By The Informer

Bang! Bang! Twelve policemen carrying a huge battering ram barge down the doors. The lead investigator strides in wearing a long beige overcoat –like the one Columbo wears, waving his police badge, declaring: “This is a raid.”

Some of the workers try to flee, but it’s futile – armed officers have the entire premises surrounded. The detective confronts the baddie, and utters a cheesy action movie phrase – something along the lines of: “Today, is your data with destiny.”

Ok, that’s probably not quite how it happened. But the European Commission announced that it “initiated unannounced inspections” at the premises of a number of telecommunications companies. Such is the wording of the communication and as a result we’re left guessing what exactly happened.

Deutsche Telekom and Orange have confirmed that they were targeted with these “unannounced inspections” and the EC has given the reason that they “may have violated EU antitrust rules that prohibit the abuse of a dominant market position”.

News agency Reuters reported that a source at Telefonica has claimed the Spanish group was also targeted, but no others appear to have been implicated.

The EC’s suspicions appear to be concerning the throttling of data services for customers. Deutsche Telekom said that the inspections were “further investigations into internet traffic”, and according to the Daily Telegraph, it is due to operators crippling customer access to services such as Skype and YouTube.

The EC said that its officials were accompanied by their counterparts from the relevant national competition authorities. So in reality, it was most likely just a case of the investigator, accompanied by his colleagues, walking into an operator’s office reception, asking to see whoever is in charge, flicking through an issue of MCI while he waits, and then asking to see some paperwork. If it’s a Hollywood script, it needs some work.

Deutsche Telekom said it “is very surprised by the initiation of further investigations into internet traffic.”

“Allegations made to date have turned out to be groundless, which is why corresponding investigations carried out by national regulatory authorities which deal with the issue in great detail have been abandoned,” it said in a statement. “Deutsche Telekom faces intense competition on the global internet traffic market. The market is dominated by big US providers, and as such we are not the right target of these investigations.” The only time no one wants to be the big guy is when the competition authorities get involved.

Orange said that a number of its premises are “currently subject to inspection by the European Commission and these inspections could take several days to complete.

“We are confident about the eventual outcome of this matter, given the French Competition Authority decision regarding Cogent which exonerated our Group. The company’s business activities are continuing as normal during the inspections.”

Both operators added that they would fully co-operate with the EC while the investigations are ongoing. The EC stated that there is no legal deadline to complete inquiries into anti-competitive conduct.

Continuing the theme of shady dealings in the industry, Apple has beenfound guilty of fixing the prices of the e-books it sells in the US. The US District Court for the Southern District of New York determined that the iPhone maker colluded with book publishers and conspires to raise e-book prices, violating Section 1 of the Sherman Act; federal statute to limit cartels and monopolies.

The US Department of Justice claimed that the move was made in a bid to usurp online retailer Amazon’s dominance of the e-books market and limit e-book retailers’ freedom to compete on price.

“This result is a victory for millions of consumers who choose to read books electronically,” said assistant attorney general Bill Baer. “After carefully weighing the evidence, the court agreed with the Justice Department and 33 state attorneys general that executives at the highest levels of Apple orchestrated a conspiracy with five major publishers – Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster – to raise e-book prices.”

Apple can, and the Informer suspects it most likely will, contest the decision.

Perhaps these alleged shady dealings in the telecoms space stem from an absence of creative thinking. It could be that when you’re fresh out of new ideas, the pursuit of revenue and profit growth causes firms to turn to illicit or illegal measures to keep shareholders happy and their pockets lined.

Whether the allegations against Deutsche Telekom, Orange and Telefonica are true or not, mobile operators need to review their approach to innovation, according to Ovum. The research firm said mobile operators are “missing the big picture”, “exaggerating the threat from over-the-top (OTT) players”, and “misunderstanding the broader benefits of innovation”.

According to Emeka Obiodu, principal analyst in Ovum’s Industry, Communications, & Broadband practice, the pursuit to create the next big consumer facing product or service has been a futile one and operators had not accepted that their core role is in facilitating connectivity.

“We wouldn’t expect telcos to be the ones to be coming out with the next iPhone,” he said. “Telcos have finally come to that realisation and I believe we are coming to the ideal state for telco innovation, which is grounded in reality, and an acceptance of the telco’s role. It is grounded in the acknowledgement of the limitations of a telco’s capabilities and of what it can do within the ecosystem.”

Obiodu added that one way to encourage innovation is through partnerships with academic institutions, research bodies, start-ups, industry standards bodies, small vendors, OTT players and universities. However, he stressed that operators must take a more humble approach to partnerships than they have done so historically.

A separate report published this week by recruitment consultancy European Leaders suggested that the fact that the boards of the world’s ten largest operators are dominated by executives with legal, financial and engineering backgrounds has resulted in a conservative culture that “struggles to drive and nurture innovation”.

On the contrary, boards of OTT giants, which have large proportions of strategy, marketing and operations professionals, contribute to a more innovative culture, the firm argued.

“Operators have built strong businesses with healthy margins. But as competition for customers heats up, the make-up of most operator boards stifles their ability to compete with innovative, nimble and more aggressive OTT players,” said Philip Randerson, managing director at European Leaders.

“The ‘type’ of individual that dominates operator boards tend to create a more conservative, defensive and insular culture. Executives are more focused on maintaining the status quo than driving forward and taking calculated risks.”

The Informer wonders if operators need not concern themselves with innovative new products, services, or the next iPhone. Perhaps the focus for operators’ innovation ought to be in better fitting pricing models for customers, more efficient customer service and driving down cost per gigabit, by deploying LTE and LTE-A services. And just maybe, it is the people with legal, financial and engineering expertise that are best place to oversee this type of innovation.

It’s all open to interpretation, but the Informer concedes that OTT players are clearly doing something right – getting people to use their services. The number of global OTT mobile VoIP subscribers increased more than 550 per cent during 2012 to reach over 640 million, and is expected to approach the one billion mark in 2013, according to Infonetics Research.

However, most OTT mobile VoIP providers are making very little money per user, according to Diane Myers, Infonetics Research’s principal analyst for VoIP, UC and IMS.

“In 2012, the average revenue per user was a meagre $7.13 annually. Since this alone is an unsustainable business model, most providers are turning to advertising, third-party apps and wholesale arrangements with traditional operators,” she said.

The research firm also reported that Microsoft, through Skype, had roughly 40 per cent of all active users of OTT mobile VoIP services in 2012 and it projects that the number of VoLTE subscribers to grow at a 145 per cent compound annual growth rate from 2012 to 2017 Combined, over-the-top mobile VoIP and VoLTE services are expected to become a $16bn business by 2017, it added.

While Apple is busy trying to usurp Amazon’s dominance in the e-book space, the movement to usurp Apple, and Google’s dominance in the mobile OS space is gaining momentum. And it’s open source software developers who have their eyes on the two firms’ crowns.

Mozilla has announced that its official Firefox devices are now on sale in stores in Spain. Telefonica is selling the low-cost handsets in Madrid.

The ZTE Open is available through the operator’s Movistar stores for €69, including €30 of balance for prepaid customers and a 4GB microSD card. Poland, Colombia and Venezuela will see similar handset launches soon, according to Mozilla, and they will be arriving in further countries later.

Developers can upload and share their apps in the Firefox Marketplace, and the Firefox OS allows them to accept payments for apps and in-app purchases. Mozilla has also launched the Firefox OS Simulator, a tool to help developers test their apps quickly.

And the mobile OS made by Linux house Ubuntu received a significant boost this week as ChinaUnicom signed up to the Ubuntu Carrier Advisory Group and potentially add its 300 million subscribers to the user pool.

Ubuntu parent and open source software developer Canonical established the Carrier Advisory Group for its Ubuntu smartphone OS last month. The group is led by David Wood, a former Psion engineer and one of the founder members of the original Symbian collaboration. A number of large operators, including LG UPlus, SK Telecom and Korea Telecom from Asia Pacific and Deutsche Telekom, EE, Telecom Italia and Portugal Telecom from Europe have already signed up.

Over in Australia, Telstra has announced plans to outsource 170 jobs from its cloud services division to India. The jobs will be primarily moved from the firm’s profitable and growing Network Applications and Services division, and will affect IT and resource management staff.

And in Croatia, the Croat subsidiary of operator group TelekomAustria, Vipnet, has acquired three regional cable network providers. The operator has finalised the purchase of OKI, Kabelska televizija Šibenik (KTS) and the residential customer segment of Metronet, which was spun off from the rest of the company.

Meanwhile, the US Federal Communications Commission (FCC) has approved Japanese operator SoftBank’s proposed takeover of US operator Sprint. The Commission decided that the transaction will serve public interest.The FCC noted that SoftBank’s decision to invest in the US market is very different to when domestic operators seek to acquire stakes in each other. SoftBank has no overlapping service areas or spectrum holdings in the US and therefore the transaction will not result in the elimination of an existing competitor, it said.

And finally, Huawei called on superheroes to help it launch its latest phone. It must be a tough sell if you need superpowers to shift the device. The P2 handset, which the Chinese vendor claims is the world’s slimmest phone (at the rate ‘world’s slimmest phones are coming out’ it’s a wonder we can still see them side on), was launched by real-life superheroes from Seattle at the Huawei Superpowers Symposium.

Having watched footage of these superheroes in action, the Informer is suitably impressed. They may be the heroes the industry deserves but are they the ones it needs right now?

Take care

The Informer