its own lte services using 800-MHz spectrum by year end.
T-Mobile launches LTEt-Mobile Austria launched commercial lte services in innsbruck, just four weeks after the completion of the country’s spectrum auction in september.
Singapore 3G spectrumthe singapore government will allocate 3g spectrum to singapore telecom, starHub and M1 after there were no other bidders for the s$20 million slots.
UK 3G spectrum reversaluk regulator ofcom ruled that the refarming of spectrum in the 900MHz and 1800MHz bands for 3g services will not impact competition, reversing its previous decision. that could open the way for o2 and Vodafone to use the spectrum, in line with european legislation.
Denmark awards 3G spectrum3 denmark was awarded licences in the 900-MHz and 1800-MHz bands for dkk 12 million (about E1.6 million).
Telecom NZ bids for NGNtelecom new Zealand submitted a new plan to become part of the country’s ultra-fast broadband initiative. the operator is proposing operational and structural separation.
Next-gen broadband projectsseveral countries last month announced plans to extend high-speed broadband coverage. the german government plans to provide 75% of households speeds of up to 50 Mbps by 2014. telecom italia continued its fibre deployment and aims to make 100 Mbps services available in six cities by the end of this year. And softbank floated a JPy500 billion (E4.5 billion) plan to build a nationwide fibre network in partnership with rival operators ntt and kddi.
End to 3G sharing in Australiatelstra will end its 3g network sharing agreement with Vodafone Hutchison Australia in 2012, after eight years.
NSN/Ericsson India contractsnokia siemens networks and ericsson won contracts to supply, build and manage infrastructure for the 3g networks of Vodafone essar in india.
PEOPLE
Executive remembereddean olmstead, president of echostar satellite services, has died aged 55 after a battle with cancer. olmstead worked for the us federal government and nAsA before a 26-year career in the satellite industry holding senior positions at ses global, Arrowhead global solutions, loral space & communications, directV and Hughes electronics.
Nokia job cutsnokia’s new ceo stephen elop announced the company will cut 1,800 jobs. the changes will come at the symbian smartphones unit, where the focus will be on creating a common developer ecosystem and streamlining software development, and also in services.
tiMElinE
syMBian fORtunEsThe Symbian Foundation re-ceived a much needed boost when the Artemis Joint Tech-nology Initiative, a public-pri-vate partnership that includes the European Commission, agreed to invest E22 million in the non-profit organisa-tion. Just weeks earlier Sym-bian Foundation executive director, Lee Williams (pic-tured), resigned and was re-placed by CFO Tim Holbrow. David Wood, a co-founder of Symbian, left the Foundation a year ago. Williams was ap-pointed executive director in October 2008, a few months after handset maker Nokia announced plans to take full control of Symbian and turn it into the open source Symbian Foundation. His resignation is the latest blow to the Founda-tion as it struggles to regain the initiative from smartphone rivals Apple and RIM and in the face of strong growth of Google’s Android operating system (see story p.6). His departure comes less than a month af-ter Sony Ericsson confirmed it would not develop handsets based on the new version of the operating system, Sym-bian 3, mirroring Samsung’s decision to abandon the plat-form. Both handset makers were key financial contributors to the project. Symbian is still the leading smartphone op-erating system, but its market share declined to 41.2% in the second quarter from 51.0% in the same period of 2009, ac-cording to Gartner. Strategy Analytics, says Nokia’s smart-phone market share slipped to a low of 34.4% globally in Q3, even though it shipped a re-cord 26.5 million units. Apple and RIM gained ground, ship-ping 14.1 million and 12.4 mil-lion units respectively.
KPN names new CEOeelco blok will become kPn’s next ceo and chairman when Ad scheepbouwer retires next April. blok has been on kPn’s management board since 2004 and has worked there since 1983.
Microsoft departures continueMicrosoft chief software architect ray ozzie became the latest executive to leave the company, following the departures of business division head stephen elop to nokia, platforms and services chief kevin Johnson and cfo chris liddell.
T-Mobile USA changesPhilipp Humm took over as ceo of t-Mobile usA in october, five months ahead of schedule, replacing robert dotson. further changes see cto cole brodman becoming chief marketing officer, and chief network officer, neville ray, will become cto.
PTC gets new CEOPolish mobile operator Ptc named Miroslav rakowski as its new ceo from January, replacing klaus Hartmann. rakowski is currently chief sales officer and director for crM at t-Mobile czech republic.
OTE appoints new leaderMichael tsamaz was appointed ceo and chairman of greek operator ote, moving from his position as head of ote’s mobile arm cosmote.
ITU reappoints headHamadoun touré of Mali has been elected as secretary general of the international telecommunication union (itu) for a second four-year term.
Telstra job cutstelstra said it will cut 950 jobs, mostly in executive and middle management areas.
Sponsors:
Organised by:
2010
World Communication Awards For global communications providers
24 November 2010 The London Hilton on Park Lane
The World Communication Awards London Hilton on Park Lane
24 November 2010
To book your table, visit www.worldcommsawards.com
For sponsorship opportunities contact Rob Chambers +44 (0) 20 7827 5971
BOOK A TABLE
freedomThe feeling of
www.worldcommsawards.com
6 www.totaltele.com November 2010
Google and Apple are making strong inroads in the smartphone OS market. A fi erce battle now looms in the face of rocketing growth and consolidation. By nick Wood
S M A R T P H O N E O P E R A T I N G S Y S T E M S
sMaRt WARS
cOntEnt stRatEgiEs
the increasingly fragmented smartphone operating system market is heading for a showdown
that could lead to some well-known plat-forms disappearing altogether over the next five years. the survivors will embark on what promises to be a fierce battle for the attentions of handset makers, devel-opers and customers.
Microsoft and nokia both have intro-duced long-anticipated new versions of their smartphone operating systems—windows 7 and symbian 3—in the run-up to christmas, all the while that google and Apple continue to make strong inroads with their respective Android and ios platforms.
but analyst numbers indicate it’s still all to play for. According to gartner, one in five of the 325.56 million handsets sold in the second quarter this year was a smart-phone; in the second quarter of 2009, smartphones accounted for just one in seven handsets sold. High growth coupled with low penetration suggest there is still a sizeable opportunity for a smartphone player to claim substantial operating system (os) share.
latest figures, from strategy Analytics, show that global smartphone shipments grew by 78% in the third quarter to reach 77 million units, representing 23% of total worldwide handset volumes. that growth compares to 50% in Q2 and just 5% in the third quarter a year ago. canalys records 80.9 million shipped units in Q3, repre-senting 95% growth over the quarter a
year earlier. (gartner is due to publish its Q3 figures in mid-november.)
so why are some already saying there isn’t enough room in the market for every-one? “it’s a two-horse race,” says erik Huggers, director of future media and technology at the bbc. currently, Android and ios have the most traction. “i think there are two platforms that have the momentum needed to reach escape veloc-ity, ” he adds.
Apple grew its share of the smartphone market to 18.3% in Q3 from 13.5% in the previous quarter, according to strategy Analytics (see table above right), shipping 14.1 million units. the analyst company says leader nokia is also facing increasing competition from Android players such as samsung, Htc and sony ericsson.
Huggers oversees how the bbc delivers its content via the internet, interactive tV and mobile devices, and leads the broadcaster’s research and development activities. during february’s Mobile world congress in barcelona he unveiled the bbc’s first official smartphone appli-cation and rallied against fragmentation in the smartphone os market.
“i used that opportunity to tell the [mobile] industry how much trouble they’re causing us,” says Huggers. He explains that the bbc has “an obligation of universality” that means it has to make its mobile services accessible on as many devices as possible, including smartphones. “it’s tough when you have to work with multiple standards,” he says. “we find it
rather cumbersome.” Huggers believes the vast majority of developers and content producers will end up supporting no more than three smartphone platforms, and that means some will lack the ecosystem needed to survive. “ultimately, consolidation will take place and we will be left with probably two,” he says.
but not all analysts believe considerable consolidation will take place any time soon. idc forecasts mobile phone vendors will ship 269.6 million smartphones—or what it calls converged mobile devices—in total this year compared to 173.5 million units in 2009. in the company’s latest worldwide Quarterly Mobile Phone tracker, idc senior research analyst, kevin restivo, says: “idc believes the market will comfortably support up to five os players over the next five years. shorter replacement cycles and an ample feature phone-to-smartphone upgrade opportunity means the smartphone os market will remain fragmented but healthy for the foreseeable future.”
certainly, most developers have the luxury of being more selective than the bbc. “developers focus initially on one platform, familiarise themselves with it, and then look to see which other plat-forms they can develop for,” says dominic lobo, head of the orange Application shop. He says in some cases variances in smartphone os characteristics mean some developers are reluctant to focus on making apps that are portable between different smartphone platforms.
“they’re targeting what they think will give them good reach,” says lobo. “it depends on how much marketing push there is behind [the os], how easy it is to develop for, and whether there are a lot of operators [putting it in their ranges].”
indeed, handset makers as well as soft-ware developers have the potential to make or break an operating system. “ultimately our strategy is about fulfill-ing the expectations of the consumer, and
Worldwide Smartphone Sales to End Users by Operating System, (000s) company 2Q10 units 2Q10 Market 2Q09 units 2Q09 Market share (%) share (%)symbian 25,386.8 41.2 20,880.8 51.0Research in Motion 11,228.8 18.2 7,782.2 19.0android 10,606.1 17.2 755.9 1.8iOs 8,743.0 14.2 5,325.0 13.0Microsoft Windows Mobile 3,096.4 5.0 3,829.7 9.3linux 1,503.1 2.4 1,901.1 4.6Other Operating systems 1,084.8 1.8 497.1 1.2total 61,649.1 100.0 40,971.8 100.0
Source: Gartner
November 2010 www.totaltele.com 7
the os forms an important part of that,” says Aldo liguori, head of global commu-nications at sony ericsson.
the company has a policy of not pre-announcing new devices, but it made headlines in late september when it confirmed it has no plans at present to develop further phones based on symbian, the current market-leading smartphone operating system by some distance (see table p.8). sony ericsson says it will favour Android for the majority of its new devices. “given the tremendous growth of the Android community it’s clearly an os that’s really moving,” says gustaf brusewitz, spokesman for sony ericsson.
reflecting that growth, both gartner and informa forecast that Android will overtake symbian to become the leading smartphone operating system in terms of market share some time in 2014.
sony ericsson is by no means the biggest influencer on the market: in Q2 the vendor had a 3.4% share of total handset sales globally—equal with research in Motion (riM)—compared to 34.2% for nokia and 20.1% for samsung, according to gartner. but smartphones now make up more than 50% of sony ericsson’s total sales—up from 13.6% in the second quarter and just 5.8% in 2Q09 — as it shifts its focus to higher-end devices.
in october ceo bert nordberg said the company also has no plans in the short term to develop smartphones running on windows Phone 7 (wP7), adding that it aims to be the world’s number one provider of Android hand-sets. (sony ericsson had a 13% share of the global Android device market in the second quarter, says gartner, behind Motorola with 26% and Htc with 41%.)
such narrowing of focus, effectively to one smartphone platform, does not augur well for operating system companies with falling market share. but vendors are understandably reluctant to make predic-tions. “i don’t know what is the optimal number of operating systems,” says liguori. “Maybe two or three.” And brusewitz adds: “two years ago everyone was talking about symbian and Android didn’t exist; it’s a fast-moving industry.”
what’s more, mobile operators could
hit back if they feel they are becoming marginalised. in september reports suggested orange, deutsche telekom (t-Mobile), telefonica (o2) and Vodafone were considering the development of a common platform for mobile devices, in the face of the rising influence of Apple and google in the mobile space .
unfortunately for people like Huggers at the bbc, the number of competing smartphone operating systems is still growing. Microsoft in october unveiled nine windows Phone 7 handsets, all of which will ship in various markets across the Americas, europe and Asia Pacific in time for christmas.
Microsoft’s take on the smartphone user experience has been generally well-
received. “unlike all the other solutions, wP7 is not a sea of application icons,” says richard windsor, global technology specialist at nomura. “instead, wP7 is more like a series of folders—called hubs by Microsoft—that carefully organise content in a way that aims to reduce clutter and provide quick access to content.”
windsor says Microsoft has focused on integrating applications with web-based services more heavily than its rivals, a move which he says has “clearly differen-tiated” wP7 from alternative offerings. He has a warning, however: “it is still unclear how much developer support wP7 will capture, or whether operator retail channels [will] actively push its devices over rival solutions.”
cOntEnt stRatEgiEs
‘Two years ago everybody was talking about Symbian, and Android didn’t exist’
q3 2010 global Smartphone Shipments and market Sharesglobal smartphone vendor shipments (millions of units)nokiaappleRiMOtherstotal
global smartphone vendor market share %nokiaappleRiMOtherstotal
Meanwhile nokia at the end of september finally began shipping the first of its symbian 3 handsets, the n8, in an attempt to regain some momentum in the smartphone space. According to gartner, symbian had a 41.2% share of the smart-phone operating system market by sales in the second quarter, down from 51.0% in the same period a year ago (table p.6). during that time Android’s market share by sales grew from just 1.8% to 17.2%, placing it third behind riM (18.2%) and—notably—ahead of the other big grower Apple ios (14.2%).
comparing just Apple and Android, isuppi expects the latter to overtake ios by usage in smartphones in 2012 (see bar chart above). but unlike gartner, idc forecasts symbian will retain its number one position through 2014 with 32.9% market share. it expects Android to grow its share from 16.3% to 24.6% by that time (see table top).
nevertheless, handset makers including samsung, Motorola and sony ericsson, which once were symbian stalwarts, have
all but abandoned the os to focus on devices based on rival platforms .
the symbian foundation is confident it can maintain its position. “the forecasts we’ve seen to 2014 still show symbian as first or joint first, [and] that’s a worst case scenario,” says ian Hutton, manager of the symbian foundation’s technology roadmap team. but he admits that the os market can’t sustain everyone. “i would expect to see some consolidation over the next couple of years or more,” he says.
the foundation’s future is being ques-tioned by some after executive director lee williams resigned last month after two years in the role. nokia has since denied speculation that it could bring the development of symbian back in-house.
Hutton argues that open source oper-ating systems like symbian stand a better chance of surviving compared to verti-cally integrated environments like Apple and riM. He points out that the symbian foundation doesn’t have to cover the cost of developing handsets, and can attract developers on the promise of
offering a consistent application envi-ronment and user experience to a broader range of users. “it’s a set-up that makes more sense in the long term,” says Hutton. closed platforms “are relatively expensive and hard to maintain profita-bly” compared to open platforms. He says that working in an open source envi-ronment with a range of contributors also allows the symbian foundation to draw on a broader set of skills.
in october Apple ceo steve Jobs hit back at suggestions that Apple’s approach to ios is closed, in particular attacking google which it now trails for os market share. “we find this disingenuous and clouding the difference between our approaches,” he said. “closed versus open is a smoke screen for what’s best for the customers.” Jobs maintained that the Android market is increasingly frag-mented, giving the example of mobile twitter platform provider tweetdeck developing its product for 244 handsets and over 100 versions of Android, compared to the iPhone which has just two versions of software.
the symbian foundation, along with nokia, has also been criticised for taking too long to develop a new operating system that can compete with the likes of Apple and Android. Hutton denies it is related to the symbian foundation’s corporate structure.
“doing everything as a community doesn’t necessarily mean being slow and cumbersome; it’s not software develop-ment by committee,” he says. “there’s an implication that doing everything in-house is quick and efficient, but i don’t think that’s necessarily always the case.”
Meanwhile symbian’s vertically inte-grated competitors have more than once expressed their reasons for controlling the user experience from top to bottom. “we’re able to deliver a more compelling user experience,” says rory o’neill, senior director of business marketing for riM’s eMeA activities. He argues that closer integration between hardware and soft-ware enables a higher level of sophistication and therefore results in a richer user expe-rience. “nothing gets thrown in the bin faster than a smartphone that doesn’t
Worldwide Converged mobile device OS market Share Forecast Operating system 2010 Market 2014 Market 2014/2010 change share share symbian 40.1% 32.9% -18.0%BlackBerry Os 17.9% 17.3% -3.5%android 16.3% 24.6% 51.2%iOs 14.7% 10.9% -25.8%Windows Mobile 6.8% 9.8% 43.3%Others 4.2% 4.5% 8.3%total 100.0% 100.0%
Source: IDC Worldwide Quarterly Mobile Phone Tracker, September 2010
Global Forecast, Android and iOS Usage in Smartphones
140
120
100
80
60
40
20
0
Source: iSuppli Corp.
2010 2011 2012 2013 2014
Milli
ons
of u
nits
n Android n iOS
cOntEnt stRatEgiEs
work, and nothing gets deleted faster than an app that doesn’t work,” he says.
riM in August unveiled the blackberry torch, powered by its new operating system blackberry os 6. the company believes its enterprise pedigree, its secure email and messaging services, as well as its loyal ‘prosumer’ following will remain valuable differentiators going forward. “we’re focused on how we can help companies make the most of what we call the ‘consumerisation’ of enterprise devices,” o’neill says.
unchecked, that can cause problems for it departments trying to manage multi-ple devices. “People are bringing into work devices that are more advanced than what their company has—the lines between work and play are more blurred than ever—so we’re working with compa-nies to find ways of giving their employees the freedom to use their own smartphones while at the same time enabling the corporation to maintain some control
over what they’re used for,” says o’neill.All the while smartphones are generat-
ing burgeoning traffic. new research from informa says smartphones account for 65% of all mobile traffic worldwide. it says average traffic per smartphone user per month will increase 700% to 2015, rising to 776 Mb from 85 Mb now.
Meanwhile Huggers at the bbc has a clear vision for how the smartphone os of the future should take shape. “the most successful os will be the one that truly embraces HtMl5,” he says.
currently under development by the world wide web consortium, HtMl5 will become the latest revision of the HtMl standard for displaying internet content. it will enable developers to incor-porate rich multimedia content and more advanced functionality into web sites without the need for additional plug-ins such as Adobe flash. “the ecosystem for the web already exists,” continues Huggers. “[developers] don’t need to
download sdks, learn new [program-ming] languages or any new tricks.”
but for now, at least, Huggers and his contemporaries will have to contend with a fragmented smartphone os market. And for consumers, at least, that is not necessarily a bad thing. “ competition is great for consumers,” he says. “it gives them more choice and lowers prices, and all sorts of other things like that.”
one well-known gadget lover, who has made no secret of his admiration for prod-ucts like Apple’s iPhone, summed up the consumer’s point of view during Microsoft’s wP7 launch in london in october. “i think you have to be very stony-hearted not to welcome a new player,” argued actor and comedian stephen fry. “i want biodiversity in this market, and all of us who love it probably do too…the more players there are in it, the more it drives creativity and innova-tion and the more thrilling a space it becomes.” n
This November join the World Telecoms Council and discuss the future of business and enterprise servicesEngage with senior telecoms executives and debate the fiercely competitive business services market place.
Attend and…• Listen to expert speakers• Learn from global operators• Debate with our Mega Panel• Network with peers at the Breakfast Briefing• Be first to hear the brand new proprietary research put together by Total Telecom and Telemark Services• Gain a complimentary place at the WCA held on 24th November
Click here to view our agenda
For more information on attending or sponsoring contact:Charles GeorgiouTel: +44 (0) 20 7608 7071Email: [email protected]
Or visit our websitewww.worldtelecomscouncil.com
world telecoms council
Sponsored by
Keep up with Business Services 23 & 24 November 2010
10 www.totaltele.com November 2010
western network equipment providers face a mounting challenge from Huawei and
Zte to capture spend on managed ict services. china’s bright stars are gaining ground fast, and in particular when it comes to operator spend on managed infrastructure services, but they have yet to gain traction in the more lucrative areas of software, it and consultancy services.
taking into account just network equipment providers’ proportion of ict services revenues globally, in the second quarter Huawei took a 13% share among its peers, according to latest figures from ovum (see chart opposite page, right). that was just a whisker behind Alcatel lucent (14%) and nokia siemens networks (16%), although still some way behind leader ericsson (26%).
stéphane téral, a principal analyst at infonetics research, says china’s suppli-ers will continue to make large strides in the global managed services market, and before long will rival their network equip-ment provider (neP) counterparts from the west. “they will get there,” he says, “because they already have a strong repu-tation with their technology. they are no longer just competing on price.”
Although the market shares of Huawei and Zte are still small within the bigger ict services picture—taking into account spend from all industry vertical sectors and across all service providers—they are growing fast (see box opposite page). from 2Q 2007 to 2Q 2010, Huawei grew its share of the total ict services market from 0.9% to 2.3% says ovum. Zte’s share grew from 0.14% to 0.60% over the same period.
but it is spend from operators where china’s vendors currently major: ovum estimates Huawei derived 99% of its ict services revenues from telecoms service providers over the 12 months ended 30 June 2010, compared with 85% for Alcatel-lucent and 75% for ericsson.
spending by operators on ict services has held firm during the economic down-turn, and there are signs that the market is beginning to pick up again. According to ovum, operators globally spent us$64.4 billion on ict services—infrastructure services (including managed network services), software and it services (sits), and business process consulting—during the 12 months to the end of June this year. that is not far below the us$66.8 billion ict services spending peak recorded during the 12 months through to 3Q 2008, just before operators started to rein in spending following the collapse of lehman brothers in september 2008 that sent financial markets into a tailspin.
since the fourth quarter of 2009, the 12-month rolling periods (to the end of each quarter) have seen increased levels of ict service spending by operators after a year of decline. that appears to be a vote of confidence by operators that suppliers, in general, can meet their key perform-ance indicator (kPi) targets and deliver on their opex-reduction promises.
And when it comes to making headway in the operator segment, Huawei stands out from its rivals. ovum says Huawei generated us$5.1 billion from operators’ spending on ict services in the 12 months ended 30 June 2010, giving it a share of around 8% in a highly frag-mented market (nearly 30 suppliers are tracked by the analyst company). ericsson is again the market leader in the operator segment with us$8.1 billion of revenues
from ict services, followed by nokia siemens networks (us$5.8 billion), ibM (us$5.6 billion) and Alcatel lucent (us$5.2 billion).
what’s more, Huawei continues to make ground. taking the second quarter of this year in isolation, Huawei moves
into second position behind ericsson with ict services revenues from opera-tors totalling us$1.43 billion (ericsson drums up nearly us$2 billion). when ovum first compiled its 12-month ict services revenue figures in the operator segment in 2006, Huawei had us$1 billion income from ict services in a market that was worth over us$47 billion—a meagre 0.02% market share.
if you strip out sits and business process consulting from the ict services revenue mix and focus just on infrastruc-ture services—which includes managed services, or the day-to-day running of networks—then Huawei claims an even bigger market share of operator spend-ing, rising from 5% in Q2 2007 to 12% in Q2 2010, says ovum. (ericsson is still the leader here, but only just with a 13% market share.) Zte also starts to become more visible when the parameters are limited to infrastructure-related serv-ices, growing its market share from 1% in Q2 2007 to 3% in Q2 2010.
“the growth of chinese suppliers [in operator ict services] is due in part to the relative strength of china’s economy,” says John lively, chief forecaster at ovum. “As telecom spending did not fall as much in china as it did in europe and north America, Huawei and Zte have bene-fited from having a large share of china’s telecoms market.”
but that is not the whole picture. lively points out that expansion into europe and emerging markets over the last few
years—and the opportunity for relation-ship-building with operators through the supply of equipment—have provided a more solid international platform from which Huawei and Zte can persuade operators to take on additional services.
Huawei, for example, has won managed
China’s leading vendors Huawei and ZTE are making strong headway into providing managed services to operators, with key markets firmly in their sights. By Ken Wieland
m a N a g E d S E r v i C E S
EastERn PROMISE
‘China’s vendors have a strong reputation with technology. They are not just competing on price’
nEtWORK stRatEgiEs
November 2010 www.totaltele.com 11
services contracts from service providers in germany (telefonica o2), spain (Jazztel and ono) and the uk (Virgin Media). And while Zte has not been as successful as Huawei in making inroads into europe, it is doing well at winning equipment deals in some emerging markets, particu-larly in Africa.
“Zte is building a lot of cdMA networks in Africa, so there is a strong likelihood they will be able to make a strong play in managed services there in the future, as well as in some parts of eastern europe and russia,” says téral at infonetics research. “it takes a while to build a trust with operators, and suppliers usually need equipment deals to win that trust before they can move into managed services.”
infonetics says telecoms service provid-ers paid network equipment vendors us$50.4 billion in 2009 for outsourced services worldwide, and forecasts that will rise to $73.2 billion by 2014. it says the outsourcing vendors with the largest revenue gains in 2009 were HP, ericsson, Huawei and Zte.
certainly, managed services deals are rolling in, but the biggest contracts are still being won by western nePs. in september, ericsson announced a five-year agreement with Vodafone germany to manage its fixed and mobile networks. the deal, which marks the first time Vodafone germany has outsourced any part of its telecoms network operations, will see ericsson manage the field services of the operator’s transmission network, as well as fixed core network nodes.
And earlier this year, russian operator Mts announced what it claimed to be the first full network outsourcing contract signed in the country. the deal was not won by Huawei or Zte, which already had experience as network suppliers to sistema (the majority shareholder of Mts) via its Mts india subsidiary, but by nokia siemens networks. nsn in July also won an eight-year, us$7 billion outsourcing deal to deploy and manage the forthcom-ing nationwide lte network of us company lightsquared.
nevertheless, operators give Huawei and Zte hope for winning greater managed services business outside china.
younes benchekroun, network services sourcing manager at orange, stresses the need to have multiple suppliers. “if all elements [equipment and managed serv-ices] are provided by the same vendor, the risk is being stuck with that one vendor,” he says. “it’s better to separate the two—equipment and managed services—to challenge vendor proposals, unless of course there is a considerable economic advantage in opting for one supplier.”
yet operators’ desire to use different suppliers can also work against Huawei and Zte in regions where they are the more dominant suppliers of infrastruc-ture. Mts india, a mobile operator that uses equipment from both Huawei and Zte, in september awarded the two
chinese companies a managed services deal, but it also brought in ericsson as part of a three-way agreement. ericsson is also making an impact in their own back yard: in July it won a substantial managed serv-ices deal from china Mobile, which involves the provisioning of field mainte-nance services in Hebei province.
“to have a credible managed services proposition you need a lot of experience running networks, to go through a learn-ing curve and to learn from your mistakes, and that is something we have done,” says Valter d’Avino, head of managed services at ericsson. “the depth of that experience is something that really can’t be copied.”
d’Avino emphasises network manage-ment experience, and the number of “soft
nEtWORK stRatEgiEs
To date, Huawei and ZTE have yet to branch out beyond the operator segment in the ICT services space, so despite Huawei’s considerable progress it does not appear in Ovum’s pie chart for the top players in overall ICT services (below left). Ovum identifies a US$281 billion ICT services market to the end of June, with telecoms infrastructure services accounting for $56 billion, software and IT services for $143 billion and business process consulting for $83 billion. Of the total $281 billion, telecoms providers account for spend of US$64 billion, with government and educational providers generating US$42 billion, and the remainder made up from a range of different industry verticals.
NSN and Alcatel-Lucent—among Huawei’s main Western network equipment rivals in the managed services space—are also not among the top ten players when the ICT services market is viewed as a whole, underlining the exceptional progress made by Ericsson, which commands a 4% share. A measure of Ericsson’s increasing sway in other sectors, for example, came in November 2009 when it won a ten-year managed services contract with broadcaster TV4 Group in Sweden to run the day-to-day transmission of TV channels.
But when compared with its network equipment provider (NEP) peers only (see chart below right), Huawei’s inroads into the telecoms segment are deep enough to give it a 13% market share of ICT services revenues generated by this sub-group. NEPs generated revenues of US$42.3 billion in the year from the third quarter of 2009 to the second quarter of 2010, says Ovum.
iCT services market shares
Others26%
total $281 billion annual revenues (rolling)
iBM20%
H-p13%
accenture8%
fujitsu9%
csc 6%
t-systems/dt 4%
Ericsson 4%nEc 4%
capgemini 3%
dell/perot systems
3%
Source: Ovum
Others6%
nEps’ share of services market:$42.3 billion 3Q09 through 2Q10
nsn16%
Ericsson26%
cisco18%
alcatel-lucent
14%
amdocs7%
Huawei13%
12 www.totaltele.com November 2010
issues” surrounding people management that need to be addressed. when opera-tors hand over part or all of their day-to-day network operations to a third party, which can include the transfer of staff from operator to supplier, d’Avino identifies the successful merging of the often very different cultures of the opera-tor (service-based) and supplier (technical) as key to making outsourcing deals work.
“we have 40,000 staff associated with managed services in some form or other, with around 20,000 coming from operator customers,” says d’Avino. “we also have a presence in 175 countries, which gives us a very strong local reach.”
from Huawei’s perspective, the scale and reach cards can be overplayed by the more established western suppliers. “A lot of these arguments are totally irrele-vant,” says Adriana rodriguez, Huawei’s VP of services sales in the eu. while
conceding that Huawei’s track record of running networks is not as long as most other major western nePs—the chinese supplier entered the managed services market in 2005, a full ten years after ericsson made its first concerted push into this space—rodriguez points out that strenuous efforts have been made to make up for lost time.
Huawei’s service infrastructure now includes more than 130 branch offices globally (14 in the eu), including an eu regional network operations centre (noc) with which to remotely manage network elements for operators. it also has 20,000 service staff globally, 1,200 of which are based in europe. “we’ve hired lots of local people for our eu operations, so there is really no cultural or language gap,” continues rodriguez, who is a former senior manager at ericsson and based in the netherlands.
Hiring local experts with network management experience is one way Huawei believes it can catch up with the leaders on the international outsourcing stage. A year ago Huawei employed bt chief technology officer Matt bross to bolster its interna-tional operations, working out of the us.
Huawei is aiming to make inroads in the us market—initially though equip-ment deals and from there into managed services—where the government has expressed security concerns over the vendor. bross is heading up a national security committee to try to allay those concerns, and the company has enlisted the help of former government officials to lobby its case. Huawei already is working with cox communications on the compa-ny’s 3g cdMA network, and is believed to be one of the bidders for a network modernisation project by sprint nextel (it is already a wiMAX supplier for sprint partner clearwire).
but for all its managed services progress in other markets, the chinese supplier still has some way to go. rodriguez confirms, for example, that Huawei has yet to secure a managed services contract with an operator that doesn’t already use some of its equipment. Although rodriguez says Huawei is building up extensive multi-vendor network equipment management experience, the Huawei and Zte brand names still are not strong enough to win services contracts from customers that do not use their infrastructure.
by contrast, ericsson continues to win these types of customers. one of the most notable deals was the agreement it struck with sprint in July 2009 for the day-to-day management of its wireless cdMA and fixed-line networks over a seven-year period. the contract is reportedly worth around us$5 billion for ericsson.
nevertheless, rodriguez claims she is seeing a changing attitude among opera-tors to Huawei—at least in europe—which could see the significant breakthrough of managing a network comprised fully of other vendors’ kit. “instead of me asking operators about whether they would be interested in our professional and managed services, they are asking me,” she says. “it is quite a turnaround.” n
nEtWORK stRatEgiEs
Vendor revenues by task, worldwide
Source: Infonetics Research
CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14
n Network maintenance n Operations$35
$30
$25
$20
$15
$10
$5
$0
Rev
enue
in U
S$
billio
ns
Worldwide equipment vendor revenue from professional services to carrriers
Source: Infonetics Research
CY08 CY09 CY10 CY11 CY12 CY13
110
0
Rev
enue
in U
S$
billio
ns
Do you have what it takes? Enter the World Vendor Awards and prove you're one of the world's greatest vendors!
For sponsorship opportunities or further information contact Gordon White call: +44 (0) 20 7608 7041 or
Write your winning entryEntry deadline: Friday 21st January 2011
The World Vendor AwardsBe not afraid of greatness
5th May 2011 - Swan at the Globe - Londonwww.worldvendorawards.com
Celebrating Telecoms' Leading Players
Organised by: Founding Partner:
14 www.totaltele.com November 2010
the adoption of virtualisation techniques is causing an upheaval in the data centre. Virtualisation
is being used to boost server perform-ance, but its introduction is having a profound knock-on effect, first on storage (Total Telecom Plus, October 2010) and now on data centre networking.
“this is the most critical period of data centre transformation seen in decades,” says raju rajan, global system network-ing evangelist at ibM.
data centre managers want to accommo-date variable workloads, and that requires moving virtualised workloads between servers and even data centres. that is leading to new protocol developments and network consolidation, all the while making it management more demanding, in turn requiring greater automation.
standards to meet the networking chal-lenges created by virtualisation are close to completion and are already appearing in equipment. in turn, switch makers are developing architectures that will scale to support tens of thousands of 10-gigabit-per-second (gbps) ethernet ports. but industry experts expect these develop-ments will take up to a decade before they become mainstream.
“we are all marketing to a very distant future, while most users are still trying to get their arms around eight virtual machines on a server,” says stephen garrison, VP of marketing at force10 networks. “we are on a long hard path; it is going to be a really challenging transition.”
ibM points out that its customers are used to working in it siloes, selecting subsystems independently. new work practices across divisions will be needed if the networking challenges are to be addressed. “for the first time, you cannot make a networking choice without under-standing the server, virtualisation, storage, security and the operations support strategies,” says rajan.
A lot of the future value of these various developments will be based on enabling
it automation. “that is a big hurdle for it to get over: allowing systems to manage themselves,” says Zeus kerravala, senior VP at yankee group. “do i think this vision will happen? sure i do, but it will take a lot longer than people think.”
networking provides the foundation for servers and storage and, ultimately, the data centre’s applications. “fifty percent of the data centre spend is servers, 35% is storage and 15% networking,” says Andy ingram, VP of product marketing and business development, fabric and switching technologies group, Juniper networks. “the key resources i want to be efficient are the servers and the storage; what interconnects them is the network.”
traditionally, applications have resided on dedicated servers, but equipment usage has been low, at 10% commonly. given the huge numbers of servers deployed in data centres, that is no longer acceptable. Virtualisation splits a server’s processing into time-slots to support 10, 100 and even 1,000 virtual machines, each with its own application, improving server usage by 20%–70%.
that could result in significant effi-ciencies when you consider the growth of server virtualisation: in 2010, deployed virtual machines will outnumber physi-cal servers for the first time, claims idc.
in enterprise and hosting data centres, servers are typically connected using three tiers of switching. the servers are linked to access (top-of-rack) switches that sit above them, which in turn connect to aggregation switches whose role is to funnel traffic to the large, core switches.
the rise of virtualisation impacts data centre networking profoundly, with appli-cations no longer confined to single machines but shared across multiple servers for scaling. nor is the predomi-nant traffic ‘north-south’ (client-to-server) across this three-layer switch hierarchy. instead, virtualisation promotes greater ‘east-west’ (server-to-server) traffic, across the same tiered equipment.
“the network has to support these changes and it can’t be the bottleneck,” says cindy borovick, VP, enterprise communications infrastructure and data centre networks, idc. the result is networking change on several fronts.
currently, it staff have to manage sepa-rate networks: ethernet for the lAn, fibre channel for storage and infiniband for high-performance computing. to migrate the traffic types onto a common network, the ieee is developing the data centre bridging (dcb) ethernet standard (see box). A separate fibre channel over ethernet (fcoe) standard, developed by the international committee for information technology standards, enables fibre channel to be encapsulated onto dcb.
yet while dcb is starting to be deployed, networking convergence remains in its infancy. “fcoe seems to be lagging behind general industry expecta-tions,” says ibM’s rajan. “for many of our data centre owners, virtualisation is the overriding concern.” network conver-gence may be a welcome cost-reducing step, but it introduces risk. “so the net gain [of convergence] is not very clear yet to our customers,” says rajan. “but the net gain of virtualisation and cloud is absolutely clear to everybody.”
Another protocol, the internet engineering task force’s transparent interconnection of lots of links (trill), promotes large-scale ethernet networks. its primary role is to replace the spanning tree protocol that was never designed to address latest data centre requirements.
spanning tree disables links in a layer-two network to avoid loops arising and ensure that traffic has only one way to get to a port. but closing off links can disable up to half the available network bandwidth. trill enables a large layer-two network linking the switches that avoids loops without losing bandwidth.
“trill treats the ethernet network as the complex network it really is,” says Mike benjamin, a vice president at global
Data centre networking is being transformed. The goals are automation, greater server efficiency, streamlined management and significantly lower costs. By Roy Rubenstein
d a T a C E N T r E S
scalE CHANGES
tEcHnOlOgy tREnds
November 2010 www.totaltele.com 15
crossing. “if you think of the complexity and topologies of iP networks today, trill will have similar abilities in terms of truly understanding a topology to forward across, and permit us to use load balancing, which is a huge step forward.”
it vendors are also developing flatter switch architectures to reduce the switch-ing tiers from three to two to ultimately one large, logical switch. this not only promises to reduce the overall number of platforms and their associated manage-ment, but also switch latency. global crossing’s default data centre switch design is a two-tier switch. “unless that top tier starts to hit scaling problems, at which time we move into a three-tier,” says benjamin. “A two-tier switch archi-tecture really does have benefits in terms of cost and low-latency switching.”
Juniper networks is developing a single-layer logical switch architecture that will support tens of thousands of 10-gbps ports and span the data centre. Juniper says the design will be based on a 64 x 10-gbps building block chip. “we have some customers with very difficult networking challenges that are signed up to be our early field trials,” says ingram.
Meanwhile, brocade is set to launch its virtual cluster switching architecture, which supports trill and dcb. “there will be 10 switches within a cluster and they will be managed as if it is one chassis,” says simon Pamplin, systems engineering
pre-sales manager. “we have the ability to make much larger, flat layer-two networks which ease management and the mobility of [servers’] virtual machines.”
kash shaikh, cisco’s group manager, data centre product marketing, argues multi-tiered switching is needed for system scaling and separation of work-loads: “sometimes [switch] tiers are used for logical separation, to separate enter-prise departments and their applications.” However, cisco itself is moving to fewer tiers with the introduction of its fabricPath technology within its nexus switches that support trill.
Another networking challenge caused by virtualisation is switching virtual machines and moving them between servers. A server’s software-based hyper-visor that oversees the virtual machines comes with a virtual switch. but the industry consensus it that hardware is better at doing the switching.
there are two standards under devel-opment to address the virtualisation requirements: the ieee 802.1Qbg edge Virtual bridging (eVb) and the ieee 802.1Qbh bridge Port extension. the 802.1Qbg camp is backed by many leading switch and network interface card vendors, while 802.1Qbh is based on cisco systems’ Vn-tag technology.
Virtual ethernet Port Aggregation (VePA), part of 802.1Qbg, is the transport mechanism used. in terms of networking,
VePA allows traffic to exit and re-enter the same server physical port to enable switching between virtual ports. eVb’s role is to provide the required virtual machine configuration and management.
“the network has to recognise the virtual machine appearing on the virtual interfaces and provision the network accordingly,” says nick ilyadis, chief technical officer for broadcom’s infra-structure networking group. “that is where eVb comes in, to recognise the virtual machine and use its credentials for the configuration.”
“the common goal of both [802.1Qbg and 802.1Qbh] standards is to help us with configuration management, to allow virtual machines to move with their entire configuration and not require us to apply and keep that configuration in sync across every single switch,” says global crossing’s benjamin “that is a huge step for us as an operator.”
“our view is that VePA will be needed,” says gary lee, director of product marketing at fulcrum Microsystems, which has just announced its first Alta family switch chip that supports 72 x 10-gigabit ports and can process over one billion packets per second.
Malcolm Mason, eMeA hosting product manager at global crossing, says the upshot of these new protocols and flatter, more scalable networks will be less data centre equipment doing more, which will save power and require less cabling. it will also enable more stringent service level agreements to be met.
“the end-user won’t notice a lot of difference, but what they should notice is more consistent application perform-ance,” says yankee’s kerravala. “from an it perspective, the cost of computing should fall quite dramatically; if it doesn’t fall by half we will have failed.”
Meanwhile data centre operators are hard at work understanding these new technologies. “i get a lot of questions about end-to-end architectures,” says borovick. “they [data centre operators] are very cognizant of the fact that they are sitting in the middle of the battle of [it vendor] giants and they want to make the right decisions.” n
tEcHnOlOgy tREnds
Data Centre Bridging (DCB) is designed to enable the consolidation of many networks to just one within the data centre. A single server typically has multiple networks connected to it, including Fibre Channel and several separate 1-Gbps Ethernet networks.
DCB standard components include Priority Flow Control, which provides eight classes of traffic; Enhanced Transmission Selection, which manages the bandwidth allocated to different flows; and Congestion Notification which, if a port begins to fill up, can notify upstream along all the hops to the source to back off from sending traffic. “These [three components] are some 98% complete, waiting for procedural things,” says Broadcom’s Ilyadis. As a result, DCB can now be safely encapsulated in silicon and can transport Fibre Channel in a lossless fashion (Fibre Channel is intolerant to loss and can take minutes to recover from a lost packet). That means critical storage traffic such as FCoE, iSCSI and network-attached storage can now be supported over Ethernet.
Network convergence may be the primary driver for DCB, but its adoption also benefits virtualisation. Since higher server usage results in extra port traffic, virtualisation promotes the transition from 1-Gigabit to 10-Gigabit Ethernet ports. “No-one is coming to the market with 10 Gigabit [Ethernet ports] without DCB bundled in,” says IBM’s Rajan. The uptake is also being helped by the significant reduction in the cost of 10-Gigabit ports with DCB. “This year we will see 10-Gigabit DCB at about $350 per port, down from over $800 last year,” says Rajan. The upgrade is attractive when the alternative is using several 1-Gigabit Ethernet ports for server virtualisation, each port costing $50-$75.
Consolidating data centre networks
16 www.totaltele.com November 2010
it’s buying season again as mergers and acquisitions in the telecoms sector show marked signs of acceler-
ating in the run-up to christmas.M&A research firm Mergermarket says
the telecoms sector accounted for 9.7% of all M&A deals worldwide in the first nine months of this year: 135 deals were completed with a total value of $138.3 billion. the technology, media and tele-coms (tMt) sectors together accounted for 16.3% of activity, with 1,257 deals yielding a total value of $232.3 billion.
As ever private equity firms will play a key role in the consolidation. Pyramid research cites Privateequityinsight.com’s calculation that a total of 12 transactions over E5 million were completed by private equity and venture capital firms globally in the tMt sector in the first seven months of this year. Pyramid says the total could reach 25 transactions before the end of the year, which would repre-sent a near 100% increase over 2009 when a total of 13 transactions were completed by private equity (Pe) companies.
that is still well short of the 40 or so deals each year in the 2006-2008 period when debt was cheaper, says Pyramid. “[nevertheless], cVc’s acquisition of
swiss mobile provider sunrise from tdc incorporated the largest leveraged loan component to a Pe deal witnessed in europe for two years,” say the analysts. “A return to the good old days it is not, but it certainly signals an increased appe-tite from banks to provide large debt financing packages for the right assets.”
Mergermarket says average debt financ-ing on Pe buyouts across all sectors has increased to 44.3% of total funding per deal this year, up from 30.4% in 2009.
Many of the telecoms deals taking place point to another round of consolidation in some of the most intensely competitive markets and regions, but some are concerted bids to buy into rising technol-ogies and fast-growing segments such as mobile payments, cloud computing and location-based software (lbs). Motorola in september bought Aloqa, a developer of lbs, for an undisclosed sum. And creativity software claims eight of nokia’s last 10 acquisitions were lbs assets; it says Apple and google invested over half a billion dollars in lbs acquisitions in the six months to the end of september.
indeed google is among the biggest buyers this year, completing 40 acquisi-tions worth us$1.6 billion during the first
nine months of 2010 according to its quar-terly regulatory filing. google’s largest three acquisitions so far this year are mobile advertising start-up AdMob for us$681 million, social networking appli-cation developer slide for $179 million and video software maker on2 technologies for $123 million. the numbers don’t include travel software company itA software, which google agreed to acquire for $700 million in July.
one of the biggest potential sellers is Vodafone. in september the mobile oper-ator sold its 3.2% stake in china Mobile for £4.3 billion, 10 years after establishing its presence in a country where subscriber numbers are still rising sharply. Vodafone as part of a corporate restructuring placed non-core assets Verizon wireless, sfr, Polkomtel and bharti Holding in a separate division overseen directly by ceo Vittorio colao. Many see it as a precursor to Vodafone selling its minor-ity stakes in Polish operator Polkomtel, in which it holds 24.39%, and french mobile operator sfr, in which it has a 44% share (see box). Moreover, there has long been speculation that Vodafone could sell its 45% share in Verizon wireless to partner Verizon communications. n
BusinEss and financE
Private equity companies are circling as some carriers streamline their operations, while other telcos are buying into rising technology and service segments. By ian Kemp
Buying SEASONm E r g E r S a N d a C q u i S i T i O N S
sEptEMBERn Vodafone sold its 3.2% stake in China Mobile for £4.3 billion.n France Telecom signed a deal to buy a 40% stake in Morocco’s second largest telecoms operator Meditelecom for around E650 million. n Private equity firm CVC Capital Partners bought TDC’s Swiss operator Sunrise Communications for 3.3 billion Swiss francs (E2.4 billion). n Greek mobile operator Wind Hellas was acquired by a consortium of its major bondholders.n Swisscom paid E256 million to acquire the remaining 17.9% share in its Italian business Fastweb.n Telekom Austria acquired Bulgarian cable operators Megalan Network and Spectrum Net for E80 million.n H-P bought security software company ArcSight for $1.5 billion.
OctOBERn Russian mobile operator Vimpelcom struck a US$6.5 billion deal to merge with most of the telecoms assets of Weather Investments. The deal includes Italy’s Wind and 51.7% of Orascom.n United Arab Emirates operator Etisalat agreed to acquire 46% of Kuwait mobile operator Zain for US$11.7 billion. Zain sold most of its assets in Africa to Bharti Airtel in a $10.7-billion deal completed in June.n Russian mobile operator Megafon agreed to acquire St Petersburg-based fibre network operator Metrocom, in a deal worth 2 billion roubles (US$67 million). Earlier this year Megafon bought long-distance operator Synterra for US$745 million.n NTT agreed to buy solutions provider Dimension Data in a US$3.3
billion cash deal. NTT Data then agreed to acquire IT services firm Keane for an estimated $1.2 billion.n Carlyle Group bought mobile technology company Syniverse Technologies for US$2.6 billion.n Global Crossing acquired global video services provider Genesis Networks for $27 million.n US operator Windstream bought managed hosting/cloud provider Hosted Solutions for $310 million.
in tHE RuMOuR Milln Vodafone is preparing the sale of its 45% stake in SFR to media group Vivendi for around £6 billion.n A string of private equity firms, TeliaSonera and Turkcell are lining up to buy Polkomtel for up to E4 billion.n Singtel and AT&T are considering bids for Cable & Wireless Worldwide.
n Etisalat is preparing to buy Indian mobile operator Idea Cellular.n Deutsche Telekom is seeking to increase its stake in Greek operator OTE, in which it holds a 30% stake.n AOL and private equity firms could team up to make a bid for Yahoo.n Telekom Austria, Deutsche Telekom and France Telecom are all eying a 51% stake in Telekom Srbija, for sale at around E1.4 billion.n Qualcomm is talking to Indian mobile operators about selling its Indian TD-LTE business for a minimum of US$1.1 billion.n BT is planning to sell a part or all of its 30.9% stake in Indian software company Tech Mahindra for about $663 million.n Apple and Google are vying to acquire US mobile payments firm Boku for up to $450 million.
Recent deals: selected acquisitions (subject to approval)
UNITED STATES AND CANADAKCS International T +1 717 397 7100 F +1 717 397 7800Karen c smith-Kernc – East [email protected] Kernc – West & Canada [email protected]
JAPANHiroko Kujime [email protected] Business T +81-3-3661-6138 F +81-3-3661-6139
ADVERTISING PRODUCTIONPlease forward all advertising material directly to: [email protected] +44 (0)20 7827 4151
OtHER puBlicatiOnsOnline: www.totaltele.com television: www.totaltele.tv
tOtal tElEcOM EVEntsWorld communication awards www.worldcommsawards.comWorld Vendor awardswww.worldvendorawards.comWorld telecoms councilwww.worldtelecomscouncil.com
to ship in 2010, rising to 129 million units in 2015.
(IMS Research)
MicROWaVE cOOlsInfonetics says the worldwide micro-wave equipment market yielded revenues of US$1.3 billion in 2Q10, down 4% from the first quarter, with the most marked slowdown in Asia Pacific. Ericsson regained the lead for market share from NEC. A full 80% of micro-wave equipment purchased was for mobile backhaul network deployments, with the remainder for transport applications (such as trunking and metro access) and first-mile access. In a separate report the research company forecasts service providers will spend US$36 billion on mobile backhaul equipment between 2010 and 2014.
Voip continues to surgeMore than one in five consumer broadband lines worldwide now comes with a voice over IP service, according to new statistics from Point Topic. Globally, 12 million VoIP subscribers were added in the first half of this year to reach more than 112 million. In France more than 90% of broadband subscribers have VoIP bundled with their service offering, and over 70% of French households now have a VoIP service available to them . But elsewhere there is plenty of room for growth: In China, the world’s largest broadband market, only one in 20 broadband subscriptions comes with a VoIP bundle. The US is the largest market “in absolute terms” says Point Topic, with almost one in three broadband subscribers taking VoIP, mainly due to cable companies offering their customers a voice service based on the technology.
363 millionhomes in Asia receive pay-TV
services (50% penetration). (CASBAA)
Developing economies driving mobile growth
wireless intelligence says the developing world now accounts for four out of every five mobile connections worldwide. figures to the end of september showed developing markets accounted for 3.98 billion of the world’s 5.15 billion total connections. what’s more, developing economies grew their mobile subscriber base by 19.1% year-on-year in Q3, compared to growth of just 4.39% in developed economies. based on world bank definitions both china and india are classed as developing economies and together account for almost 30% (1.5 billion) of the world’s total mobile
connections. the top ten developing economies for mobile connections have a combined 2.6 billion connections, over half of the global total. by contrast, the top ten developed economies total less than a billion connections, with the us account-ing for about a third of that total. developing economies accounted for seven of the top ten largest mobile markets by connections in Q3; the developed econo-mies were the us (third), Japan (eighth) and germany (ninth). Mobile penetration is 112.7% in developed countries (popula-tion 1.04 billion) and 68.78% in developing countries (5.78 billion).
Source: Point Topic
100%
80%
60%
40%
20%
0%
Broadband subscribers with VoIP service bundled, Q2 2010
Fran
ce
Japa
n
Net
herla
nds
Slo
veni
a
Sou
th K
orea
Can
ada
Sw
eden
Ger
man
y
Den
mar
k
Italy
top ten developing Economies by Mobile connections (millions) Q3 2010
Rank Market connections Overall Rank1 china 812.5 12 india 692.8 23 Russia 219.6 44 indonesia 197 55 Brazil 191.1 66 Vietnam 123.9 77 pakistan 100.9 108 philippines 89.3 129 Mexico 86.2 1310 nigeria 85.1 14 2,598.4
top ten developed Economies by Mobile connections (millions) Q3 2010
Rank Market connections Overall Rank1 us 296.1 32 Japan 115.4 83 germany 108.5 94 italy 90 115 uK 74.6 156 france 59.9 207 spain 54.8 238 saudi arabia 51.1 259 south Korea 50.1 2610 poland 44.8 28 945.3
