Wednesday, October 4, 2017

ZTE and Softbank hit 956 Mbps on 20 MHz Massive MIMO

ZTE and SoftBank achieved a peak downstream rate of 956 Mbps on a 20MHz bandwidth in a trial of pre-5G TDD massive MIMO. The trial, which was conducted on Softbank's commercial network in Nagasaki, Japan, featured 24-stream space division multiplexing technology.

ZTE previously achieved a similar rate of 1.1Gbps in a 24-stream field test in Shenzhen, China that also used its Pre5G TDD Ma
ssive MIMO solution.

ZTE and SoftBank are also collaborating on a Smart Life strategic project for post-4G networks, including improvement of spectrum efficiency, 4G/5G network integration, mobile bandwidth, IoT, and Internet of Vehicles.


ZTE signs up as Official Smartphone for PGA Tour

ZTE has signed a three-year marketing agreement to become the PGA TOUR’s first-ever Official Smartphone.

The deal, which includes global rights through 2020, was officially signed today by PGA TOUR Commissioner Jay Monahan and ZTE Mobile Devices CEO Lixin Cheng.

“The PGA TOUR is delighted to introduce ZTE as a new marketing partner as we enter the smartphone category for the first time,” said Brian Oliver, PGA TOUR Senior Vice President, Sponsorship & Partnership. “Mobile devices have become such a critical means by which fans watch and get updates on our competition, find information about their favorite players and share PGA TOUR-related content. In ZTE, we are partnering with a global leader in the telecommunications industry.”

Tuesday, October 3, 2017

100G - Challenges for Performance and Security Visibility Monitoring

by Brendan O’Flaherty, CEO, cPacket Networks

The 100Gbps Ethernet transport network is here, and the use cases for transport at 100Gbps are multiplying. The previous leap in network bandwidths was from 10Gbps to 40Gbps, and 40Gbps networks are prevalent today. However, while 40Gbps networks are meeting bandwidth and performance requirements in many enterprises, the “need for speed” to handle data growth in the enterprise simply cannot be tamed.

As companies continue to grow in scale, and as their data needs become more complex, 100Gbps (“100G”) offers the bandwidth and efficiency they desperately need. In addition, 100G better utilizes existing fiber installations and increases density, which significantly improves overall data center efficiency.

A pattern of growth in networks is emerging, and it seems to reflect the hypergrowth increases in data on corporate networks just over the last five years. In fact, the now-famous Gilder’s Law states that backbone bandwidth on a single cable is now a thousand times greater than the average monthly traffic exchanged across the entire global communications infrastructure five years ago.

A look at the numbers tells the story well. IDC says that 10G Ethernet switches are set to lose share, while 100G switches are set to double. Crehan Research (see Figure 1) says that 100G port shipments will pass 40G shipments in 2017, and will pass 10G shipments in 2021.



Figure 1: 100G Port Shipments Reaching Critical Mass, as 40G and 10G Shipments Decline

100 Gigabit by the Numbers

The increase in available link speeds and utilization creates new challenges for both the architectures upon which traditional network monitoring solutions are based and for the resolution required to view network behavior accurately. Let’s look at some numbers:

100G Capture to Disk

Traditional network monitoring architectures depend on the ability to bring network traffic to a NIC and write that data to disk for post-analysis. Let’s look at the volume of data involved at 100G:



(1)




(2)




(3)

By equation (3), at 100 Gbps on one link, in one direction, a one-terabyte disk will be filled in 80 seconds. Extending this calculation for one day, in order to store the amount of data generated on one 100 Gbps link in only one direction, 0.96 petabytes of storage is required:




(4)

Not only is this a lot of data (0.96 petabytes is about 1,000 terabytes, equivalent to 125 8TB desktop hard drives), but as of this writing (Aug 2017), a high-capacity network performance solution from a leading vendor can store approximately 300 terabytes, or only eight hours of network data from one highly utilized link.

100G in the Network – What is a Burst, and What is Its Impact?

A microburst can be defined as a period during which traffic is transmitted over the network at line rate (the maximum capacity of the link). Microbursts in the datacenter are quite common – often by design of the applications running in the network. Three common reasons are:

  • Traffic from two (or more) sources to one destination. This scenario is sometimes considered uncommon due to the low utilization of the source traffic, although this impression is the result of lack of accuracy in measurements, as we’ll see when we look at the amount of data in a one-millisecond burst.
  • Throughput maximizations. Many common operating system optimizations to reduce the overhead of disk operations or NIC offloading of interrupts will cause trains of packets to occur on the wire.
  • YouTube/Netflix ON/OFF buffer loading. Common to these two applications but frequently used with other video streaming applications is buffer loading from 64KB to 2MB – once again, this ON/OFF transmission of traffic inherently gives rise to bursty behavior in the network.
The equations below translate 100 gigabits per second (1011 bits/second) into bytes per millisecond:



(5)



(6)

The amount of data in a one-millisecond spike of data is greater than the total amount of (shared) memory resources available in a standard switch. This means that a single one-millisecond spike can cause packet drops in the network. For protocols such as TCP, the data will be retransmitted; however, the exponential backoff mechanisms will result in degraded performance. For UDP packets, the lost packets will translate to choppy voice or video, or gaps in market data feeds for algorithm trading platforms. In both cases, since the packet drops cannot be predicted in advance because the spikes and bursts will go undetected without millisecond monitoring resolution, the result will be intermittent behavior that is difficult to troubleshoot.

Network Monitoring Architecture


Typical Monitoring Stack
The typical network monitoring stack is described in Figure 2. At the bottom is the infrastructure – the switches, routers and firewalls that make up the network. Next, in the blue layer are TAPs and SPAN ports – TAPs are widely deployed due to their low cost, and most infrastructure devices provide some number of SPAN ports. The traffic from these TAPs and SPANs is then taken to an aggregation device (or matrix switch or “packet broker”) – at this point, a high number of links, typically 96 10G, are taken to a small number of tool ports, usually four 10G ports (a standard high-performance configuration). At the top are the network tools – these tools take the network traffic fed to them from the aggregation layer and provide the graphs, analytics and drilldowns that form dashboards/visualization.


Figure 2: Typical Network Monitoring Stack

Scalability of Network Monitoring Stack

Let’s now evaluate how this typical monitoring stack scales in high-speed environments.

·         Infrastructure: As evidenced by the transition to 100G, the infrastructure layer appears to be scaling well.

·         TAP/SPAN: TAPs are readily available and match the speeds found in the infrastructure layer. SPANs can be oversubscribed or alter timing, leading to loss of visibility and inaccurate assumptions about production traffic behavior.

·         Aggregation: The aggregation layer is where the scaling issues become problematic. As in the previous example, if 48 links are monitored by four 10G tool ports, the ratio of “traffic in” to monitoring capability is 96:4 (96 is the result of 48 links in two directions) or, reducing, an oversubscription ratio of 24:1. Packet drops due to oversubscription mean that network traffic is not reaching the tools – there are many links or large volumes of traffic that are not being monitored.

·         Tools: The tools layer is dependent on data acquisition and data storage, which translates to the dual technical hurdles of capturing all the data at the NIC as well as writing this data to disk for analysis. Continuing the example, at 96x10G to 4x10G at 10G, the percentage of traffic measured (assuming fully utilized links) is 4x10G/96x10G, or 4.2%. As the network increases to 100G (but the performance of monitoring tools does not), the percentage of traffic monitored drops further to 4x10G/96x100G, or 0.42%.

It is difficult to provide actionable insights into network behavior when only 0.42% of network traffic is monitored, especially during levels of high activity or security attacks.
Figure 3: Scalability of Network Monitoring Stack

Current Challenges with Traditional Monitoring Environments

Monitoring Requirements in the Datacenter

Modern datacenter monitoring has a number of requirements if it is to be comprehensive:  
  • Monitoring Must Be Always-On. Always-on network performance monitoring means being able to see all of the traffic and being able to perform drill-downs to packets of interest on the network without the delay incurred in activating and connecting a network tool only after an issue has been reported (which leads to reactive customer support rather than the proactive awareness necessary to address issues before customers are affected). Always-on KPIs at high resolution provide a constant stream of information for efficient network operations.
  • Monitoring Must Inspect All Packets. To be comprehensive, NPM must inspect every packet and every bit at all speeds—and without being affected by high traffic rates or minimum-sized packets. NPM solutions that drop packets (or only monitor 0.24% of the packets) as data rates increase do not provide the accuracy, by definition, to understand network behavior when accuracy is most needed – when the network is about to fail due to high load or a security attack.
  • High Resolution is Critical. Resolution down to 1ms was not mandatory in the days when 10Gbps networks prevailed. But there’s no alternative today: 1ms resolution is required for detecting problems such as transients, bursts and spikes at 100Gbps.
  • Convergence of Security and Performance Monitoring (NOC/SOC Integration). Security teams and network performance teams are often looking for the same data, with the goal of interpreting it based on their area of focus. Spikes and microbursts might represent a capacity issue for performance engineers but may be early signs of probing by an attacker to a security engineer. Growing response time may reflect server loads to a performance engineer or may indicate a reflection attack to the infosec team. Providing the tools to allow correlation of these events, given the same data, is essential to efficient security and performance engineering applications.
A Look Ahead

100G is just the latest leap in Ethernet-based transport in the enterprise. With 100G port shipments growing at the expense of 40G and 10G, the technology is on a trajectory to become the dominant data center speed by 2021. According to Light Reading, “We are seeing huge demand for 100G in the data center and elsewhere and expect the 100G optical module market to become very competitive through 2018, as the cost of modules is reduced and production volumes grow to meet the demand. The first solutions for 200G and 400G are already available. The industry is now working on cost-reduced 100G, higher-density 400G, and possible solutions for 800G and 1.6 Tbit/s.”


Broadcom's acquisition of Brocade faces delay

Broadcom's pending acquisition of Brocade is facing a regulatory delay. The companies withdrew and re-filed their joint voluntary notice to the Committee on Foreign Investment in the United States (CFIUS), triggering a new 45-day investigation period. Brocade and Broadcom now anticipate the acquisition to be completed by November 30, 2017, subject to clearance from CFIUS.

Brocade now plans to directly sell its data center switching, routing and analytics business to Extreme Networks, instead of waiting for the Broadcom deal to first and then making the sale, as had been previously agreed. Brocade and Extreme Networks expect this deal to close this transaction prior to the closing of Broadcom's acquisition of Brocade.

"We are actively engaged with CFIUS and remain committed to Broadcom's proposed acquisition of Brocade," said Lloyd Carney, CEO of Brocade. "We continue to work diligently and cooperatively with Broadcom to close the transaction as soon as possible in a challenging and dynamic policy and regulatory environment. In the meantime, we are pleased to announce an agreement to divest our data center networking business to Extreme Networks, which we believe is in the best interest of our shareholders, customers, partners and the employees aligned with the business."

Broadcom to Acquire Brocade for Fibre Channel Business

Broadcom agreed to acquire Brocade Communications Systems for $12.75 per share in an all-cash transaction valued at approximately $5.5 billion, plus $0.4 billion of net debt.

Broadcom plans to keep Brocade's Fibre Channel storage area network (FC SAN) switching business and divest Brocade’s IP Networking business, consisting of wireless and campus networking, data center switching and routing, and software networking solutions.

Broadcom expects to fund the transaction with new debt financing and cash available on its balance sheet.

The companies said the deal is not subject to any financing conditions, nor is it conditioned on the divestiture of Brocade’s IP Networking business.

Broadcom said key reasons for the acquisition include the profitability margin for Brocade's FC SAN business, which currently comprises vast majority of Brocade’s non-GAAP operating profit.

Extreme to Acquire Brocade's Switching Business for $55 Million

Extreme Networks agreed to acquire Brocade Communications Systems' data center switching, routing, and analytics business from Broadcom following Broadcom's acquisition of Brocade. The deal is valued at $55 million in cash, consisting of $35 million at closing and $20 million in deferred payments, as well as additional potential performance based payments to Broadcom, to be paid over a five-year term. The sale is contingent on Broadcom closing its acquisition of Brocade, previously announced on November 2, 2016 and approved by Brocade shareholders on January 26, 2017. Broadcom presently expects to close the Brocade acquisition in its third fiscal quarter ending July 30, 2017.

Extreme expects the acquisition to be accretive to cash flow and earnings for its fiscal year 2018 and expects to generate over $230 million in annualized revenue from the acquired assets. The acquisition is expected to close within 60 days following the closing of Broadcom's acquisition of Brocade.

"The add

US DoJ approves Centurylink + Level 3 merger with conditions

The U.S. Department of Justice cleared CenturyLink's pending acquisition of Level 3 Communications with certain conditions, including the divestiture of certain Level 3 metro network assets and certain dark fiber assets.

Specifically, the combined company is required to divest Level 3 metro network assets in Albuquerque, N.M.; Boise, Idaho; and Tucson, Arizona. In addition, the combined company is required to divest 24 strands of dark fiber connecting 30 specified city-pairs across the country in the form of an Indefeasible Right of Use (IRU). CenturyLink said that because these fibers are not currently in commercial use, this divestiture will not affect any current customers or services.

The acquisition sill requires regulatory approval from the Federal Communications Commission and the California Public Utilities Commission.

CenturyLink to Acquire Level 3 for $34 Billion

CenturyLink agreed to acquire Level 3 Communications in a cash and stock transaction valued at approximately $34 billion, including the assumption of debt.

The deal combines CenturyLink's larger enterprise customer base with Level 3's global network footprint. The companies said this scale will enable further investment in the reach and speeds of its broadband infrastructure for small businesses and consumers. After close, CenturyLink's Glen Post will continue to serve as Chief Executive Officer and President of the combined company.  Sunit Patel, Executive Vice President and Chief Financial Officer of Level 3, will serve as Chief Financial Officer of the combined company. The combined company will be headquartered in Monroe, Louisiana and will maintain a significant presence in Colorado and the Denver metropolitan area.

Under terms of the agreement, Level 3 shareholders will receive $26.50 per share in cash and a fixed exchange ratio of 1.4286 shares of CenturyLink stock for each Level 3 share they own, which implies a purchase price of $66.50 per Level 3 share (based on a CenturyLink $28.00 per share reference price) and a premium of approximately 42 percent based on Level 3's unaffected closing share price of $46.92 on October 26, 2016. Upon the closing  CenturyLink shareholders will own approximately 51 percent and Level 3 shareholders will own approximately 49 percent of the combined company.

EdgeX Foundry announces its first release for Edge IoT

EdgeX Foundry, which is the open source project hosted by The Linux Foundation that is focused on Internet of Things (IoT) edge computing, announced its first major code release.

The "Barcelona" software release, which will be available later this month, reflects the collaborative effort by more than 60 member organizations to build out and support an ecosystem for Industrial IoT (IIoT) solutions. The software release includes important work on “north side” Export Service interfaces that provide connectors to Azure IoT Suite and Google IoT Core as well as support for connections via MQTTS and HTTPS.

The EdgeX Foundry project was launched in April 2017.

“We believe that EdgeX will radically change how businesses develop and deploy IIoT solutions, and we are excited to see the community rally together to support it,” said Philip DesAutels, senior director of IoT at The Linux Foundation. “Barcelona is a significant milestone that showcases the commercial viability of EdgeX and the impact that it will have on the global Industrial IoT landscape.”

Zain Saudi Arabia tests NB-IoT

Zain Saudi Arabia is testing NB-IoT (Narrowband Internet of Things) technology at a live site in Mina area of Makkah Province. Nokia is the technology partner.

The trial focuses on smart metering. NB-IoT is used to communicate temperature, humidity and air pressure from a remote location via a Nokia Flexi Multiradio 10 LTE base station at 900 MHz.

NB-IoT is a 3GPP Release 13 radio access technology designed to enable connectivity to IoT devices.

IEEE publishes 5G and Beyond Technology Roadmap White Paper

IEEE published a white paper summarizing the challenges and opportunities in building and sustaining a 5G and beyond ecosystem.

The whitepaper, which is titled "5G and Beyond Technology Roadmap", describes key technology trends that will impact design drivers and challenges for technologies to provide simultaneous wireless communication, massive connectivity, tactile internet, quality of service and network slicing. Some topics addressed include: applications and services, hardware, MIMO, mm-wave, edge automation platform, security, standardization building blocks and testbed. The white paper is available for download at no cost on the IEEE 5G web portal’s Roadmap page. The IEEE 5G and Beyond Technology Roadmap will be periodically updated with forecasts for three-, five- and 10-year horizons.

“5G consolidates the trend in convergence of technologies and underlying standards with emerging solutions offering exciting possibilities not only to consumers but also to industries,” said Mischa Dohler, co-chair, IEEE 5G and Beyond Technology Roadmap Working Group. “Disruption will happen at many levels, most importantly through changes in the value chain, adoption of flexible systems management and orchestration, as well as emergence of innovative mobile connectivity technologies.”

The white paper can be downloaded here: https://5g.ieee.org/roadmap

Yahoo now believes all 3 billion user accounts hit by breach

Yahoo, which is now part of Verizon's Oath division, provided notice that all of its 3 billion user accounts were impacted by the 2013 data breach.  Previously, Yahoo had disclosed that more than one billion of the approximately three billion accounts existing in 2013 had likely been affected. The company believes that the user account information that was stolen did not include passwords in clear text, payment card data, or bank account information.

In Memorium: Paul S. Otellini, 1950 – 2017

Paul Otellini, who served as the fifth CEO of Intel from 2005 to 2012, passed away in his sleep Monday, Oct. 2, 2017, at the age of 66.

Otellini, who joined Intel in 1974 and rose through the ranks, is remembered for many accomplishments at the company. He successfully guided Intel through many technology and market transitions, including the financial turmoil of 2008. Intel noted that in the last full year before Otellini was named CEO, its revenue was $34 billion; by 2012, the number had grown to $53 billion. During his tenure, Intel won the Apple PC business and expanded its presence in security, software and mobile communications. As Intel CEO, Otellini was preceded by Craig Barrett and succeeded by Brian Krzanich.

During his retirement, Otellini was active in several philanthropic and charitable organizations, including the San Francisco Symphony and San Francisco General Hospital Foundation. He is survived by his wife, Sandy; his son, Patrick; and his daughter, Alexis.

Monday, October 2, 2017

Vodafone and NOS reach networking sharing deal in Portugal

Vodafone Portugal has reached a network sharing agreement with NOS (formerly Portugal Telecom Multimedia), a Portuguese media holding company whose main assets include a satellite, cable operator, and ISP, a mobile phone operator, a movie distributor (NOS Audiovisuais) and a virtual carrier of mobile phone services.

Under the deal, the companies will deploy and share a fibre-to-the-home network which will be marketable to around 2.6 million homes and businesses in Portugal. The two companies will provide reciprocal access to each other’s networks on commercially agreed terms.

Key elements include:

  • Vodafone Portugal will gain access to 1.3 million homes and businesses in new areas, consisting of new fibre builds in NOS’s current cable footprint, NOS’s existing fibre reach in areas greenfield to Vodafone, and building homes in new areas. This will increase its total coverage from 2.7 million to around 4.0 million, representing 80% of the households in the country.
  • Each party will deploy, but not share, the link between the central office and the fibre backbone, active equipment and CPEs. Customer connections and activations will be independent of each other.
  • Marketing of services across the joint network will commence from the beginning of calendar 2018. 
  • Both Vodafone Portugal and NOS will maintain complete autonomy and flexibility in respect of their respective retail offers.
  • Vodafone said the arrangement in Portugal is consistent with its fixed infrastructure strategy, which aims for an optimal mix of build, strategic partnerships, wholesale and buy approaches. 

Level 3 expands its network-based adaptive firewall service

Level 3 Communications is expanding its cloud-based, next-generation Adaptive Network Security footprint to Asia Pacific and Africa.

Level 3's Adaptive Network Security is a network-based firewall service that includes intrusion defense systems and intrusion protection systems, anti-malware sandboxing, data loss protection, URL and web content filtering, and application awareness and control. 

Customers can access the firewall service via a constellation of security gateways distributed across Asia Pacific, Europe, Middle East and Africa and North America. All of these gateways are connected via Level 3's global VPN backbone.

Level 3 said it currently monitors over 1.3 billion security events across 94 billion NetFlow sessions daily, in addition to activity by over 5,000 command and control servers (C2s) and malicious IPs, creating rules to detect and block attacks.

"While the threat landscape continues to evolve, enterprises are seeing the cost and complexity of security solutions continue to rise. Level 3's expansion of Adaptive Network Security marks the next step in delivering adaptive networking solutions to break the hardware dependency cycle and reduce the administrative burden of trying to stay ahead of bad actors. Global businesses can leverage Adaptive Network Security for the latest security technology to keep their networks and workforces secure while they focus on what matters most to their business," stated Chris Richter, SVP of Global Managed Security Services for Level 3.

Telecom disaster continues in Puerto Rico: 88% of cell sites still down

Nearly ten days after Hurricane Maria struck Puerto Rico,  88.3% of cell sites across the island remain out of service, according to the FCC. The figure is basically unchanged in the past few days.

In the U.S. Virgin Islands, 68.9%  of cell sites remain down. All of the cell sites in St. John are still out of service.

The FCC continues to post a daily outage report but has not yet convened a public hearing into the disaster, nor has it speculated as to when the public should expect services to be restored. Claro (America Movil), AT&T, T-Mobile and Sprint are the major cellular operators serving Puerto Rico.

Sandra Torres, the president of Puerto Rico's telecom regulatory authority (Junta Reglamentadora de Telecomunicaciones JRT) told local media on Sunday that the goal is to restore 50% of cell sites within 30 days. She said AT&T has installed a few COW (Cell on Wheels) units around the island, but no number was given. The JRT website remains offline.

PREPA Networks, the dominant fiber network operator across Puerto Rico and a business unit of the island's hard-hit electrical utility company, has not provided any public statements about the damage to its network since before the hurricane.

Ajit Pai confirmed for new term as FCC Chairman

The U.S. Senate voted to confirm Ajit Pai for a second term as chairman of the FCC. Ajit Varadaraj Pai was nominated for FCC Commissioner by President Obama in 2011. Pai took over the seat abandoned by Meredith Baker who left the FCC to take a job as a lobbyist for Comcast. Pai was previously a Partner in the Litigation Department of Jenner & Block LLP. Previously, Pai worked in the Office of the General Counsel at the Federal Communications Commission, where he served as Deputy General Counsel, Associate General Counsel, and Special Advisor to the General Counsel. He holds a B.A. from Harvard University and a J.D. from the University of Chicago.

Separately, Dr. Eric Burger was appointed Chief Technology Officer of the FCC. Prior to joining the Commission, Dr. Burger served as director of the Security and Software Engineering Research Center in Washington, DC. Previously, he has taught computer science at Georgetown University, George Mason University, and The George Washington University. He holds a Ph.D. in computer science from Illinois Institute of Technology, an MBA from Katholieke Universiteit Leuven in Belgium, and bachelor’s degree from Massachusetts Institute of Technology.

Larry Ellison claims Oracle 18c is first Autonomous Database

Larry Ellison introduced what he calls "the world's first, 100%, self-driving, self-scaling and self-repairing Autonomous Database.

Oracle 18c, which will be released later this year, uses machine learning to eliminate human labor involved with managing the database. The automation includes upgrades, security patches and tuning to ensure a 99.995% uptime guarantee. Ellison claims this automation will reduce typical AWS Redshift bills by over 50% while delivering significantly better performance. Demos at Oracle World showed 6 ~ to 8X advantage for Oracle compared to AWS.

Some of the new features in Oracle 18c:

  1. 4x faster in-memory OLTP access
  2. 5x faster RAC for high-concentration OLTP
  3. 2X faster in-memory column store
  4. 100x faster in-memory analytics for external data
  5. 100x faster approximate query processing
  6. New machine learning algorithms


VIRTUS plans massive data center in West London

VIRTUS Data Centres announced plans two new buildings at its eight-acre campus near Stockley Park, West London.

The new two facilities, known as LONDON5 and LONDON6, measure 34,475m2 and are designed to deliver 40MW of IT load. LONDON5 is expected to be ready in early 2018.

The VIRTUS campus is 16 miles from central London on the main fibre routes from London to Slough, and 7 miles from Slough. The company said this expansion strengthens its position as the largest hybrid colocation provider in the London metro area.  These two new data centres will provide an additional 17,000NTM (net technical metres) of IT space and will increase VIRTUS’ portfolio in London to approximately 100MW across their six facilities in Slough, Hayes and Enfield, with the power to expand to circa 150MW on the various campuses.

Update on Australia's Mobile Market



by James E. Carroll

Telstra faces scrutiny as it prepares for further transformation

The headline from Saturday’s The Sydney Morning Herald on 19-August-2017 reads “End of the line: Telstra’s day of reckoning has arrived.” At issue is shareholder discontent following a disappointing fiscal year, shrinking dividends, and rising competition. Earlier in the week Telstra’s CEO Andy Penn announced that starting next year the company will trim its dividend 30%, marking the first time in 19 years that the company cuts its dividend. Shares in the company (ASX:TLS) closed on Friday at A$3.90, down roughly 10% from two days earlier.

Last week, Telstra outlined two other financial maneuvers that drew scrutiny from investors and the media. First, Fox Sports Australia will be merged into Foxtel, giving the media company more valuable content, but also reducing Telstra’s stake in the venture. Eventually, Foxtel may pursue an IPO, which may benefit Telstra but move it further away from being a media company in its own right. Unlike many global operators who are rushing to become integrated network + content players, this arrangement appears to take Telstra in the other direction.

Second, in a move to satisfy bond holders, Telstra may bundle up all future receipts from NBN into a separate security. While this would reduce debt, it also seems to take away more of the historical base of the company. What will be left? The judgement from The Sydney Morning Herald was harsh: “This week's developments offer striking evidence of how Telstra has utterly failed to transform itself from its monopoly past.”

Rising competition
To be fair, Telstra is facing new competition in both the fixed-line market and mobile services. Australia’s National Broadband Network constrains what could be done in terms of fixed-line residential services, where Telstra is moving from being the primary fixed network operator to one of many retailers competing in a lower-margin environment.


In mobile, Telstra has built a world-class network that routinely is first to deploy the latest and greatest technical innovations. Peak download speeds of up to 1 Gbps over the Telstra 4.5 G network are now possible in some cities across the country. Management is quite aware of the digital transformation occurring across markets and knows that to stay ahead it will have to invest heavily in its network. The 5G rollout is just over the horizon.

To keep up, Telstra argues that it must accelerate its transformation, even at the expense of generous dividends. The company has previously stated its intention to invest up to A$3 billion in additional capital expenditure over the next three years, an amount that is in addition to its usual capital spend.
This takes the expected total capital investment, including spectrum, over the three years to FY19 to more than $15 billion. Since November 2016, Telstra has invested around $750 million in its network, while reducing underlying fixed costs by $244 million. These cost reductions will now be accelerated, bringing forward a $1 billion net productivity target by one year to FY20.

The FY 2017 Results

The just-published financial results show that Telstra remains a profitable company, although less so than before, with many possibilities to grow, even with Australia’s GDP expanding by an anemic 0.3% in Q1 2017 and possibly remaining flat for the year as a whole. In most of its product categories, Telstra’s fiscal 2017 revenue shrank, but so did its costs as it gains efficiency.
On a reported basis from continuing operations, Telstra’s total income1 increased 4.3 per cent to $28.2 billion. EBITDA increased 2.0 per cent to $10.7 billion and basic earnings per share increased 2.8 per cent to 32.5 cents. nbn connections grew by 676,000 to 1,176,000 bringing total market share (excluding satellite) to 52 per cent

“It is against the backdrop of these market dynamics that we announced during the year our intention to invest up to $3 billion over the next three years to achieve a further step change in our strategic positioning to deliver economic benefits of more than $500 million of EBITDA by 2021,” stated Telstra CEO Andrew Penn.

Here are some top-line results
 

Some Telstra highlights for 2017

Telstra Retail income, comprised of Telstra Consumer and Telstra Business, was largely flat excluding the impact from the Mobile Terminating Access Service (MTAS) regulatory decision, down 0.2 per cent. O
Telstra now has 17.5 million mobile customers, including 7.6 million postpaid handheld retail customers
Postpaid handheld revenue ended the period flat at $5,448 million, but importantly, it was 0.8 per cent higher in 2H17 compared with the previous corresponding period and 0.9 per cent higher compared with 1H17. While postpaid handheld ARPU declined by 2.5 per cent from $69.45 to $67.70 (excluding the impact of mobile repayment options), there was continued growth in minimum monthly commitments offset by the impact of factors such as unlimited calls, larger data allowances, lower cost of excess data, and a higher mix of bring your own (BYO) device plans.
Telstra's 4G network now reaches 99 per cent of the Australian population
Telstra is now deploying 577 new 3G/4G base stations and up to 250 small cells under the Federal Government’s Mobile Black Spot Program
Telstra's mobile network now has more than 100 sites across five capital city CBDs capable of delivering peak speeds of 1Gbps (typically 5Mbps-300Mbps)
In ADSL, more than 80 per cent of Telstra customers now have speeds that support a quality video experience
The company says it is on track for its first 5G trials early next year on the Gold Coast
In 2016, Telstra conducted 5G radio testing in Melbourne, delivering peak download speeds of greater than 20Gbps
This year, Telstra decommissioned its 2G mobile network, which was first launched in 1993.
The Telstra Live Pass, which lets customers watch every AFL, NRL and National Netball game live, fast and data-free, now has 1.45 million subscribers
Telstra TV now has with 827,000 devices in market and a growing number of apps including Netflix, BigPond Movies, Stan, Foxtel Now and Yupp TV
Fixed revenue declined by 4.7 per cent to $6,407 million. Fixed voice revenue decreased by 9.1 per cent to $3,125 million while fixed data revenue grew by 1.6 per cent to $2,553 million.
The company says the Telstra Programmable Network is helping enterprise customers with digital transformation by transforming the way they interact with the network. The Telstra Programmable Network uses SDN and NFV to provide flexible bandwidth across Asia Pac. Telstra owns and operates the largest subsea cable network in the Asia Pacific region. This year Telstra plans to introduced assured availability across the busy Hong Kong, Singapore and Japan triangle. This utilises the scale and diversity of the network to reroute and maintain connectivity in the event of a cable cut or damage due to a natural disaster.
Telstra has entered into an agreement with Anent, Google, Indosat Ooredoo, Singtel and SubPartners to build a new international subsea cable to connect Singapore, Indonesia and Australia.
During the year, Telstra was awarded a $243 million 10-year deal with Australia's Department of Foreign Affairs and Trade to provide a global WAN across 157 sites.
In China, Telstra sold the remaining 6.5 per cent interest in Chinese online business Auto home to Ping An Insurance Group for US$217 million (A$283 million)
During the year, Telstra made several strategic investments, including in VeloCloud Networks (SD-WAN) and Crowdstrike (cloud-delivered endpoint protection).
In FY17, the number of first stage (Level 1) complaints made about Telstra to the Telecommunications Industry Ombudsman increased, with nbn-related issues being a key driver.
During the year, the company activated its one millionth Telstra Air hotspot - Australia’s largest Wi-Fi network.
Telstra currently has 32,000 employees in over 20 countries
In FY18, Telstra expects Income in the range of $28.3 to $30.2 billion and EBITDA of $10.7 to $11.2 billion.  CAPEX is expected to be between $4.4 - $4.8 billion or approximately 18 per cent capex to sales and free cashflow is expected to be in the range of $4.4 - $4.9 billion.
Telstra expects total dividends in respect of FY18 to be 22 cents per share fully-franked, including both ordinary and special dividends.
Telstra’s objective is to have at least four women on the Board, representing a female gender representation among non-executive Directors of at least 40 per cent.
In June, Telstra announced that it has acquired Company85, a UK-based technology services business headquartered in London that offers data centre, workspace, cloud, security and network services. Established in 2010 and based in London, Company85 has approximately 75 employees and focuses on providing services to major UK-based business and government customers including the BBC, NHS, Royal Mail and London City Airport, as well as multinational corporations including AstraZeneca, J.P. Morgan and Roche.

On the mobile side, Telstra has built a world-class network that often leads globally in new technology rollout. However, the market is saturated with competitors, causing growth to slow and ARPU likely to decline.Commentary from Telstra executives in its recent financial report speculate that a fourth mobile network operator is a possibility from the government’s perspective. Mobile market share in Australia as of June 2017 is roughly as follows, according to Kantar, the market research firm:

Telstra – 39%, down from 41% a year earlier
Optus – 24.2%, up from 21.8% a year earlier
Vodafone – 14.4% down from 15.2% a year earlier.

The remaining percentages are attributed to at least 5 mobile virtual network operators (MVNOs) using infrastructure from these top players.

Update on SingTel’s Optus

Optus, which is a wholly-owned division of SingTel, recently announced its intention to spend A$1 billion to strengthen and expand its mobile network in regional Australia by the end of June 2018.  The initiative will see the construction of 500 new mobile sites across regional and remote parts of Australia, including 114 sites under the Federal Government’s Mobile Blackspots Program. Optus will complete its 4G program by upgrading more than 1,800 sites from 3G to 4G. Optus will also add additional 4G capacity to more than 200 sites and continue to roll out satellite small cells, which provide mobile voice and data services to remote areas of Australia. Currently, Optus has 30 small cell sites across regional Western Australia, South Australia and the Northern Territory. Some of this budget may also go to spectrum licences in regional areas.

Optus spectrum holdings include

700 MHz – 2 x10 MHz nationally
900 MHz – 2 x 8.4 MHz nationally
1800 MHz – 2 x 15 MHz in Sydney, Melbourne, Brisbane, Perth and Adelaide
1800 MHz regional – between 2 x 20 and 2 x 25 MHz in regional areas
2.1 GHz – 2 x 20 MHz in all 8 Australian capitals and 5 MHz in regional areas
2.1 GHz apparatus – up to 2 x 10 MHz in regional and remote areas
2.3 GHz – 98 MHz in Brisbane, Adelaide and Perth; 91 MHz in Sydney and Melbourne; 70 MHz in Canberra
2.6 MHz – 2 x 20 MHz nationally
3.5 GHz – 100 MHz in Melbourne; 96.5 MHz in Sydney; 65 MHz in Brisbane, Perth, Adelaide and Canberra

On August 1st, Optus officially deactivated its 2G network, which was first turned on in 1993. All traffic has been moved to the 3G and 4G networks.  The migration also impacted Virgin Mobile, which operates as an MVNO on the Optus infrastructure. 4G customers now account for 60% of Optus’ total mobile customer base.

Additional spectrum bands could be coming

The ACMA has several proceeding underway to open further spectrum bands for new services. Specifically, the 1.5 GHz and 3.6 GHz bands have progressed from an initial investigation to a preliminary replanning stage for mobile broadband reuse. The 3.6 GHz is being given a higher priority of 1.5 GHz planning in order to give certainty to incumbent services currently using the band.

Optus 5G trials with Huawei

Earlier this year, Optus completed a pre-5G field trial of Huawei’s Massive MIMO AAU solution, which has 16 beamforming streams in a 128T128R configuration. Optus reported aggregate cell throughput of 665Mbps over a single frequency channel of 20MHz on Optus’ 2300MHz frequency band, shared by 16 devices.

Since February, Optus has been running 4.5G network services across the suburb of Macquarie Park, Sydney’s hi-tech innovation district, north-west of the city. Peak speeds of 1.03 Gbps have been reported in the downlink. Optus says it will have similar capabilities working in selected capital cities. By February 2018, the goal is to reach over 70% of the Optus network in Sydney, Melbourne, Brisbane, Perth and Adelaide. Here again, Huawei is the lead supplier. The Optus technology trials and rollouts builds on a strategic alliance focused on joint R&D that parent telco Singtel signed with Huawei in 2014.

However, SingTel has also conducted pre-5G trials with ZTE in Singapore, and earlier this month, Singtel stated that it will team with Ericsson, Huawei and ZTE to deploy massive MIMO technology at the Marina Bay area. The additional capacity was desired for Singapore’s National Day celebrations, with further deployments planned for the Singapore F1 Night Race and the New Year countdown event.

Optus Financial Trends

Optus recently reported a strong Q2 with operating revenue increasing 4.8 per cent to A$2,095 million due to higher Mobile and NBN revenues, partially offset by decline in Wholesale Fixed revenues.  Some highlights:
EBITDA increased 2.6 per cent to A$662 million underpinned by growth in mobile and fixed businesses.
Net Profit was stable at $171 million following an increase in depreciation and amortisation from network investments and net finance expenses.
Free cash flow for the quarter was A$120 million, up from $99 million (YoY).
With an increased focus on postpaid customers, Optus added over 54,000 postpaid subscribers.
Postpaid handset ARPU improved 1.8 per cent excluding Device Repayment Plan (DRP) credits.
The number of 4G mobile customers increased by 85,000 this quarter, resulting in the total 4G customer base increasing to 5.88 million as at 30 June 2017.
Optus continued to invest in its mobile network, reaching 96.4% of 4G population coverage.
In Consumer Mass Market Fixed, operating revenue grew 13.2% mainly on higher NBN migration and NBN customer growth of 143,000 from a year ago.
Excluding NBN migration and preparation fees, Mass Market Fixed revenue grew 4.4%.
Optus now has 279,000 NBN broadband customers.

Update on Vodafone Hutchison Australia (VHA)

As of 30 June 2017, VHA’s customer base was approximately 5.7 million. Vodafone Hutchison Australia (VHA) was created through the 2009 merger between Vodafone Australia and Hutchison 3G Australia. The old Three brand was phased out in 2011. More recently, the legacy 2G network has been deactivated and efforts are focused on upgrading the network and migrating subscribers to 4G plans. The company projects an almost $2 billion spend in 2017 on its mobile network and technology to increase coverage, capacity, performance and competition. New construction or upgrades are underway in approximately 450 sites across the country.

Key VHA H1 performance highlights as of 30-June-2017:

• Total customer base grew by approximately 190,000 customers to 5.7 million, 3.5% increase YoY
• EBITDA increased 15.9% YoY to $477.3 million
• Total revenue increased 3.0% YoY to $1,651 million
• ARPU for the six months to 30 June 2017 grew 2.0% to $45.89 on a gross basis
• Roaming revenue increased 19.7% YoY
• Loss decreased 50.3% YoY to $81.5 million
• Net Promoter Score increased 9 points between June 2016 and June 2017
VHA has just rolled out simplified mobile service plans that eliminate two-year lock in consumer contracts. VHA is interest-free device plans on 12, 24 or 36 monthly instalments, separating mobile services (voice, text and data) and handset repayments. Mobile data allowances range from 3 GB to 50 GB per month depending on the plan.

Earlier this year, VHA secured 2 x 5MHz of spectrum in Australia’s 700MHz band auction for the reserve price of $286 million, or roughly $1.25 per MHz per head of population covered by the footprint. In addition, VHA renewed the lease on its 2100 MHz spectrum for $544 million, including 2 x 25 MHz in Sydney and Melbourne. In metropolitan areas, VHA now claims the second largest metropolitan low-band spectrum holding, and the largest holdings in the 1800 MHz and 2100 MHz bands.

VHA’s spectrum holdings:
700MHz: 2 x 5MHz
850MHz: 2 x 10 MHz in metropolitan areas, 2 x 5 MHz in regional areas
900 MHz: 2 x 8.2 MHz nationally
1800 MHz: 2 x 30 MHz in SYD/MEL, 2 x 25 MHz in BNE/ADL/PER/CBR, 2 x 5 MHz to 2 x 10 MHz in other areas
2100 MHz: 2 x 25 MHz in SYD/MEL, 2 x 20 MHz in BNE/ADL/PER, 2 x 10 MHz in CBR/HOB/DRW, 2 x 5 MHz in other areas

“Already, the VHA network reaches more than 22 million Australians, and is recognised as the top-performing network in cities with populations above 100,000. And we’re only going to build on that into the future. In 2017, we are putting close to $2 billion into mobile technology, including almost 1,800 new and upgraded sites, spectrum licence payments, and our continued fibre transmission rollout. Our customers know how good our network is, and this positive customer sentiment is reflected through our Net Promoter Score. We are committed to giving customers an even better experience in more places, and offering them even more great value,” stated James Marsh, VHA’s Chief Financial Officer.

 “Preparations for our fixed broadband launch are also ramping up, and we know that many Australians are currently unhappy with their current internet service provider. Again, we plan to change the game by offering a service that is simple to understand and gives customers what they are paying for.”

Signing up for nbn’s Cell Site Access Service

In February 2017, Australia's nbn co signed its first agreement for its Cell Site Access Service (CSAS) wholesale product with Vodafone. Hutchison Australia (VHA). The nbn CSAS could be used by mobile operators to expand mobile coverage quickly and cost effectively. Through the CSAS agreement with VHA, the mobile carrier will shortly extend its network coverage in Molong, New South Wales utilising tower sharing and fibre services supplied by the nbn network.
Entering Australia’s fixed broadband market

Vodafone has just announced its entrance into Australia’s fixed broadband market using the nbn infrastructure. One feature of the service is a 4G backup capability that could be activated in the event on an nbn fault.  Vodafone’s service will initially launch in Sydney, Canberra, Melbourne, Geelong, Newcastle and Wollongong.

Cisco + Ericsson transformation project

It should also be noted that Vodafone Hutchison Australia is a marquee customer for the Cisco + Ericsson alliance. In January 2017, Ericsson and Cisco Systems confirmed their selection to transform and virtualise VHA’s networks to better prepare for new emerging services. The upgrade uses Ericsson Hyperscale Datacenter System and software components such as Ericsson Cloud Execution Environment, Ericsson Cloud Manager, Cloud SDN controller; together with Cisco WAN Automation Engine, Cisco Network Services Orchestrator (NSO), Cisco IP Network VNFs including IOS XR 9000v and Cloud Services Router 1000v, and both virtualized and physical security technologies such as the Adaptive Security Appliance and Cisco Firepower security gateway, along with services and support. Three years earlier, in 2014, VHA had selected Ericsson to replace and upgrade its earlier core network, including virtual EPC and virtual IMS/ Voice over LTE.

365 Data Centers, acquires two data centers in Florida

365 Data Centers, which operates eight data centers across the U.S., has acquired two data centers in southeast Florida markets. Financial terms were not disclosed.

The properties are located in Boca Raton and Fort Lauderdale and offer approximately 62,000 square feet of floor space, 8,000 square feet of business continuity space, 4.5 MW of power, and 330 miles of fiber providing direct connectivity to the NAP of the Americas in Miami with under one millisecond of latency.

Bob DeSantis, Chief Executive Officer of 365 Data Centers, stated, "This follow-on acquisition, within just 6 months of purchasing the 365 Data Centers platform, provides significant financial scale for 365 and accelerates our strategy of broadening the Company's customer and services base with more than 500 enterprise customers and a portfolio of scalable, retail and wholesale Network, IP blend, remote Disaster Recovery as a Service, virtual Cloud compute and storage, and Business Continuity product offerings."

IBM acquires Cloudigo for edge networking technology

IBM has acquired Cloudigo, a start-up based in Israel focused on advanced networking technology that moves the networking function from the server to the edge. Financial terms were not disclosed.

IBM said Cloudigo will work with its Cloud Innovation Lab, which is part of the IBM Cloud Infrastructure group.

Dimension Data names former SAP exec to head Americas

Dimension Data has appointed Ross Wainwright as Chief Executive Officer of Dimension Data in the Americas. Wainwright will report to Dimension Data’s Group CEO, Jason Goodall.

Prior to joining Dimension Data, Ross was SAP's Chief Customer Officer for its S/4HANA Cloud business unit. Before this, he was Global Head of Financial Services with an end-to-end responsibility for the SAP Financial Services industry; and Global Head of Financial Services managing the company’s Professional Services business. Ross also served as Chief Operating Officer for SAP North America, and Executive Vice President of Services for North America, where he was responsible for the direct leadership of over 3,400 professionals in the Services line of business, including sales, consulting delivery and education. He also held senior leadership positions within SAP’s License team and in Services Sales.