Telephony developments
It seems we need a monthly telephony update to keep track of all the deals and maneuvers. Finally completed this week was the purchase of MCI by Verizon with all the requisite changes of area names and gold tournaments, not to mention layoffs.
Sprint Nextel buys out Nextel Partners and other affiliates
Sprint Nextel, the #3 US wireless firm, has agreed to buy out affiliate wireless company Nextel Partners Inc. in a $6.5 billion deal. The purchase of Nextel by Sprint triggered a contractual obligation for the buyout. The problem was negotiating the price, which was finally set by outside appraisers.
Nextel Partners was set up as an affiliated company by Nextel to sell wireless services with the Nextel brand to mostly rural customers. Sprint Nextel has also been obligated to buy out several Sprint affiliates, including Alamosa ($3.4 billion), Enterprise Communication Partners ($700 million), US Unwired ($1 billion) and a combined IWO Holdings and Gulf Coast Wireless ($714). The company also bought recently a New Jersey firm, Velocita Wireless, that supplied wireless services to business for an undisclosed sum. Also under negotiation are UbiquiTel, Horizon Sprint, and iPCS.
Think of this as a tidying up operation for a very messy situation. Sprint was more of an umbrella organization, with a number of semi-independent affiliates reselling its services and maintaining regional uptime. Now the company will have to take over maintenance and management of its full national system.
Pakistan Telecommunications handed over to Emirates firm
The Pakistani government has just privatized the Pakistan Telecommunications state monopoly, selling a major portion along with the right to manage the operation to Gulf Emirates-based telecom company Etisalat. Etisalat will pay around $2.6 billion for 26% of the company and management rights.
Etisalat beat out a number of rivals, including China Mobile (Hong Kong) Ltd. and Singapore Telecommunications. The Emirates firm, which offers telephone, cable TV, and broadband services locally is well financed with oil money and has been trying to expand, with unsuccessful bids recently in Tunisia and in Turkey.
Tech-Media Pie
A wall Street Journal article ("Baby Bells Are Mobilizing For Piece of Tech-Media Pie", 1/6.2006) documents the latest steps in the attempt of the big telephone companies to charge content delivery fees for us of their broadband services.
The ploy is the classification of "priority services," so that the external supplier of videos, music, or games pays extra to guarantee the efficient delivery of content over busy DSL lines. As the article puts it:
The phone companies envision a system whereby Internet companies would agree to pay a fee for their content to receive priority treatment as it moves across increasingly crowded networks. Those that don't pay the fee would find their transactions with Internet users -- for games, movies and software downloads, for example -- moving across networks at the normal but comparatively slower pace.
That reads awfully as if the services that customers get online now will be available at a fee, while a second-class service will penalize those who don't pay the toll. Granted, the broadband companies have added expense involved in adding extra servers and perhaps wider pipelines. But this is not an attempt to recoup costs, which are pretty well covered by user fees. (And we still hear plenty of complaints about DSL service speed that we don't hear from cable modem users.)
The right image may be those lucky mediaval barons who had castles that were situated on the Rhine or other riverways. They managed to extort a toll on any boat going up or down the river, simple by virtue of location. I believe the term is "robber barons, " though I am sure that they claimed they were just covering the added expenses of ensuring "priority delivery."
The tolls on Internet traffic promise to spread from paid content to all content if left unchecked, so that every time someone uses Google, for example, the telcos hear a ka-ching. As the WSJ article puts it:
The phone companies are meeting heavy resistance from companies that say making them pay for priority delivery of their content amounts to holding them ransom, thus hurting competition and, ultimately, the consumer.
