The past week has seen a number of government decisions that could potentially impact the CSP (communications service provider) market in a big way. Business technology journalist Antony Savvas looks at the cause and effect of the moves.
Cloud services
UK communications regulator Ofcom is referring the cloud services industry to the country’s Competition and Markets Authority (CMA) for “further investigation” as it could be anti-competitive.
Ofcom’s own investigation has found that aspects of the market “make it more difficult for customers to switch and use multiple cloud suppliers”. It says it is “particularly concerned” about Amazon Web Services and Microsoft, given their substantial presence in the market.
The regulator highlights three specific areas of market concern, including the level of egress fees (for transferring data out of a cloud), the technical restrictions on interoperability, and committed spend discounts.
“For too long, cloud services have drifted away from what users actually want from a provider. We now need to see regulators, in partnership with industry, build a fairer and ultimately more successful cloud space,” says Mark Boost, CEO of Civo, a cloud-native service provider.
“Our own research found that 37% of public cloud users have been stung by unexpected costs in the last 12 months. Many users face persistent problems with opaque pricing and unpredictable billing, leaving users struggling to stay on top of their usage,” says Boost.
Cloud Services Providers in Europe (CISPE), homed in on Ofcom’s criticism of Microsoft. Francisco Mingorance, secretary general at CISPE, says: “It’s clear that Ofcom recognises the potential for Microsoft’s unfair software licensing practices to distort competition in the cloud market, it devoted a whole chapter of its report to these practices and noted it ‘will consider the most appropriate way forward on these issues’ with the competition authority.
“Based on the mounting evidence it is important that both national and EU authorities urgently open formal investigations into Microsoft’s unfair practices.”
With telcos worldwide increasingly making go-to-market deals with the major cloud providers to serve their customers in both the cloud and at the telco edge, it is obviously important they have clarity on competition matters too.
Mergers and acquisitions
It has been the case that the main mobile operator presence in developed markets will usually see at least four companies tough it out for supremacy, along with a much larger number of mobile virtual network operators (MVNOs) “piggybacking” on these main players’ networks.
Recently however, there have been calls for consolidation from some quarters in the industry, as less money is made from calls and texts and contract margins are squeezed, and just when operators are expected to invest big in rolling out 5G services.
Consolidation was expected to be seen in Spain, for instance, but now the European Commission has put the brakes on the proposed Orange and MasMovil merger, with the announcement of an “in-depth” investigation into the deal.
The Commission is concerned the transaction may reduce competition in the retail supply of mobile and fixed broadband services, as well as the provision of multiple-play bundles in Spain.
Orange and MasMovil are the second- and fourth-largest operators in Spain, competing against Telefonica and Vodafone. The Commission says Orange and MasMovil are “close competitors”, with the deal potentially leading to higher prices and lower quality of services for customers. Together, they would also have the “ability and incentive” to restrict access to MVNOs, it adds.
“We want to ensure that Spanish consumers continue to benefit from affordable and high-quality telecom services, including from virtual operators that need competitive wholesale access to fixed and mobile networks,” says Margrethe Vestager, executive vice-president in charge of competition policy at the European Commission.
Then again, if the main operators in developed markets cannot feel confident about generating good profits, their capacity to open their spectrum and infrastructure to MVNOs through wider investment will be curtailed.
In Spain specifically, this may well be demonstrated by Vodafone, whose Spanish unit is reportedly the target for venture capitalists. Vodafone has been a big advocate of market consolidation in the past, and previously planned a merger with MasMovil well before Orange made a move.
A Vodafone sale in Spain would be worth over US$4 billion (€3.67 billion), it is estimated, but more significantly a sale would demonstrate how the biggest names in mobile are struggling to do good business in key markets. This is further demonstrated by the reported merger discussions in the UK between Vodafone and Three, with any successful deal there also reducing the number of main operators to three.
Political costs
Western governments have demanded that network gear from China’s Huawei be ripped out in response to US government-instigated spying fears.
Bouygues Telecom and Altice France have now begun legal proceedings in the courts to win hundreds of millions of euros in compensation for the Huawei replacement demand, which covers about half of the companies’ networks.
While these operators are having to fight for compensation to help cover the costs of a French government decree that was made after a US demand, it is ironic that US operators have no similar worries. Successive US governments have given them numerous handouts worth billions of dollars to be able to address US government policy on non-Chinese telecoms infrastructure.
State attacks
From this month, cyber insurance syndicates operating through Lloyd’s of London have to include exemptions that would prevent policies paying out if a major attack is judged to be “state-backed”.
Exemptions as a result of war are standard across a variety of insurance policies covering property, vehicles and other assets. While cyber war is new, Lloyd’s’ stance is pretty ridiculous, and will no doubt be proved so if legally challenged by organisations putting in claims as a result of an attack, and then being refused compensation through their insurance.
Failure to exclude significant state-backed attacks from policies will leave insurers exposed to “systemic risk”, Lloyd’s maintains. It obviously wants to reduce its own liabilities and payouts in the face of risk, but who doesn’t? That is the point of insurance.
The price of cyber insurance has gone through the roof in the last couple years, particularly in the face of rising ransomware attacks. But companies have been urged to buy it regardless, partly to help them resist paying ransoms to criminals after an attack.
If Lloyd’s sticks to this policy it will be interesting to see how it announces the first “state-backed” cyber attack that cancels organisations’ cyber insurance claims.
What evidence will it use to back its stance, a report about Iran, China, North Korea or Russia “being behind” the attack in The New York Times, The Washington Post or Reuters, some of the favoured news outlets targeted by US spooks and other security services to try and disseminate their political messages?
Or maybe Lloyd’s will rely on a press release from a cyber security vendor stating that this or that state is “probably” responsible for the attack, judging by the chatter between international criminal gangs on the dark web?
Whether its industry regulation or government law, those that it effects should always be given a fair deal.
The author is Antony Savvas, a global freelance business technology journalist.
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