What’s up with… Deutsche Telekom, DZS, Verizon

TelecomTV Staff
By TelecomTV Staff

Jan 8, 2024

  • Deutsche Telekom forms a new API unit
  • Access equipment vendor DZS offloads Asia unit, raises cash
  • Verizon settles lawsuit with $100m payment

In today’s industry news roundup: Deutsche Telekom forms a new unit called Magenta API Capability Exposure (Mace) to develop its network API business; FTTx equipment vendor DZS raises cash as it tries to dig itself out of a financial hole; Verizon, despite claiming to have done nothing wrong, settles a class action lawsuit with a $100m payment; and much more!

To fully exploit the potential of network APIs, Deutsche Telekom has formed a new business unit, dubbed Magenta API Capability Exposure (Mace), and appointed Peter Arbitter, formerly head of the telco’s Global SD-x unit, as the senior VP in charge of building and running the new operation. Arbitter announced the formation of the unit on LinkedIn at the beginning of the year and it was first reported by Fierce Wireless. The new unit will build on the network API platform development between Deutsche Telekom and Ericsson that was announced in September: The two companies are working together on a network application programming interfaces (APIs) service called MagentaBusiness API that is underpinned by a platform developed by Vonage, the cloud-based communications platform specialist that Ericsson bought for $6.2bn in July 2022. In his LinkedIn post, Arbitter noted that the development of the MagentaBusiness API service is “not only the start of Deutsche Telekom’s journey but also that of the industry towards the decomposition of telco services,” and that the move is as important for the telecom sector as “the introduction of cloud computing has been for the IT industry.” Industry support for network APIs defined, developed and published by the CAMARA alliance and supported by the GSMA Open Gateway initiative is growing, with operators in Brazil and Sri Lanka already making headway with initial APIs that have been made available to the application developer community – see Brazil goes nuts for network APIs.

Broadband access technology vendor DZS has sold its Asia business unit in a deal valued at $48m to one its major shareholders, Dasan Networks, the South Korean vendor that spun out its Dasan Network Solutions unit to merge with US access network equipment vendor Zhone Technologies to form Dasan Zhone Solutions (now DZS) in 2016. At that time, Dasan Networks received stock worth about $55m in the new combined venture, giving it a majority stake of 58% (since reduced to the current 29%). Under the terms of the new deal, DZS will get $5m in cash and offload $43m in debt from its books. (It’s worth noting that Dasan Networks also loaned DZS nearly $30m in September last year.) In addition to selling its Asia unit, DZS has raised $15m in cash from investment firm EdgeCo and $10m in cash from the sale of newly issued shares to a Korean limited partnership controlled by Invites Ventures, of which affiliates of Dasan Networks are the limited partners. According to DZS, the sale of the Asia unit “aligns with the company’s vision, strategy and growth pillars unveiled in October of 2020, specifically 1) fiber-to-the-X (FTTX) broadband investment cycle fuelled by over $100bn in government stimulus funds, 2) growth spanning North America and Europe, 3) geopolitical security-related cap-and-grow opportunities, 4) software-defined networking (SDN), and 5) 5G mobile transport adoption,” and allows the vendor to “focus on the Americas, EMEA and ANZ [Australia and New Zealand] regions.” Charlie Vogt, president and CEO of DZS stated that the $30m gleaned from the sale and fundraising activities “is expected to enable us to focus on our momentum with fibre-forward service providers… The sale of our Asia business additionally enables us to transition to a more software-centric, AI-driven business model. Service providers in our new focused regions are embracing our open, standards-based, software-defined solutions and are increasingly transitioning away from Chinese vendors due to security concerns. During the second half of 2023, we secured several new multi-year, FTTX and 5G projects spanning our new Velocity V6 Access Edge, Saber 4400 Optical Edge, and AI-driven 5G slicing, automation and network orchestration software platforms. Our refined geographic focus allows us to scale common platforms across these regions and aligns with the numerous government stimulus initiatives designed to bring high-speed digital communications services to unserved and underserved communities that are underway across these markets and expected to ramp [up] during the next 12 to 18 months. We expect that our focus – now on the Americas, EMEA and ANZ regions, with disruptive and differentiated access and optical networking solutions and a higher percentage of cloud-controlled software – will enable us to achieve improved gross margins by the end of 2024.” Indeed, DZS appears to be at the cutting edge of some fibre broadband technology developments but it also has some operational issues, including some outstanding accounting issues that mean the company has not filed a quarterly earnings report since the first quarter of 2023 and led to the receipt of delinquency notification letters from the Nasdaq Stock Market in August and November last year. Vogt will need to turn the company around quickly if DZS is to capitalise on the opportunities it has in the broadband access market. The company’s share price currently stands at $1.54 – down 88% from a year ago – giving it a market valuation of just $48m.  

Verizon is to pay some of its mobile customers up to $100 each under the terms of a class action lawsuit settlement, even though the US operator claims it did nothing wrong. The lawsuit alleged that Verizon had applied a monthly administrative charge or an administrative and telco recovery charge to some customers without properly declaring and highlighting the charge. Verizon absolutely refutes that it has done anything wrong, says the accusations are without merit and claims its processes are all above board and transparent but still agreed to a settlement. It will pay $100m into a “settlement fund” that will then be distributed to customers who are eligible and who file a claim for a payout by 15 April. The size of the payment will be determined by how many customers legitimately file a claim by the deadline. The settlement and payments might not be the end of the affair, though: Customers who are eligible for a payout can also choose to receive no payment from the settlement and retain the right to “sue Verizon about the issues in this lawsuit,” according to a note on the settlement agreement website.

Japanese operators NTT Docomo and KDDI have set up ship-based mobile stations to restore communications services in the Japanese prefecture of Ishikawa in the wake of an earthquake that hit the Noto Peninsula on 1 January 2024. The base station is a submarine cable-laying vessel, owned by an NTT Group company, while equipment on board has been provided by both NTT Docomo and KDDI, according to local newspaper Asahi Shimbun. The service began operating on 6 January and delivers mobile connectivity to areas in proximity to the vessel, which is anchored close to the city of Wajima. Mobile communications have been disrupted across the peninsula, which was struck by a magnitude 7.6 earthquake on New Year’s Day. According to local media, mobile services have been restored in some areas, though efforts have been hindered by blocked or severed roads due to landslides. NTT Docomo and KDDI made an agreement in 2020 to cooperate in the event of natural disasters, including through the use of ships to transport supplies, disaster response training and awareness activities.

BT has confirmed that Allison Kirkby will take over from Philip Jansen as CEO of the UK national telco starting on 1 February. Kirky was announced as the next BT chief executive in late July. Jansen discussed his five-year tenure at BT during a fireside chat at the recent Great Telco Debate – see The future’s brighter for BT, says outgoing CEO Philip Jansen.

This week the overcrowded and frenetic annual extravaganza that is CES (the Consumer Electronic Show) takes place in Las Vegas in Nevada in the US. The organiser, the Consumer Technology Association (CTA), is pleased to bill the gathering as “The Most Powerful Tech Event in the World” and the only trade show that showcases the entire tech landscape at one time in one place. The first CES was held in 1967 in New York City, as a spin-off from the Chicago Music Show: That initial CES event featured 250 exhibitors demonstrating their wares and 17,500 industry attendees turned up. Since then – and notwithstanding having to go completely virtual in 2021 at the height of the Covid-19 pandemic and losing a day in 2022 as continuing public health concerns resulted in delegates voting with their feet and leaving Las Vegas early – CES has expanded massively and now encompasses both traditional and non-traditional tech industries. This year the show boasts more than 4,000 exhibitors across 12 locations and has attracted more than 130,000 registrants. During the course of the event, which is already well underway despite not officially opening its doors until 9 January, we can expect to see a host of new devices, gadgets and gizmos ranging from a transparent TV (presumably you'll be able to watch your wallpaper through it) to new laptops, electric vehicles (EV) and a multitude of other products. But the biggest theme will be generative AI (GenAI) and there will  be a determined focus on the brands that are likely to be the first to incorporate real and meaningful AI into their products. We can expect a lot of hype and plenty of smoke and mirrors in that regard. In advance of the official opening, Parks Associates, the Addison, Texas-based consumer electronics and internet of things market research and consulting practice, has published a report showing that 92% of US households now have fast broadband installed, while 66% own a smart TV. In addition, 42% own at least one smart home device, 20% have a video doorbell and 17% own a smart thermostat. According to a blog penned by the fabulously monikered Mindi Sue Sternblitz-Rubenstein, VP of marketing at Parks Associates, “consumers’ lives practically revolve around the internet and connected devices, and in all residence types, safety leads smart home product use cases. Many consumers are also interested in convenience and automation and rate valuable benefits of smart home devices around monitoring, notifications, automation, and remote controls.”

Amazon Prime’s video streaming service is now either already imposing, or is about to impose, ad breaks in streaming programming unless consumers pay extra to be allowed the privilege of not being bombarded with yet more ‘buying opportunities’ – and Amazon Prime is not alone. Netflix set the ball rolling with an “ad supported” version of its service in 2022 and that initiative was emulated by Disney+ and others in 2023. As a result, paying more to avoid in-programme advertising is a matter of disposable income, and customers are not happy about it. However, as a new survey report from Portsmouth, New Hampshire-based Hub Entertainment Research shows, more and more US subscribers would be prepared to watch streaming content adulterated with advertising if service subscription prices were cut. According to the results of the Hub’s latest TV Advertising: Fact vs. Fiction survey, some 64% of streaming service subscribers in the US would opt for an ad-supported service if it saved them as little as $4 or $5 a month. The survey found that percentage is “significantly higher” than it was just six months ago as inflation has roared ahead and household budgets have tightened. But while more and more people are prepared, albeit grudgingly, to tolerate some intrusive advertising, their patience for being forced to watch ads is very short. One minute of ads per advertising break, comprising no more than two different adverts, is regarded as being reasonable but ad breaks in excess are a turn off and are likely to result in viewers taking a short screen break, thus negating the purpose of the ad in the first place. Interestingly, showing fewer adverts per break in programming actually has tangible benefits for those companies trying to influence the masses: One or two ads per break are perceived by the viewer as being of “better” quality and relevance rather than the usual “loading” of 8, 9, 10 or more that are all too frequently crammed into an advertising blitz every 12 minutes or so (in the US, at least). As Mark Loughney, a senior analyst at Hub, noted, “As consumers begin to get hit with the double whammy of needing multiple subscriptions to get their entertainment, coupled with significant price increases, opting in for advertising becomes more appealing to them. And as long as providers stick to reasonable ad loads, it’s a win for them and their advertisers as well.” 

It seems, then, that pay-TV firms want to do everything they can to make adverts more relevant and palatable to their customers in order to maximise advertising revenues and maintain a decent customer experience. That’s why South Korea’s SK Broadband, part of the SK Telecom empire, has turned to AI for help. As The Korea Bizwire reports, SK Broadband is using artificial intelligence tools to more accurately deliver relevant advertising to customers using its IPTV service, which is now called AI B tv. SK Broadband’s approach is to invite customers to link their smartphones to their TVs, thus allowing the company’s AI platform to track a user’s preferences from their smartphone activity and deliver the most relevant advertising during their TV viewing sessions. This is all done with the consent of the customers, of course, and according to the report, about 60% of the service provider’s IPTV customers have agreed. SK Telecom’s main domestic telco rivals are also using AI to enhance their IPTV offerings. For example, KT is enhancing the content recommendation engine of its GenieTV service using AI, and with very positive results, according to the Korea Bizwire report – there’s more on that development in this KT press release (in Korean). LG Uplus TV, meanwhile, is using AI to gauge the emotions of its IPTV viewers and, in turn, is using the results to classify and recommend its IPTV content. 

Still in South Korea… KT has upgraded the backbone of its R&D network, dubbed KOREN, using 1 Tbit/s ROADM (reconfigurable optical add drop multiplexing) technology sourced from transport network vendor Coweaver. The network, which previously deployed 100 Gbit/s and 400 Gbit/s technology, is run by the Korea Intelligence and Information Society Agency (NIA) on behalf of KT and serves research bodies, universities and other R&D organisations, as well as the Korean telco. According to KT, the upgrade will enable KOREN to “increase the efficiency of research that requires a wider data bandwidth, such as ChatGPT, artificial intelligence (AI), big data and cloud.” For more, see this announcement (in Korean). 

In an intriguing note its institutional investor clients, Bernstein Research, the global asset and investment management firm and Wall Street go-to for trusted analysis of technology industries, has said that, starting in 2024, after 20 years or so of non-stop development and expansion, the world’s biggest internet companies will face challenges, changes and growth rates that are likely to be cut by half in comparison to the glory years of runaway evolution. According to a Business Insider report, the firm’s research note covered digital advertising, e-commerce, cloud computing and content delivery and makes clear that digital advertising is close to – or may actually already be at – saturation point. Mark Shmulik and Nikhil Devnani, the note’s authors, stressed that, “There is a general concern amongst internet investors that core revenue pools may be approaching saturation, with growth at risk of being structurally lower going forward. This debate is perhaps most evident in (though not isolated to) digital advertising, where traditional cuts of the market point to a 70%+ online penetration rate.” Meanwhile e-commerce will not be immune to “growth rate moderation”. It seems that excluding food, vehicle and fuel sales, market penetration for e-commerce is now in excess of 20% and, as the note made clear, if (as seems likely) e-commerce “tops out” at between 30% to 40% of total retail sales, it will be “halfway along the migration curve”.  The Bernstein Research note added, “It certainly feels like our eCommerce businesses are entering a transition period from new user adoption to retention and re-engagement.” The note took as an example the big online furniture retailer Wayfair which, in the US, has a customer base of more than 85 million that represents “a substantial percentage of the total addressable households – meaning the company now has to increasingly rely on re-acquisition to drive customer growth”. As the Bernstein Research note authors pointed out, this makes trading both more difficult and more expensive. “We don't think Wayfair is alone. We should be prepared for a moderation in growth rates going forward,” they added. Elsewhere, the report noted that new apps are becoming more appealing with consumers downloading more of them, an indication they may be tiring of the core internet services on which they have relied for a decade and more. Furthermore, “When there is less growth, big tech companies start looking around at adjacent markets and try butting in on each other’s turf. “ For example, “Amazon is starting to sell cars, while going up against Google and Meta in digital advertising, and Google is challenging Microsoft and Amazon in cloud computing.” Topping it all is the mounting, hysterical frenzy surrounding generative AI, which is regarded as the ‘next big thing’ to keep the revenues flowing across big tech platforms. 

North Korea has finally embraced the mobile broadband era, with Daily NK, an English-language news portal focused on developments in the secretive state, reporting that 4G services and handsets are now available in parts of the country. The 4G network capabilities have reportedly been built using both used and new radio access network technology supplied by Chinese vendor Huawei Technologies.  

- The staff, TelecomTV

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