Optical/IP Networks

Eurobites: VOIP's Hot

The inevitable is finally happening on the mainland of Europe – incumbent carriers are starting to offer widely available VOIP services that cannibalize their precious, traditional, circuit-switched voice revenues.

The time, it seems, has finally come when Europe's major operators (outside Scandinavia, where everything happens in advance) have realized that if they don't offer voice-over-broadband services, there's a queue of competitors with a host of attractively priced alternative packages just waiting to snatch their customers (see Telia Launches Broadband Telephony).

So let's see what Johnny Continental has been up to.

FT catches VOIP bug
Following the announcement of its partnership and service development plans with Microsoft Corp. (Nasdaq: MSFT), France Telecom SA (NYSE: FTE) has been drip-feeding further details of its next-generation service and product plans, including a full-blown VOIP service that will compete with specialist players such as Skype Technologies SA and Neuf Telecom's Wengo, Alain Coffre reports (see France Telecom Goes Live).

FT has launched Livecom, which – similarly to Skype – allows IP-based videotelephony, voice calls, and messaging for free among users of Livecom. Also, like SkypeOut, it offers pre-paid services for calls to traditional landlines, the main difference being that Livecom's per-minute charges are much higher. Skype, for example, charges less than €0.02 per minute for calls to major West European countries and the U.S., while Livecom's per-minute rates are, respectively, €0.05 and €0.10.

FT's development plans with Microsoft are also heavily based on VOIP (see FT Commits to MS SDP and FT, Microsoft Develop Services).

Last week the duo unveiled their joint services development program based on Microsoft's service delivery platform (SDP) – the Web-services-based Connected Services Framework (CSF). Microsoft's CEO Steve Ballmer told a Paris audience that Web services are "the most important technology in the IT world today."

In addition to the services developments, FT is launching two SIP phones for the consumer market based on Microsoft's operating system.

The first, Livephone, is a €99 (US$119) combined wireless-LAN/Bluetooth handset that allows VOIP calls via the carrier's Livebox DSL modem. It also provides email alerts, and displays weather reports, sports results, and other information on a real-time basis. In conjunction with this handset, FT has announced a number of home connectivity services under the umbrella term, "Live Services," which are available now in one district in Paris and will be rolled out nationwide in October. These include: a photo transfer service that allows subscribers to post pictures taken with their mobile phones straight onto a personal "photoblog" page; "Live Music," which allows subscribers to use their stereos and home cinema systems to listen to Internet radio stations and the MP3 music files stored on their PCs; "Livezoom," a Web camera that allows people to see what's happening in their home from any video-enabled mobile phone or PC; and an electronic surveillance service that detects break-ins and alerts subscribers and the police.

The second handset is Homebox, a combined WLAN/GSM handset that connects to the Livebox when it's within range and which can roam seamlessly onto a GSM mobile network. This combined GSM/VOIP service, called Homezone, is based on the same principle as the Fusion service announced recently by BT Group plc (NYSE: BT; London: BTA). (See BT Launches Fixed/Mobile Phone and BT Goes Blue.)

FT and Microsoft have a history of collaboration in the mobile device sector, as FT's mobile operator, Orange SA, was the first carrier to jointly develop and promote a "smartphone," dubbed the SPV, based on the software company's slimmed-down mobile operating system (see Orange Uncovers Its SPV).

The two companies are also planning to launch a new version of the very popular French Minitel, a fixed-line device that provides national and local information such as the weather, train timetables, and so on. A new low-cost device is set to be unveiled within the next few months, says FT's CEO Didier Lombard.

Both firms stress that this is only the start of a long collaborative process, which will see them sharing the resulting intellectual property of the products and services created. "Before, we only had one-off agreements with Microsoft – now we have a long-term framework," said Lombard .

FT appears to have two main objectives. It wants to create new revenues – it has stated that it aims to achieve between 5 percent and 10 percent of all its revenues from its new "convergent services" by 2008 – and it wants to reduce churn. The French market is already one of the most competitive in Europe, and the pressure on FT from triple-play providers like Neuf, Iliad (Euronext: ILD), Telecom Italia SpA (NYSE: TI), and T-Online International AG's Club Internet looks set to intensify further (see Neuf: Time Is Right for IPTV, Iliad Reports Q1 Numbers, and Italians Prep Big French DSL Rollout).

To help reduce churn further, FT is also planning an unbundled broadband service for next year that will allow subscribers to sign up for DSL access without having to take an FT voice line.

Portugal joins VOIP gang
FT isn't the only European incumbent jumping on the VOIP bandwagon. Portugal Telecom Group has just launched a free IP telephony service for the 150,000 broadband customers already using its SAPO messenger service.

Again, this move is all about fending off competitive offerings. Ovum Ltd. analyst Cesar Bachelet notes that the Portuguese incumbent is facing increasing pressure from the country's leading cable operators, Novis Telecom S.A. and Cabovisão S.A., and that it needs to offer such services if it is to reach its goal of 1 million broadband customers by the end of 2005. PT currently has about 800,000 DSL subscribers.

German broadband heats up
Deutsche Telekom AG (NYSE: DT) is undoubtedly king of the German broadband market with more than half the country's 7 million-plus users, but competitors see plenty of potential to keep some of the spoils away from the incumbent's T-Online AG division.

According to local press reports, Telecom Italia's HanseNet Telekommunikation GmbH, which currently has about 300,000 customers, has invested €150 million in new access infrastructure to offer its own broadband services in 15 cities, and is using wholesale lines from the incumbent to offer DSL services in the rest of the country starting this month. It's also planning to offer a triple-play package including IPTV by the end of this year.

Another broadband hopeful in Germany, pan-European player Tiscali, is planning to install its own access equipment in hundreds of DT's local exchanges in the next three years in a bid to provide its own services to more than half the country's population. Tiscali currently has fewer than 300,000 broadband customers, about 4 percent of the Bundesrepublik's total, but aims to double its market share within the next two years.

Industry analysts are expecting significant growth in the German broadband market (DSL and cable) in the coming years, with the total number expected to double to about 14 million by 2008.

Tiscali has also reached a significant financial milestone: It's just repaid its outstanding €250 million ($302 million) bond that was due at the beginning of this month. The operator has had to sell a lot of its smaller assets and has undergone a significant reorganization to make the payment (see Eurobites: Incumbents Splash Their Cash, Tiscali Reorganizes, and Tiscali Raises Funds).

A golden hello
Here's a recent appointment that caught our eye: Mikhail Afonin has been promoted by Russian carrier Golden Telecom Inc. (Nasdaq: GLDN).

Apart from his surname sounding like a radio chat show, Afonin's elevation captured our attention because of his new job title. Head of Big Spending – otherwise, and officially, known as VP of Mergers and Acquisitions (see Golden Appoints M&A Head).

Golden has hardly been shy of expanding via acquisition before now, but clearly it feels the need to have a specific man on the job. So are there any specific plans? Who knows. Golden specializes in media silence campaigns, so we'll have to wait until the operator's second-quarter results conference call later this month for any updates (see Golden Has a Golden 2004, Golden Telecom Announces Q2, Possible Acquisition, and Golden Expands Its Business Empire).

Auna sizes up bids
According to media reports, Spanish giant Grupo Auna, the main competitor to Telefónica SA, is currently sizing up some multibillion-dollar bids from at least two private equity joint ventures. Any sale could rival the value of the recent €12 billion ($14.5 billion) purchase of Italian competitive operator Wind Telecomunicazioni SpA (see Enel Sells Wind to Weather).

Other European news of note:

— Ray Le Maistre, International News Editor, Light Reading and Alain Coffre, special to Light Reading

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