Wednesday, 22 April 2015

Brussels plans to shake up telecoms market

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Brussels will call for a “level playing field” between telecoms groups and online rivals such as WhatsApp and Skype next month, putting Europe’s regulators on a collision course with US companies once again.
The European Commission is set to launch reforms of everything from telecoms to media to online shopping as part of plans for a “digital single market” within the EU on May 6.

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Companies that provide over-the-top content — which let people have free voice calls and messages over the internet — are “not subject to the same rules” as traditional telecoms company, argues the commission in a draft document seen by the FT.
The move will be welcomed by large European telecoms groups which have long claimed these services benefit from less stringent regulation. But it will also add fuel to accusations that the EU favours European operators over their US peers.
Technology regulation in Brussels came under the spotlight last week after the commission launched an antitrust case against Google, following nearly five years of back-and-forth negotiations between the company, its rivals and the regulator. This year, Barack Obama accused European regulators of protectionism — charges that the commission denied.
Alongside “ambitious” telecoms reforms, the commission has also promised a “comprehensive investigation” into platforms such as Amazon and Google, to look at how they display search results and use customer data. In the document, the commission writes that the “growing market power of some online platforms” is “potentially raising concerns”.
Other measures discussed include simplifying the removal of illegal content from the internet and wide-ranging copyright reforms.
Andrus Ansip, the commissioner overseeing the plan, last month outlined ways to eliminate tactics such as geoblocking, which stops customers in one country using websites or watching media or buying goods online in another.
The commission’s plan to reform telecoms regulation comes as its long-running attempt to get rid of roaming charges and introduce some form of “net neutrality” — whereby all internet traffic must be treated equally — enters its final stages.
In the document, the commission acknowledges the shortcomings of the last attempt to create a digital single market. It says that attempt became too focused on net neutrality and roaming in spite of the wider ambitions to drive investment and innovation by Neelie Kroes, the former digital commissioner.
The commission wants to help develop a pan-European telecoms industry through reforms of regulations and investment incentives for high speed broadband networks.
Steven Tas, chairman of Etno, which represents Europe’s leading telecom operators, said: “Boardrooms feel an urgent need for in-depth reforms that stimulate investments in high speed broadband networks. Investment is crucial for the competitiveness of Europe in the global economy.”
The EU’s executive arm plans to better co-ordinate the regional auctions of mobile spectrum, which is crucial to supporting the next generation of mobile internet services. The commission is clear that the proceeds from the sale of the spectrum to mobile groups should remain with the member states.

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Monday, 13 April 2015

Billionaire Fridman targets US and Europe in $16bn telecoms spree

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Russian billionaire Mikhail Fridman is drawing up plans for a $16bn investment spree in telecoms and technology businesses in Europe and the US boosted by the appointment of a heavyweight advisory board of industry entrepreneurs.
The focus on telecoms and technology comes just weeks after Mr Fridman was embroiled in an acrimonious spat with the British government over the acquisition of a dozen North Sea fields by his oil and gas group, L1Energy, a similar venture chaired by Lord Browne, former chief executive of BP.

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London-based LetterOne Technology (L1Technology) has been set up as a private equity-style group by Mr Fridman and his Russian partners to invest a $16bn fund.
The board, which will include Lastminute.com co-founder Brent Hoberman and Irish telecoms entrepreneur Denis O’Brien, has been brought together to aid acquisitions in the technology sector to augment an already substantial portfolio of telecoms businesses. It will also include Osama Bedier, a former Google payments executive, former Skype executive Russ Shaw and Sir Julian Horn-Smith, one of the founding management team at Vodafone.
L1Technology is seeking to disrupt the traditional telecoms industry using new technology to transform business practices. Chief executive Alexey Reznikovich said he believed that the “old fashioned” telecoms industry needed a root-and-branch overhaul to make money for investors. He said the group had no debt on its balance sheet, which meant that leverage could be used to increase available funds to $25bn.
Mr Reznikovich, who oversaw the board appointments, said the company was aiming to acquire businesses in areas ranging from traditional telecoms groups that needed help or new capital, to internet companies such as those making apps and streaming services that could be used by its global mobile operations.
L1Energy ran into opposition last month from the UK government, which argued that future sanctions against Russia could lead to the shut down of the company’s North Sea assets, acquired as part of a strategy to build an international energy business, threatening supplies vital to the UK economy. It is now looking to sell the gasfields.
Telecoms assets could also potentially be politically sensitive as providers of key national communications, as was seen by the thwarted attempt two years ago by Carlos Slim’s America Movil to take control of KPN, the Dutch telecoms incumbent.
New acquisitions will benefit from our significant expertise, and will gain access to our existing customer base
- Alexey Reznikovich, chief executive of LetterOne Technology
L1Technology will act as a holding company for the 48 per cent stake in VimpelCom, the telecoms group held by Mr Fridman and his Russian partners. The group will also control their 13 per cent share in Turkcell, the Turkish telecoms company, which is being fought over with Mehmet Emin Karamehmet, one of Turkey’s best-known businessmen. The stakes are valued at about $14bn.
“We are not looking for the next Google,” Mr Reznikovich said, pointing to the opportunity to invest in markets open to consolidation as regulatory concerns about mergers in the sector ease.
“New acquisitions will benefit from our significant expertise, and will gain access to our existing customer base, which numbers over 200m across existing networks,” said Mr Reznikovich.
European telecoms businesses risked “dying” unless they changed a sluggish incumbent mindset, he said, adding that few were using their “deep knowledge of their customer base”, for example, to launch additional services in banking and digital content distribution.
Mr Hoberman in particular is considered one of the best-connected tech investors in Europe from his position as co-founder of ProFounders Capital, a leading venture group, and co-founder of Founders Forum. He is also close to the UK government.
The acquisition strategy will be played out alongside plans by Mr Reznikovich to push for an overhaul of the operations at VimpelCom, which has businesses across the world including in Russia, Algeria, Pakistan, Bangladesh and Italy.
Two-thirds of the company’s cost base could be cut even as it sought new revenues from digital services, he added.
Additional reporting by Murad Ahmed

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Friday, 3 April 2015

Telecoms Ready Fight Against Net Neutrality Challenge could start by focusing on how much notice industry got






FCC Chairman Tom Wheeler testified before the House Judiciary Committee last month. PHOTO: CHIP SOMODEVILLA/GETTY IMAGES
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The telecommunications industry has myriad objections to the government’s new net-neutrality rules, but its legal challenge could start with a procedural point: whether the Federal Communications Commission provided adequate notice.
Groups representing wireless carriers, cable firms and Internet providers are expected to file lawsuits seeking to overturn the new rules as soon as they land in the official record of government actions, which is imminent. On Wednesday, the FCC sent the net-neutrality rules, which it passed in February, to the Federal Register for publication.
The industry groups—CTIA, the National Cable & Telecommunications Association and the United States Telecom Association—are likely to file lawsuits against the rules and plan to attack on three fronts, people familiar with the plans said.
First, the groups are expected to take issue on the procedural ground that the FCC didn’t provide proper notice to the industry for various parts of the new rules. Second, they will argue the agency doesn’t have the authority to reclassify broadband services for regulation under the same utility-like rules used on the phone network. Lastly, the trade groups may take aim at specific provisions such as the ban on paid prioritization.
The procedural argument stems from abrupt changes to the rules after President Barack Obama’s November proclamation that he wanted tougher rules to protect an open Internet and, specifically, that he wanted the Internet reclassified as a Title II Telecommunications Service.
The FCC followed typical procedure by issuing a Notice of Proposed Rulemaking last May outlining the rules. But after it changed its proposed rules, it didn’t issue a new notice despite what the industry argues were meaningful changes, such as altering the definition of what constitutes commercial mobile service and expanding the rules to cover interconnection agreements. Federal laws require adequate notice.
A senior FCC official said the original proposal in May provided more than ample notice that the agency was considering reclassification of broadband service as a Title II Telecommunications Service because it laid out detailed questions about such a route. The public comment and other commissioners’ statements also gave notice to the public that the FCC was considering using Title II, the official said.
In a speech at Ohio State University last Friday, FCC Chairman Tom Wheeler said the new rules would withstand a court challenge. When the court tossed out the majority of the rules in early 2014, it did so because they treated Internet providers as common carriers even though the FCC hadn’t formally classified them as such.
“We have addressed that issue, which is the underlying issue in all of the debates we’ve had so far,” he said. in prepared remarks. “That gives me great confidence going forward that we will prevail.”
In the past, opponents of FCC rules have pursued legal challenges over failures to follow procedure with some success. In 2011, an FCC media ownership rule was tossed out by the Third Circuit Court of Appeals because of procedural missteps. In 2010, the agency lost a court challenge because it failed to provide adequate notice.
“This is a very common argument,” said Donald Evans, a telecom attorney at Fletcher, Heald & Hildreth who has made the argument himself in past cases against the FCC. The opposition will have to show that a reasonable person wouldn’t have known that the agency’s ultimate decision was under consideration. But the argument often doesn’t work, he said.
If the procedural grounds fail, the meat of the challenger’s case will hang on whether the FCC has the authority to reclassify the Internet as a Title II Telecommunications Service. In the late 1990s, the FCC classified DSL Internet sent over phone lines as a Telecommunication Service, but in 2002, it classified high-speed Internet provided by cable companies as an Information Service. A legal challenge to that decision went all the way to the U.S. Supreme Court, which ruled that the decision was up to the FCC’s discretion.
Since then, wireless and cable companies have spent billions of dollars investing in broadband networks, and they claim that a policy reversal will damage planned businesses that rely on the existing rules.
If a court found violations in procedure, the rules would be sent back to the FCC, which could then go through the proper process and pass them again. But a delay could buy the industry time in the hope of changes to the FCC if a different party got control of the White House.
Write to Ryan Knutson at ryan.knutson@wsj.com and Thomas Gryta at thomas.gryta@wsj.com
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