Setting the Course.

I will be joining SVP Advisors in August as responsible of the regulatory department.

SVP Advisors is a boutique consultancy firm specialised in regulation and financial analysis based in Madrid, Spain.

SVP Advisors won the bid for auditing Telefonica's Regulatory Accounts for 2007.

Plans on Termination Rates: No Good News

The commission presented yesterday, to a selected number of representatives of NRAs, a plan for a new recommendation on Termination Rates.

Commission's objective is to achieve a coherent harmonized approach to ex-ante regulation of termination rates. They realized that, despite a common approach (LRIC) there is still 'inconsistent application of remedies' and that there are 'different levels of termination rates across Europe'.

The good news is that the commission is supported by ERG experts on this matter and that they plan to have a transitional period to achieve symmetrical termination rates.

I believe that symmetrical termination rates should be the objective of each NRAs, if we consider an efficient operator there's only one 'efficient' termination rates. Ideally one per country, but potentially, as expected by the commission in the long run, one per the entire European continent.

The bad news is that the commission is still in trouble defining the 'ideal' parameter and approach. At this stage of the process, I would argue that no recommendation is better that a bad 'recommendation" and that the fasted and less painful solution would be a kind of Bill & Keep solution with a level of cap, a trash hold, of about 10-15% above where symmetrical (ideally low) termination rates are charged.

The reason is simple, to prevent destructive retail tariffs, "Free calls to operator's A customers", so that I gain new customers and the costs of these customers are burden by the largest operators that have to increase capacity to its network.

What do you think on this issue? And what about fixed to mobile termination rates? Will it be the old / new problem of next year?

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Lower Termination Rates for All: A New Hope

European smaller mobile operators have changed their strategies on regulated mobile termination rates.



In the last ten years smaller operators have always argued that size and market's entry matters when speaking about termination rates. Smaller operators due to lack of economies of scale and scope and the market's situation would have the right to ask for premium rates for terminating calls on their networks.

The Mobile Challengers Group (Italy's Wind, Poland's Play, Turkey's Avea, Bouygues Telecom, E-Plus, Base and 3 Europe) is promoting a change of course. They argue that, since termination rates based on LRIC are way above costs, Regulators imposing these pricing methodologies are promoting the position of a handful of large operators to the detriment of new entrants.

The Mobile Challengers Groups realized that "network economy matters", they terminate less calls that they send. They are net payers to large operators. For example, 3 has large outflows of cash due to terminations.

Their solution looks 'simple', reducing termination rates at 'marginal' costs.

They did not present, however, solid evidences on the level of reductions necessary to solve the problem and, as support, a cost model reproducing an efficient marginal cost for termination. The lack of evidences and weak/faulty arguments do not facilitate the regulator's work.


Picture Source: http://www.flickr.com/photos/63878179@N00/956430203/

How to overcome resistance to change

I spoke last week with a director of Human Resources of a large Italian organization, we discussed about structural changes. I report here some thoughts.

There is closed relationship between theory and practice in change management. Practitioners and academics jointly recognise that there is not a unique or best way to confront with change, they prefer to identify favourite modus operandi and frameworks (Burns, 1999; Hughes, 2007) than standardised tools.

I propose consequently a number of change tasks an organisation should perform to reduce resistance. I believe that organisations are far from equilibrium systems and that Lewin’s field force field is impossible to be completely overcome.

Making the transformation meaningful

The first task I would suggest to reduce resistance is to plan. Readiness has been often described as a necessary precursor to implementation of change initiatives (Armenakis et. al., 1993; Eby et. al., 2000). I propose to develop and communicate a convincing transformation story. The story should include urgency, description of the crisis, a comprehensive list of alternatives and a clear vision of the future. The story can increase the readiness of individuals to accept the change and the consequences of not changing. Planning can, also, help change agents to prepare resources and anticipate what the future might be.

Build the power to change

The second task is to understand and manage power. The practical matter of overcoming resistance is not limited to the selection of a change strategy or change agent. It is a complex and dynamic process that involves politics.
A strong and committed managing team should make the transformation personal to engage resistance and to reward successful changes personally. Leaders should be considered accountable for failure or success in implementing changes as planned.
The change agent should evaluate how conflicting interests work together and how the new structure, process or strategy change and react to constrains of the organisation.
Political behaviour of change agents can be used, also, to overcome resistance (Buchanan and Badham, 1999).

In my experience, we have noticed that very often change agents tend not to exercise power or, even worst, do not have coercive power to contrast resistance.

Strebel (1994) notes that rolling back change forces is possible, therefore, it is necessary to choose the right change path. From the above observation we can conclude that change agents should reduce the power of Status Quo Agents to avoid failure. I realize that it is not an easy task because even when transition is effectively choreographed from the centre leadership it is a cascade process in which each round engages new and old powers.

Readiness to pursuit impact

Finally, I propose a number of additional tasks change agents can use to reduce resistance to change. Kotter and Shlesinger (1979) recommend six actions managers can perform to reduce resistance to change. These tasks are not exclusive and can be grouped in conflicting (manipulation and coercion) or cooperative (negotiation, education, communication, participation and support). Kotter and Schlesinger tasks are supplement to a careful preparation and the management of power.

In almost all cases it can be recommended to use a balanced carrot and stick approach with the prevalence of context based, either cooperative or resolute, tactics.

Nothing Changes with Sunrise New Face and Strategy

Sunrise, the integrated Swiss alternative operator, recently changed its logo and strategy in an attempt to re position itself as the real and only alternative to Swisscom.

It's not the first time, in the last 8 years Sunrise had tried everything to increase its market share and become a real threat to Swisscom and Orange and a major player in the market.

With alternative successes and failures Sunrise has modified several times its prices, services and position in the market achieving only confusion and lack of trust from its customers.

First: Sunrise, do what you do best and don't confuse with different and conflicting messages your customers!

Sunrise's customers are unaware of the differences between the new and the old Sunrise.

Prices models changed, yes, but why?

At the end of the day nothing really changed!

The same basic price plans that diAx introduced 8 years ago, with some variations but - at the end of the day - the same. There is a lack of innovation.

Second: Decide! What is your business like?

Accessing your homepage a mobile phone welcome me. Almost immediately I realize that your strategy is focused only on the mobile market.

I do not see any information on your fixed and broadband businesses; and it takes some time, several clicks, to find them.

I understand that you are not doing lots of money with them, but if you want to be an alternative to Swisscom you should actively bundle, pack and supply your products as communication services. Not as separated products.

Are you shifting the attention of your customers to your core business?

Clever, business-school type strategy, however, in doing this you are now very similar to Orange. Why should customer choose you instead?

Third: Learn from your mistakes and take the best from other markets.

You have the unique opportunity of becoming the 'only' real alternative to Swisscom.

Don't miss it with 'cleaver' top-down strategies, instead try hard to be different, unique!

And actively communicate, every time, your uniqueness.
:-)

Net Neutrality: Who Pays for it?

In the last two days I had the pleasure to meet and discuss with Martin Cave, Director of the Centre for Management under Regulation, Warwick Business School, Coventry. He came to Switzerland to present his views on the economics of the ICT market at the annual Comdays. A must be event of the Swiss ICT industry.

Martin highlighted a contradiction of the Net Neutrality principle. Capacity doesn't come for free. Someone has to pay for extra capacity used for new services and the investments operators do for providing a good QOS.

I personally agree with the basic concept of any-to-any communication of the bit and net neutrality. I also respect the decision of some governments to block inappropriate content, such as porn and offensive material. I personally disagree that providers can decide what kind of services I - customer - can have (e.g. block my Skype or Zatoo packets).

As Martin said, someone has to pay for the 'neutrality'.

I agree with this principle, let's look together what the options are:

- operators, can recover investments from the monthly broadband subscription or from advertising: a mix of paid and advertised support model might be the solution.

- Operators, can charge a premium for valued content (efficient pricing) to recover these costs.

- Service providers (e.g. google) can support the extra costs with a revenue sharing model.

- Finally, governments, communities and philanthropic associations.

I know, it's not so easy to pick the best option. However, we should be aware that we will be confronted with this dilemma soon.

As already argued in this Blog there is another risk, the formation of new bottlenecks from network / content to distribution. The distributor of the 'information' (everything that can be digitized) might be the next real monopolist. See for example, the rights for sport events, such as Euro08!.

More Info:

6. Biel-Bienne Kommunikationstage, 25. / 26.10.2007, im Kongresshaus, Biel

ICT Industry strategic landscape

In the last years in the ICT industry many firms had a strategy focussed on implementing technology, rather than effectively managing resources.

I believe that the industry is now at a new, so-called, transformation point, where the environmental pressures to transform and adapt to the context are not sustainable.

In this case, to evolve and mature I would suggests to integrate all systems and successively manage the resources.

Online advertising and the decline of the broadcasting sector

On 19. September Ofcom, the UK independent regulator and competition authority for communications industries, hosted a briefing to address current and future regulatory issues in the UK broadcasting sector.

What impresses is not not the regulatory agenda, that aims to promote the development of next generation communication services, such as HD TV, but the status of a part of the traditional broadcasting sector.

In particular, the broadcasting sectors is facing new forms of competition from telcos, cable operators and 'search engines'. Competition comes mainly from production of programs and in advertising budget; "launching additional channels has been successful but not enough to offset losses on core channel".

Advertising

Since 12 months ago online advertising agencies, such as Adsense and Doubleclick, did not compete directly with traditional advertising agencies for a share of the advertising market.

What happened?

Traditional advertising agencies did recognize the opportunity of online advertising, but were not able to adapt and transform their value-chains, in particular production and distribution, and corporate strategy to the online world. Combining online and offline advertising would be too destructive to their businesses. As in the 60s TV changed the market, now Internet shifts part of the advertising market to new communication tools that have (for the moment) the exclusive advantage over TVs to be interactive and the response measurable.

The online advertising is already dominated by digital-born firms, Google owns Adsense while Microsoft owns Doubleclick, that have two advantages over traditional advertising agencies to know the technology and the market well. On the other end, advertising agencies can produce unique advertising propositions for Internet as they have the right human assets and capabilities.

Broadcasting companies can reduce competitive pressure by doing what they do best and concentrate on their core capabilities, produce shows and entertainment. Good quality shows will attract advertisers and new interactive technologies will fill the gap between the online and offline broadcasting sector.

This a evolution and not a revolution, don't panic!

Vodafone ultra low handset strategy: let's see

VODAFONE Group offer of ultra-low 2G handsets is a move to follow further developments in the mobile market. Vodafone UK latest information on subscribers net addition shows that almost 500,000 new customers, out of 700,000, were pre-paid, however, with very low ARPU. With this move Vodafone is clearly targeting low budget segments and people that are not confident with high-tech technological and complex phones. In Switzerland a similar move of Swisscom Mobile two years ago has been not as successfully as expected. No frills and virtual operators are offering old models of Nokia mobile phones at less than €10 with €10 pre-paid credit. Swisscom mobile handsets were too expensive (€120) and able to offer only basic functions, such as, voice and SMS.

However, the GSM association forecasts that this segment could be a incredible opportunity for acquiring new customers. It has been demonstrated that voice become a commodity for many customer segments in Europe, however, low wage customers have higher then the average price elasticity for making calls as they still think that the benefit of 'mobility' is higher that its relative cost. Let's see the Q1 2008 for a critical analysis of this move.

Convergence and Digitalisation

Convergence and digitalisation are part of a new and important phenomenon that influences strategy and business models. There is no surprise that it attracted so much attention from so many stakeholders. David Currie, OFCOM chairman, argued in December 2003 that convergence was slowly happening at network, device, industry and regulatory levels (4th ECTA Regulatory Conference, 10 December 2003). Now, almost four years later, convergence is reality with, as industry’s norm, Quad and Triple play offers (fixed, mobile, data and TV). In the EITO 2007 Report the European Commissioner for Information Society and Media, Viviane Reding, defines digital convergence as the ‘heart of new technology revolution’ (EITO, 2007 p. 12) and notes how the ICT sector is ‘adjusting to stronger competition and digital convergence’ (EITO, 2007 p. 14).
In the telecommunication industry convergence is based on the integration of IP systems and telephony. In ICT it can be described as the integration of fixed, mobile, data and telephony networks and IT systems (e.g. IMS). An example is the application of e-commerce systems to mobile networks.
Convergence has been enabled by the decreased cost of digitalisation of products, success of Internet and increase digital systems customisation opportunities. Digitalisation permits to deliver a wide range of push and pull products, mainly designed as voice, data and video services, in an innovative, intuitive and customisable fashion and over a sole electronic communication platform. An integrated IP-based network gives diverse firms the opportunity to invest and launch flexible and timely products for a considerable lower unit cost; in this perspective economy of scale and scope is expected to be maximised, competition at retail level enhanced and value-to-customers efficiently delivered. However, our understanding of convergence should not be limited to technological convergence. As phenomenon, it expands to business models (e.g. from e-commerce to m-commerce), markets (no boundaries), services (bundles) and organisation (horizontal organisations serving different markets). For example, e-Bay acquired Skype and Pay-Pal to address two basic needs of its customers: communicate about the products and pay. Telecom Italia merged with TIM to increase efficiency, offer a complete set of communications products and upgrade its business model.

This work is licensed under a
Creative Commons Attribution-Noncommercial-No Derivative Works 2.5 Switzerland License.

United Mobile and Roaming Regulation

The Erotariff is available or will be soon available in Europe after one of the fastest legislation processes in the history of the European Parliament. It is a clear example on how regulation can be positive for consumers and competition.

Let me explain you, I do not mean that consumers will pay less, operators are already re balancing tariffs and packages and re-negotiating wholesale charges to cope with the reduction of international roaming revenues.

It is just a start! Let wait and see how the industry evolves. For example united-mobile have launched a new virtual roaming services from the Isle of Jersey with incredible good rates (http://www.united-mobile.com/)