End of March greetings from sunny Dallas, Texas. Normally, we take the end of the quarter to evaluate key long-term trends and see how they might change as a result of events. We are trying a new end of quarter theme starting this week, highlighting ten key events (in chronological order) that shaped the quarter and likely the year.
More Brilliance from HTC – Will Anyone Notice? (and other events of the week)
Before getting into the quarter’s defining events, we’ll touch on this week’s news. First, HTC launched their new version of the One (also called the M8 – see picture). Generally, the reaction was as positive as the M7 received. However, Ars Technica has a review that is not as flattering (click here for the article). It is an absolutely gorgeous device, but, as the review points out, there’s a lot more to improve.
How do you improve upon the recently announced split of Harris Broadcast into Imagine Communications and GatesAir? Launch products and frameworks designed to improve the efficiency of content delivery. Imagine Communications announced the deployment of their new TV Everywhere platform on Thursday in advance of the National Association of Broadcasters (NAB) Show. They also announced a new framework called MediaCentral which is based on modular (as opposed to proprietary) standards. These announcements clearly show the rapid pace Imagine Communications will run to promote standards-based, cloud-based solutions.
While not a defining moment for the quarter, Sprint Chairman Masayoshi Son did make an impressive speech to the Competitive Cellular Association convention in San Antonio (video of his speech is here). “Let’s Fight Back” was his rallying cry, as Son promised device support and capital funding for rural carriers. The nearby map shows the possibility is substantial. How the CCA members respond to Son’s impassioned plea for increased partnership means the difference between an effective Sprint enterprise data offering versus city-centric SMB services.
Ten Events That Shaped the Quarter
The first quarter of 2014 was filled with large, defining events. Mega-mergers, landmark court rulings, and CEO changes fill the quarterly timeline. Rather than attempt to priority sort each opportunity, we have decided to list them in chronological order. Here are the Sunday Brief Top Ten of Q1 2014:
- January 8: T-Mobile announces Uncarrier 4.0: ETF Buyouts. The wireless world was rocked by this annoucnement and it’s my pick for “most impacting event” of the first quarter. Upping the ante from AT&T’s $450 to $650 per line put to rest any concerns about whether T-Mobile had the moxi to go for Family Plan gold. As we will see below, their action sparked a series of pricing actions in the first quarter, including changes to AT&T’s Share Everything and Sprint’s Framily plan (which was technically announced on January 7 but managed to capture only one day of headlines).
- January 14: D.C. Appeals Court remands Net Neutrality Order. While many analysts saw this ruling as inevitable, the D.C. Appeals Court ruling that “Because the Commission has failed to establish that the anti-discrimination and anti-blocking rules do not impose per se common carrier obligations, we vacate those portions of the Open Internet Order” rocked the communications world. This announcement was accompanied in the first quarter by the disclosure that Netflix, one of the largest consumers of the Internet, has struck special transport deals with Comcast and that other service providers (see this week’s disclosure about a possible Apple/ Comcast arrangement) were contemplating the same. While a Netflix deal will not impact Comcast’s first quarter results, a “pay for premium performance” alternative like the one being discussed with Apple would certainly change the competitive landscape.
- January 28: FCC and DOJ greet Sprint/ T-Mobile merger with skepticism. The first article to appear outlining resistance to the deal appeared in the Wall Street Journal. It was accompanied by a New York Times interview given by William Baer, the assistant attorney general for the antitrust division at the Department of Justice where he stated “It’s going to be hard for someone to make a persuasive case that reducing four firms to three is actually going to improve competition for the benefit of American consumers.” Mr. Son appears to be undeterred by the skepticism and has made an effective case, both this week to the CCA and previously to the US Chamber of Commerce, that a three carrier system is inevitable. Meanwhile, thanks to T-Mobile’s effective actions, the gap between #4 and #3 shrinks every quarter.
- February 1: AT&T announces dramatic pricing plan changes (and takes aim at Verizon in the process). It’s hard to believe, but it’s been less than two months since AT&T took the dramatic step of lowering prices for most family plans. We wrote extensively on why their initial launch was extremely confusing, but AT&T has been consistent with their messaging and offer – $160 for four lines of unlimited voice and text with 10GB of monthly shared data. Although this does not include the monthly price of the phone (which could be as high as $27 depending on the device), AT&T’s plan has resonated in the marketplace. They followed up their early February offer with lower prices on one and two line bundles in March. One of the interesting things to watch for in the first quarter is to see the effect of this on Verizon’s net add performance.
- February 4: Microsoft names Satya Nadella as their new CEO. Microsoft’s stock is back to levels not seen since 2000 ($330 billion in equity market capitalization as of Friday’s close), and it’s not because of the Nokia acquisition. Despite a very tepid response to his appointment (“Picking a core insider down the hall from Mr. Ballmer is an underwhelming pick relative to the high hopes that investors had when this process started” was the reaction from one Wall Street Analyst), Nadella has wasted no time shaking up Microsoft, starting with this week’s announcement of Microsoft Office for Apple’s iPad. Nadella is an excellent pick because he can streamline the bureaucracy without destroying it. He will bond with CIOs in 2014 far better than most of those who were rumored to have been considered for the position.
- February 13: Comcast announces that it is buying Time Warner Cable for $45 billion, rebuffing Liberty Media/ Charter’s January offer. While it happened mid-quarter, it’s the event that has everyone talking. It’s definitely the most polarizing and politicized event of the quarter, and promises to make lots of headlines throughout the spring and summer (starting with Cohen’s Senate hearing testimony on April 9). The merger pitts one Washington insider, David Cohen of Comcast, against many consumer groups and states who are allies of the current Administration. In the meantime, both companies are continuing with substantial capital investments (Comcast with Xfinity and Time Warner with their Maxx project) as they attempt to improve their customer experiences (see the Tempkin Group’s assessment here to see how far they both have to go).
- February 19: Facebook announces that is is buying WhatsApp for $16 billion, raising the communications stakes with Google and Apple. Along with the significant speed of transformation occurring at Microsoft, Facebook’s use of their soaring stock price to cement their social network leadership is the most underreported story of the first quarter. Over the past year, Facebook’s equity market value has grown by nearly $90 billion. That number had been as high as $119 billion until Facebook went on a shopping spree. WhatsApp is the face of mobile messaging across the globe, and Oculus is the face (pun intended) of virtual reality in the gaming community. Eye-popping figures for both companies, but essential to maintaining competition against Google and Apple (who had many acquisiitons of their own).
- February 24: Samsung announces the Galaxy S5 and entirely revamped Gear lineups. Samsung used the Mobile World Congress to launch several new devices, including the Galaxy S5 and the completely revamped Gear lineup. Both models are being aggressively pre-sold by each of the large wireless carriers with an official launch date of April 11. We wrote extemsively about the devices here and within the article there are many links to in-depth reviews. I seem to be the only one who is fascinated by the use of the Taizen operating system on the Gear devices (especially in light of Motorola’s new watch design which is based on Android). We are in the early innings of wearable technology development, and Samsung’s announcement showed the world how large the opportunity can be.
- March 3: Disney and Dish Networks sign a wide-ranging agreement that allows Dish to transmit over the top (OTT) content to customers. Decoupling transmission type from content has been an ambition of many service providers, especially DirecTV and Dish. The Colorado-based satellite provider turned a routine retransmission negotiation into a transformational event which allows Dish to transmit live or recorded ESPN content over the Internet to subscribers of Dish’s upcoming Internet service. In the process, it has elevated the value of last mile connectivity, and forced other content providers to revamp their OTT negotiations.
- March 14: The Commerce Department announces that it is transitioning the function of the management of the Internet to the “global community.” Regardless of individual libertarian leanings, this Friday afternoon announcement surprised many in the Internet world. However, as we wrote about in a previous column called “ICANN Freedom,” the possibility of multiple core root files concerned many Netizens (and, if additional actions like the ones announced in March were not taken, Brazil was likely to be the first to break from ICANN). Many critics were surprised at the unilateral nature of the announcement as opposed to its content. More to come at the ICANN meeting in April.
That’s our take on the first quarter’s most pivotal events. We welcome your comments and feedback as always. Next week, unless there is breaking industry news, we’ll do a deep dive into the Wearables Wars. Until then, if you have friends who would like to be added to The Sunday Brief, please have them drop a quick note to email@example.com and we’ll subscribe them as soon as we can (and they can go to www.sundaybrief.com for the full archive). Have a terrific week!