Lack of ambition would presumably not be the most obvious failing of a new company which styles itself under the label “Everything Everywhere” (EE for sake of brevity). The name was chosen to represent the combined UK operations of both Orange (France Telecom) and T-Mobile (Deutsche Telekom), which now form a 50-50 joint venture and which announced their first results at an investors meeting in London yesterday. It would be a tad unfair, given the company’s core network technology assets, to assume that EE would be branching out into home pizza delivery any time soon, even though casual observers might assume “everything everywhere” might encompass all manner of exciting goods and services. Nevertheless, it was perhaps a little disappointing to discover from EE’s tagline – “Creating a new mobile champion” - that the network will apparently only serve network-based communications and applications to customers who happen to be moving around at any given time. Taglines are tough to get right, of course, and inevitably cannot please everyone. As the management presentations progressed, it became clear that mobility was not after all an absolute requirement for any future products and services which EE may choose to emphasise. Indeed, although they remain well hidden beneath the inevitable deluge of mobile phone and wireless network-centric commentary, fixed broadband and IPTV (for big screens) are very much alive and kicking as key elements in EE’s strategy. Executives even went as far as to designate IPTV as a “key part of a converged play” and that fixed broadband was “strategically hugely important”. This should come as a relief, perhaps even a surprise, given that fixed networks have played no part in T-Mobile’s UK business to date, and have been losing money (£80m in 2009) from the few customers Orange alone had managed to acquire. Given this performance the new venture might have been forgiven for abandoning fixed network businesses altogether as a lost cause. Instead we were assured that Orange’s broadband profitability was “already improving”, and that the recently announced deal to outsource network, IT and customer service to BT will have the desired impact of returning “Home” EBITDA to positive territory by 2012. Specifically EE will increase targeting of home broadband to its existing Orange mobile customers initially, and also introduce it to T-Home customers during 2011. Marketing will also encourage take-up of fixed voice by Orange and T-Home customers, since EE claims that the BT deal means that acquiring fixed voice customers would no longer have a negative margin impact on overall performance as was previously the case. The company is planning for 80% of new broadband customers to include fixed voice as part of their package. Potentially even more significant will be EE’s plans for IPTV, once they are finally confirmed. The company announced that it is looking at IPTV opportunities, including Canvas, the BBC-led over-the-top initiative. It would not join Canvas as a shareholder, but is considering affiliate membership. Whatever decision is eventually made on IPTV, EE will not become a major content player, which will come as a relief to shareholders and a disappointment to content rights holders looking for new competitors in the distribution market in order to boost values. EE even has the UK’s long-awaited fibre rollout on its radar. Its agreement with BT allows for access to the new fiber network by EE, although no specific plans have been agreed. Other emerging opportunities on EE’s radar include M2M (machine-to-machine), in which the company includes connected home devices and home automation as specific “high growth” verticals. M2M is a broad concept which may certainly one day lead to services and applications which approach “everything everywhere” capability. In the meantime, EE has probably has enough on its plate just to meet its growth and profitability targets in its core mobile and broadband businesses. Client Reading: Global Broadband Forecast 1H2010

Over-the-top video services have been putting mounting pressure to pay TV providers. Apple TV is well received by the reviewers, even though nobody has used the real product. Netflix's stock price just hit a new 52-week high as it expands its streaming service into Canada and its long-time competitor Blockbuster filed for chapter 11 bankruptcy. Amazon is preparing its own streaming service, so does Sony. Everything together depicts the picture that pay TV companies are doomed. The prices for pay TVs' current plans have long been perceived as ripoffs. According to Strategy Analytics recent consumer survey, only 20% respondents say that the value-for-money of their pay TV services exceed their expectations. This is clearly a vital weakness of current pay TV services. But on the other hand, because of the overpricing pay TV providers are able to pay media companies big checks for their content. Everyone loves money. This is the reason why media companies and content producers have been reluctant to give their content to the new online distributors, such as Netflix. The advent of Apple TV seems to have taken a big step in the direction of solving this problem, offering a pretty cheap price for the content to consumers, i.e. $3.99 per movie rental and $0.99 per TV show episode. And because of its power in the consumer electronics and media industry, a lot of the major media companies are willing to participate in the deal in the hope of generating incremental revenues in addition to existing distribution channels. But today Viacom has said that the price for content on Apple TV is too low and they will not participate in the service. Other national broadcast networks owned by NBC Universal and CBS Corp. and all cable networks chose not to participate due to pricing and other strategic concerns. It is a big blow to the fledgling Apple TV service. Fundamentally, it is a confrontation between media companies and consumers, with content distributors being as the intermediary to alleviate the tense. Content owners want more money for their content, whereas consumers want to save money from their entertainment spending. As a result, a lot of consumers flock to Netflix due to its low pricing. But media companies tend to favor pay TV services for their content access, as they pay more. The end of the story is that consumers are not completely happy with Netflix as they don't get new content from it, but pay TV services suffer too, witnessing their subscribers eroding. From economics standpoint, it is not maximizing the social benefit as media companies are leaving the money on the table by sticking with overpriced pay TV services. It is clear though that anyone who can address the $64 million question in the video entertainment industry will lead itself to prosperous growth. And the industry needs a compromise. - Jia Wu

Embarrassing Apology of the Week Award goes to Sky for the following email just received by its UK customers: “In our recent newsletter - 'This week on Sky Player' - we did not make it clear that in order to watch live Sky Sports for free on Sky Player until 31/12/2010, you need to subscribe to Sky Sports 1 & 2 on Sky TV. We apologise and hope that this did not cause too much confusion.” The company presumably has received complaints from confused customers who do not currently pay for Sky Sports on TV and assumed, naturally enough, that when Sky told them they could watch Sky Sports for free on Sky Player, they could watch Sky Sports for free on Sky Player. In fact, the email should clearly only have been sent to customers who already pay for Sky Sports on TV, or worded very differently for all customers. No doubt the company’s apology is also intended to ward off any possibility of a regulatory wrist-slap. It’s a little unfair, if rather easy on this occasion, to pick on Sky for its misleading communications over bundled service offers. But this episode does highlight the age-old question of when “free” really means “free”. My own father, who was fond of repeating the well-worn cliché “there’s no such thing as a free lunch”, would probably say “never”. And perhaps consumers in the 21st Century have been bombarded by so many unlikely offers that they are simply inured to misleading advice. The details, after all, are usually in the fine print, if anyone can be bothered to check. What’s the difference, after all, between Sky offering “free” Sky Sports to its paying customers, and mobile phone customers offering “free” texts to its paying customers? Or “free” mobile phones to customers who have to pay money to use them every month? To quote Orange’s current Monkey offer: “Get free music, texts and a free daily internet pass, just for topping up £5 on Monkey”. So, spend money to get something free. These “offers” are such an established feature of bundled service marketing (and commercial life in general) if anything it's surprising that Sky felt the need to respond. A liberal deployment of asterisked fine print should help Sky avoid similar problems in future. Client Reading: Apple TV: Still Just a Hobby? Or Another Nail in Pay Television's Coffin?

Many thanks to Jeff Baumgartner at Light Reading for reminding me of my post last September concerning ActiveVideo Networks and the company's suitability as a potential Cisco acquisition. I had also just noted that ActiveVideo is planning to exhibit on Cisco's stand at this year's IBC starting tomorrow. I'm sure the relationship is quite harmless at the moment, but who knows where things may lead? If you're at IBC, hurry to register for our free-to-attend 3DTV Analyst Forum. We’ll be presenting great insights from our 3DTV research, and Sky’s Brian Lenz, who has headed up the company’s 3D initiative, will be giving the audience his thoughts on our findings as well as an update on Sky’s 3D launch plans. Attendees are invited to register in advance by visiting www.strategyanalytics.com/ibc2010.html. Meet Our Analysts: 3DTV Analyst Forum at IBC 2010

This year’s IFA www.ifa-berlin.de nicely summed up the opposing challenges facing the next wave of TV technologies. The plethora of new connected TVs on display from every major manufacturer seemed barely able to cope with the variety of Internet and managed content and applications available. By contrast, the many 3D-enabled TVs seemed starved of suitable material with which to show off their capabilities. Watching the 3D story unfold at IFA also served as a nice hors-d’oeuvres to this weekend’s IBC in Amsterdam, when you can learn more about industry and consumer adoption of 3D at our Analyst Forum: it’s not too late to register at www.strategyanalytics.com/ibc2010.html. Given that internet TV, or connected TV, or “smart TV”, depending on your preferred nomenclature, has been at least a decade in the making, perhaps it is inevitable that it seems to be making faster progress towards mass market adoption than 3DTV, which, in spite of decades-old visions, has really only begun to gather speed in the last year or two. Nevertheless, it was clear from duplicate and triplicate demonstrations of the same 3D animated movies and football games that the dearth of 3D-originated content remains 3DTV’s biggest challenge. Which makes it all the more strange that most of IFA’s big names were extremely reluctant to promote the ability of their 3DTVs to turn bog standard 2D into 3D content, on the fly and with no additional hardware required. As various Sony, Panasonic and Samsung representatives explained, to one degree or another “in-set” 2D-3D conversion was not yet considered “good enough” to warrant live demonstrations to the German technology-buying public or indeed the rest of the industry. Sony came close to giving the game away: the information board behind a line of 3DTVs noted the fact that any 2D content could be converted to 3D “by pushing a button on the remote control”. But when asked to demonstrate this functionality we were informed it was not possible on the show floor. Samsung’s stand also featured a large number of 3DTV demonstrations, all of which featured 3D-originated content of one sort or another. The only real time 2D-3D conversion demonstration featured games material. Other 3DTV sets around the stand could be switched to 3D conversion but staff were unable to supply glasses so that the effect could be appreciated. Panasonic’s representative was open in admitting that the company was behind in devlopment of in-set 2D-3D conversion technologies, and only included it as a feature “because everyone else was”. I got the strong sense that staff on many stands were tired of deflecting questions about 2D-3D and that their lives would have been made slightly less tedious if demonstrations had been available. The major exception to this was of course Toshiba. Of course, because Toshiba continues to push its Cell processor technology as a platform for real-time rendering and upscaling of 2D to 3D content. Toshiba was the major firm least backward in coming forward with in-set 2D-3D conversion, offering a number of demonstrations open to public view. These included one which claimed to offer conversion of “regular” 3D TV broadcasts to “full” 3D. The demonstration offered side-by-side comparison of otherwise identical content. To my own eyes this was not too impressive, with artefacts clearly visible in the upscaled version, even if the overall effect from a distance was greater sharpness. It was certainly a long way from matching the Blu-ray 3D experience. Toshiba also demonstrated “standard” 2D-3D conversion, which was less problematic although mild “ghosting” effects were visible. However the 3D effect, while obvious, lacked any great depth. Having said that Sony’s TV people were not discussing “in-set” conversion, around the corner the company’s Vaio group had probably the most impressive real-time 2D-3D conversion I have yet seen. A prototype Vaio used a combination of hardware (graphics card) and software (both in prototype development stage) to convert 1080p MPEG4 video to full HD 3D (2*1080p), the equivalent of the Blu-ray 3D standard. The product is currently targeted for Q1 2011 availability as a notebook product. 3D was selectable on the prototype by pressing a 3D button. Clearly the processing power required for this impressive demonstration is unlikely to feature in a TV set in the near future, but it is surely only a matter of time before it becomes widely available in mass consumer products. The sensitivity around 2D-3D conversion was the story that dared not speak its name at this year’s IFA. Yes, the technology is immature and the quality falls short of “true” 3D productions. But that will change and the content-owner dam which is currently holding it back will eventually break. As we will see at our 3DTV Analyst Forum, the TV production industry itself remains unconvinced that it should invest in 3D technology until issues such as this begin to settle down. Meet Our Analysts: 3DTV Analyst Forum at IBC 2010

It’s been implied on more than one occasion by various commentators that the arrival of 3DTV is “too soon” because many people have only recently bought their first HDTV and will be reluctant to invest once again in a new technology. The argument makes sense on the surface, but, as usual, a little digging into real data tends to prove otherwise. Our survey of 700 UK consumers found that current HDTV owners were in fact more than twice as likely to be interested in buying a 3DTV than non-HDTV owners. Specifically, 13% of HDTV owners say they are “somewhat” or “very likely” to buy a 3DTV during the next 12 months, compared to 6% of non-HDTV owners. Given that HDTVs are still in only half of UK households, this hardly suggests that 3DTV’s prospects are being held back because people have already bought an HDTV set. The truth is that it’s likely to be the same early adopters who bought HDTV who will also go out and buy the next latest and greatest TV technology. We’ll be presenting these and many more insights from our research at a free-to-attend analyst forum during this year’s IBC, and Sky’s Brian Lenz, who has headed up the company’s 3D initiative, will be giving the audience his thoughts on our findings as well as an update on Sky’s 3D launch plans. Attendees are invited to register in advance by visiting www.strategyanalytics.com/ibc2010.html. Meet Our Analysts: 3DTV Analyst Forum at IBC 2010

The Chinese PC maker Lenovo has founded a video game console company Eedoo, which was announced last month. The company will sell an Xbox-like game console, if not a ripoff, called eBox next year in China. Although the technology introduced by eedoo is nothing groundbreaking, there could be further implication behind the scene. Given that the Chinese video game console market has been highly regulated and the import of console has been prohibited for a long time by the government, we believe Lenovo's action, combined with Microsoft's recent publicly expressed interest in the Chinese video game market, indicates a potential opening-up for the market. Our recent insight Lenovo founds Eedoo: a Signal for a Potential Opening-up of the Chinese Video Game Console Market provides an in-depth analysis on the scenarios which the Chinese video game market might potentially head to. We believe that the Chinese video game market will become a new growth engine for the stagnating industry in the foreseeable future, and materially expand the size of the total market. - Jia Wu