22 December 2005

Fewer Cows, More Demand For Milk

Something must give. I have lost count of the number of firms announcing expansion of dairy-related products in Russia this year. Yet no one is dealing with the underlying demand issue. Cow population declines from Itar Tass.

Companies in low margin commodity markets, such as raw milk, are not managed well enough to regularly make money. There is so much easy money around at the moment, especially if you can sit on the coat tails of the Chinovniki; why work hard for it instead.

These imbalances in the economy are not factored in to inflation forecasts. A combination of increasing protectionism (import tariffs etc), surging consumer demand, the need to import raw materials (dry milk, meat etc) and the extreme rapaciousness of Customs will keep inflation above forecasts throughout 2006. The good news is that consumers are reaching deeper in to their pockets and tax-advisory businesses are making a mint as companies find ever cleverer ways of circumventing the rent seekers.


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What is Libjingle?

A post on Google's opening of it's Libjingle; one from the Mr. Malik with a very good post on the AOL/Google deal and then a little update on my favorite (sic) voice app being less than forthcoming about how SIP and GTalk will interoperate. That they will is fantastic, but why not be honest and upfront about the technological challenges. It's not as though the early adopter community don't understand that SIP is not entirely dissimilar to Churchill's view on democracy; Democracy is the worst form of government except for all those others that have been tried.

SIP is cludgy (ask Martin Geddes - it's a Scottish thing) and a very heavy protocol. It wants to eat your cycles and it's not ubiquitous enough for easy end user inter-operability. Until someone develops a better mousetrap it's the one we have. I look forward to the day when my GizmoProject app/softphone will talk to my PC's brethern's GTalk via an intelligble UI. Tell us its a problem and it will take time - we believe you.

But the real point is that Skype was a flash in the pan. I posted a long, long time ago that Skype would make money for its founders but not for its owners. I will place a very large bet that a SIP-based inter-op solution will win out in the long-term - shit I did already. Win is not an economic term for financial investors.

Prediction for 2007; SIP goes mainstream, in the way that Bluetooth now is.












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21 December 2005

Stalin's army of man-apes

As if you did not know where the GAI came from; Boing Boing: Stalin's army of man-apes:

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15 December 2005

FSU Software Engineering Skills

On the back of a small company called Skype it would appear that the great Soviet Scientific Legacy theory can be wiped down and rolled out. There is a fair point here that it is not just software engineering that does it but entrepreneurial skills as well.

The Wild East: In the New York Times today, a visit to Skype Estonia:
Foreign investors are swooping into Tallinn's tiny airport in search of the next Skype (rhymes with pipe). The company most often mentioned, Playtech, designs software for online gambling services. It is contemplating an initial public offering that bankers say could raise up to $1 billion.

Indeed, there is an outlaw mystique to some of Estonia's ventures, drawn here to Europe's eastern frontier. Whether it is online gambling, Internet voice calls or music file sharing--Skype's founders are also behind the most popular music service, Kazaa--Estonian entrepreneurs are testing the limits of business and law.

And by tapping its scientific legacy from Soviet times and making the best of its vest-pocket size, Estonia is developing an efficient technology industry that generates ingenious products-often dreamed up by a few friends--able to mutate via the Internet into major businesses.

These entrepreneurs grow out of an energetic, youthful society, which has embraced technology as the fastest way to catch up with the West. Eight of 10 Estonians carry cell phones, and even gas stations in Tallinn are equipped with Wi-Fi connections, allowing motorists to visit the Internet after they fill up.

Such ubiquitous connectivity makes Tallinn's location midway between Stockholm and St. Petersburg seem less remote.

Even the short icebound days play a part, people here say, because they shackle software developers to the warm glow of their computer screens. For the 150 people who work at Skype, Estonia is clearly where the action is.


Hat tip to A Step At a Time and, of course Om Malik (no link required......)

Russia warned on poor diet, lifestyle

On the same day that Scotland was acknowledged as having the fattest children in Britain: Russia warned on poor diet, lifestyle.

Anyone for more kolbasa?

Nokia plans phone with SIP client for consumer VoIP

Yup that should go down well with their clients otherwise known as mobile operatorsNokia plans phone with SIP client for consumer VoIP.

As the article notes this will not work with Skype. So it looks as though 30-40% of the cellphone VOIP market just got closed off. Excluding those who will actually go out of their way to install something other than what came in the box. Extrapolated from IE usage that would be 20% of users.

Does this mark SIP's resurrection. It has a certain Bluetooth feel to it; slated for years and then - ubiquitous?

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Lada Theft, Roland Nash and Social Spending

Roland Nash draws an improbable link between having his Lada (why would anyone steal a Lada) stolen, the appalling state of Russian government infrastructure and pre-election mis-spending.



Interviews & Opinions - News - News Agency PRIME-TASS:

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13 December 2005

Russian Liberalism

Konstantin from Russia Blog points out tangentially that different countries have different definitions of liberalism. I would like to think that the liberals that we all hope get to be the future of Russia are those described in the last paragraph. Put in very simple terms they suffer from a branding problem not entirely dissimilar to that faced by the British Labour Party pre-Blair and the current Conservative Party.

It would be better to say that they are believers in liberal economics - that is a smaller role for the state. Which is not entirely unsurprising when you consider the additional burden that the state in its role as truly organized crime applies to their business.

Anyway worth a read.

My Political Credo:
What's my political credo? I'm a liberal intelligent who supports the state although it sounds as an oxymoron. Sergei Roy, the editor of intelligent.ru (you find the English version of this site at the sidebar) defines it better than I do. Here's his thoughts about the poor state of Russian liberalism published by Peter Lavalle's Untimely Thoughts.

Putin is indeed a statist, and thus the opposite of liberal, in that he has stopped the country rolling along an inclined plane into the abyss of disintegration. By the end of Boris Yeltsin, the Liberal Pretender’s, rule, Russia was fast becoming an assemblage of fiefdoms that were “territories of free hunting” (Khodorkovsky’s phrase) for oligarchs/barons of two types, regional and financial-industrial, without a clear demarcation line between them. It came to pass that the biggest and the most impudent of these, Mikhail Khodorkovsky, made a grab for ultimate political power, buying the services of 250 deputies of the Duma and preparing to sell to a U.S.-based transnational 50 percent of the biggest oil company in the land, which would have put him beyond the reach of Russian law.

Putin put a stop to that, in the nick of time, and did some other things to restore the notorious “vertical of power,” which on closer inspection proves nothing more nor less than a functioning system of governance securing a more or less unified legal, political, and economic space.

What about Putin, the Statist Pretender’s, liberal credentials? Alas, they are no better than his predecessor’s. Although some of the oligarchs have been slapped into line, the oligarchy as a system of post-communist order is still with us and, which is more, it is thriving. Some of the members of Putin’s government – Mikhail Zurabov, German Gref, Viktor Khristenko – enjoy the tags of liberals, or neo-liberals, or radical liberals. In my view, these appellations can only be applied to these people if the word “liberal” has irreversibly passed into the swearword section of the Russian vocabulary. Monetization of social benefits was one example of their liberalism, housing and utilities reforms will be another. As a result of these liberal reforms, oligarchic profits (say, Zurabov’s pharmaceutical interests) will swell, while the populace at large will find itself in a still harsher grip of those oligarchic interests and at the mercy of the state’s handouts. Liberalism, forsooth.

I have stressed in the above the primary tenets of liberalism: freedom from state intervention and control over the sovereign individual’s affairs. In Russia, this principle has undergone a fantastic perversion: an owner or top manager of a company is free from state control and intervention precisely because he himself is the State – a government minister or a member of the President’s Administration. That’s what oligarchy is in a nutshell. And that’s what we have.

A few words on the subject of Russia’s political parties and liberalism – simply because they do not deserve more than a few words. I will leave Vladimir Zhirinovsky’s Liberal-Democratic Party entirely out of account; it is the proper provenance for the Public Prosecutor.

The Union of Right Forces, or SPS: Headed to this day by the founding fathers of oligarchic capitalism, it is a graphic illustration of the perversion of liberal principles, as described above. Chubais’s call for a “liberal empire” is a classic, in this respect: it will be an empire for a few “liberals” up top, just as it is now, and the masses vainly awaiting liberation from the slavery of poverty, at bottom.

Yabloko, the left-leaning branch of the liberal intelligentsia: For one thing, it is tarred with the oligarchic brush, much as it would like to expunge that memory. For years it fed out of Khodorkovsky’s hand. For another, it has shown a readiness to take Russian liberalism to a point at which Russia would simply disappear. During the 2000 presidential campaign, Anatoly Chubais had every right to call Yabloko head Grigory Yavlinsky a “traitor,” very publicly, on NTV, because of Yavlinsky’s stance on policy vis-?-vis Chechnya. I would hate to agree with Chubais on the time of day, but here he hit the nail right on the head: any concessions in the matter of Chechnya’s independence mean one thing, and one thing only – wave after wave of Islamic fundamentalism hitting Russia from the Caucasus, threatening to split it right down the middle, along the Turkic-populated regions of the Volga. As president, Yavlinsky would one day be crowned with the same laurels of Russia’s destroyer as Mikhail Gorbachev and Alexander Kerensky before him, not counting the scum that started the Times of Troubles.

So, aren’t there any true liberals left in Russia? There are. We are simply looking for them in the wrong places.

One locus is the same as decades and hundreds of years ago: the liberal intelligentsia. True, its role is pitiful right now, reduced to criticizing the current state of affairs and preaching to the younger generation that things can be different from the existing heap of manure as long as they keep the faith. A sad role, but a necessary one, and there are enough memories to sustain the intelligentsia in this role; it has seen much worse times. Words can barely say just how much worse they were.

The other agent is a much more robust one: the non-oligarchic capitalist. His fate is perhaps even worse than the pensive intellectual’s, for it is he who has to grapple with the forces of the bandit bureaucracy, the pressure of bandits in the more traditional sense, and of oligarchic monopolies. These people would be very much surprised if you informed them that they were the brightest hope of liberalism in Russia. Yet that is a fact. Of course, they are mostly extremely rough diamonds, their esthetic taste is abominable – you only have to look at the “castles” they are building all around Moscow or any other city. But, as Anna Akhmatova said, “If only you knew out of what garbage poems grow, unaware of shame.” Liberalism seems to be akin to good poetry, growing out of garbage. Among other things.

12 December 2005

Stasi and the Yukos Sell-off

A Step At a Time posts on the not-so-mysterious relationship between Putin and the Head of DrKW's Russia business. Stasi and the Yukos Sell-off:

Tom Parfitt, the London Telegraph's Moscow correspondent, on a new headache for Gerhard Schroeder:
Opponents of President Vladimir Putin are calling for an investigation into his links with a German banker who was exposed last week as a former East German spy.

Documents uncovered in a Berlin archive revealed that Matthias Warnig, 49, who played a leading role in the controversial forced sell-off of part of the Yukos oil giant, was once an agent of the East German secret police, the Stasi.
The two banya together frequently - which is why presentations have to be laminated. Enough said.

09 December 2005

Nafta Moskva and Mostelecom / Mosteleset

Seems as although the logic of the Mostelecom deal is pretty strong that there is no great strategic or tactical plan for it. Another wasted asset.

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Nafta Moskva and Mostelecom / Mosteleset

Seems as although the logic of the Mostelecom deal is pretty strong that there is no great strategic or tactical plan for it. Another wasted asset.

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Duma passes foreign ownership changes for Gazprom

The painful death march to a fully-tradeable Gazprom share gets a step closer Duma passes foreign ownership changes for Gazprom. The ultimate in the no news story. I wonder what the government will use to keep the financial community happy after they finally pass this in to law when they do something truly stupid (again.)

Skype

Some of the most powerful bloggers on the future, or lack of it, for the telecom industry have had a real go at Skype recently.



Here from Om Malik on legitimate comments on Skype 2.0 (albeit as a Mac user I had to kick an analyst off his PC for a while to play with it - no worries we don't pay him to have a life so he did not mind staying late anyway.)



Here from James Enck on the Yahoo offering and Verso's Skype-blocking.


And then one from Andy Abramson suggesting a little unease inside the company. As James has it the comments emanate from the West Coast and make significant reference to problems in the Estonian development center.


I have no reason to like or dislike Skype as a company (I have a different take as a technology and a further view as a service) but have an opportunity to sell a voice-engine that could replace the stranglehold that GIP's has on Skype so am always interested in a bit of salacious gossip.


Being somewhat closer to Estonia than the esteemed bloggers of the West Coast it was a little easier to have a same time of the day conversations with friends of friends. For those of you who are interested Estonians are a strange mixture of Swedes without the welfare state and Russians without a bottle of vodka. It makes them somewhat reserved and very self-sufficient. If your only interaction with an Estonian of any kind was Steve Jurvetson then you would be very surprised to meet a real Estonian. Steve would also throw many aliens off track if they captured him as a representative of the human race.


Anyway the local Estonian take on the unhappiness in Skype's ranks does not seem to ring true with the Estonian R&D center. Yes its strange having a bunch of strangers constantly wondering through the office - but changes seem to be minimal at the programmer level. There was also a little head scratching at the management change in London allegations.


Now I am not a Skype insider and I was fishing for information on the role of GIPS as a core part of the Skype offering so lets not pretend that I was getting all the story, but it does not fit with what is being blogged as gospel truth.







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07 December 2005

Nafta Moscow Acquires Mostelecom

Mostelecom (Mtk), the inappropriately named carrier of free-to-air television to the older apartments in Moscow has been acquired by Nafta Moskva. Nafta has now acquired Mostelecom and National Cable Networks (can't find a link to the story) in the past 6 months.

Mostelecom pipes between 8 and 14 free-to-air channels to about 3 million Moscow households, the cable network overcomes the frequency and power issues that free-to-air broadcasters cannot overcome from the Ostankino tower. It's a slightly strange network in that Mtk broadcasts to a series of mini-headends around Moscow which then pipes the signal in to the housing blocks via some very old and crappy copper coax. There is no upgradeable capacity in the network. Mostelecom's value is its rights of way access to (admittedly not the best) homes in Moscow and about $6mn in monthly revenues. Which assumes that Moscovites pay their utility bills.

The salacious gossip is that the real purchaser was not Nafta Moskva but the previous TV Minister and VI shareholder, Mikhail Lesin.


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06 December 2005

Reiman vs Alfa - Ongoing

One of my favourite ongoing stories has a brief pre-New Year flourish. Which was of course denied by the MinSvyaz. Also reported in the Moscow Times, but as their archive policy was created by a half-wit in the middle of a zapoi there's f**k all point linking to it. This time it's the WSJ, whose online policy was also designed whilst in the middle of a zapoi (uncertain of my grammar here), who have picked up the investigative torch from the FT.

In trying to find a news source that had heard of Web2.0 I found this piece from Tass on Aton's website from July 2005. The pertinent quotation is:

"So far, it seems that Galmond, apart from the Commerzbank managers who have already fallen on their swords, is the one big name in the investigation truly in the firing line."
I have personal interest in the story and thought that I was pretty much up to date with the news - I had however missed a Zurich court ruling;

"In 2004, the same Zurich Arbitration Court now demanding further investigation into the actions of Commerzbank, Galmond and Telecominvest, made a partial ruling that IPOC Growth Fund Ltd. had not completed the option for the purchase of CT-Mobile, and that Galmond had been guilty of falsifying documents."

Pretty sure that it will end badly for someone, but I am still not convinced that the someone may not be Alfa.

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Another Member of the RenTV News Team Resigns

"Was She Pushed Asks Humpty Dumpty"

Not sure whether this is internal politics, monumental arse licking or active suggestion I don't know. As I posted earlier there is no freedom of news broadcasting. Anyway another one bites the dust. Head of Russia’s Last Independent TV News Service Resigns.


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05 December 2005

NTL Swallows Virgin

I know I really should have been a Sun headline writer.



James Enck on NTL making a formal approach for Virgin Mobile.


Either that makes Renova's acquisition of Korbina (see previous post);


  1. Prescient

  2. Ahead of its time

  3. Not a bad deal but massively over-priced

  4. Stupid

He describes the deal as:



"no respite from the deflationary spiral which is our beloved UK telecom market"
So what does that mean for the PE players trying to forecast stable revenue for their LBO's?

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01 December 2005

Truth Stranger Than Fiction

I posted a while ago about the phenomenon that is the outsourcing at the FSB. It took a while for the NY Times to run it past its lawyers but here's the fuller story.

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Licensed DVDs Cost Too Much

Without getting overly cynical about a member of the Federation Council worrying about DVD prices this is a follow-up piece to My Friendly Local Video Kiosk Is Under Remont and tangentially about Korbina. Daniel Nezerov commented in effect that Hollywood's business model is broken. And to be fair to the VC blogosphere so has everyone else. This piece in the Moscow Times quotes a member of the Federation Council saying that there is little point trying to stamp out piracy if the narod cannot afford to buy licensed DVD's.

Being sure that Hollywood's business model is broken is very different from knowing how to make money from remaking it. It is now a pressing issue. As I pointed out in the Korbina link hi-speed internet ARPU's are on their way from $22 (ex-VAT) to $15 per month over the next three years. Additional services are essential to milking leveraging the investment in the network - however cheaply and well made they are.

For a number of reasons;

  • 1. 14 channels of free-to-air
  • 2. No meaningful cable only content
  • 3. Must-carry provisions
  • 4. The historical development of cable in Russia where crappy 250mhz networks carrying no more than 14 channels
cable TV has yet to take off in Russia yet. We are seeing better results outside Moscow and St. Petersburg where the competition for entertainment disposable income is a bottle of vodka and increasingly beer.

So if film and Hollywood content is the way to lure customers to buying premium packages, sports being the way, and the most recent blockbuster is being sold in every kiosk at Rbl90-120 ($3-4) what should the answer be and how should it be delivered? The simple answer is to make it easier to buy licensed than pirated; and that does not mean making the pirates go underground it means making licensed content really easy to pay for and watch. Whenever, however and over whatever medium. Acknowledge that however strong the DRM (an anti-consumer 4 letter word) protection someone will find a way to rip it off. So be it; as long as content is being sold at a fair price in a way that allows the user to view it as and when he/she wants then the needle will swing (violently) toward licensed versions. If iTunes isn't a lesson in fair-(ish) use there was no lesson.

I asked the head of Micorsoft's business in Moscow how she felt about competition from Linux about a year ago. Not bothered she said. I awaited the M$FT bullshit. She followed up with the view that her competitor was not Linux, OpenOffice (whatever) but pirated versions of Office et al at $10 for Office. Good point well made. The analogy is not easy to make but the point is the same. The competition is the most efficient business machine. It's input cost is close to zero and will charge whatever it can get away with. It will invest nothing in marketing or customer relations.

OK so that was the easy part; Hollywood busted, Russian piracy, poor cable TV uptake, booming consumer market. Any half-baked hack can write that part. The answer that makes money is so much harder than the question. In an environment where the only thing that costs a $ is a $ there are precious few opportunities to play the Hampton Court Maze game. The only way is forward.

Is it better to be the market leader setting the trend or the guy who has the subscribers and an open mind? Answers on a postcard please...

The technical answers are relatively simple; I just can't see the business plan without Hollywood's backing. And that's not an option to bet your hard won cash on.


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GMail

I really like - but I live in and for email so it joins one other account in Apple's Mail as a POP download. Though when I have a bunch of Gmail mail to deal with I'll switch to the browser and work in it. And I love the GMail in Basic HTML view. It feels really clean and to me (de gestibus non est disputandum) way more intuitive.

22 December 2005

Fewer Cows, More Demand For Milk

Something must give. I have lost count of the number of firms announcing expansion of dairy-related products in Russia this year. Yet no one is dealing with the underlying demand issue. Cow population declines from Itar Tass.

Companies in low margin commodity markets, such as raw milk, are not managed well enough to regularly make money. There is so much easy money around at the moment, especially if you can sit on the coat tails of the Chinovniki; why work hard for it instead.

These imbalances in the economy are not factored in to inflation forecasts. A combination of increasing protectionism (import tariffs etc), surging consumer demand, the need to import raw materials (dry milk, meat etc) and the extreme rapaciousness of Customs will keep inflation above forecasts throughout 2006. The good news is that consumers are reaching deeper in to their pockets and tax-advisory businesses are making a mint as companies find ever cleverer ways of circumventing the rent seekers.


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What is Libjingle?

A post on Google's opening of it's Libjingle; one from the Mr. Malik with a very good post on the AOL/Google deal and then a little update on my favorite (sic) voice app being less than forthcoming about how SIP and GTalk will interoperate. That they will is fantastic, but why not be honest and upfront about the technological challenges. It's not as though the early adopter community don't understand that SIP is not entirely dissimilar to Churchill's view on democracy; Democracy is the worst form of government except for all those others that have been tried.

SIP is cludgy (ask Martin Geddes - it's a Scottish thing) and a very heavy protocol. It wants to eat your cycles and it's not ubiquitous enough for easy end user inter-operability. Until someone develops a better mousetrap it's the one we have. I look forward to the day when my GizmoProject app/softphone will talk to my PC's brethern's GTalk via an intelligble UI. Tell us its a problem and it will take time - we believe you.

But the real point is that Skype was a flash in the pan. I posted a long, long time ago that Skype would make money for its founders but not for its owners. I will place a very large bet that a SIP-based inter-op solution will win out in the long-term - shit I did already. Win is not an economic term for financial investors.

Prediction for 2007; SIP goes mainstream, in the way that Bluetooth now is.












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21 December 2005

Stalin's army of man-apes

As if you did not know where the GAI came from; Boing Boing: Stalin's army of man-apes:

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15 December 2005

FSU Software Engineering Skills

On the back of a small company called Skype it would appear that the great Soviet Scientific Legacy theory can be wiped down and rolled out. There is a fair point here that it is not just software engineering that does it but entrepreneurial skills as well.

The Wild East: In the New York Times today, a visit to Skype Estonia:

Foreign investors are swooping into Tallinn's tiny airport in search of the next Skype (rhymes with pipe). The company most often mentioned, Playtech, designs software for online gambling services. It is contemplating an initial public offering that bankers say could raise up to $1 billion.

Indeed, there is an outlaw mystique to some of Estonia's ventures, drawn here to Europe's eastern frontier. Whether it is online gambling, Internet voice calls or music file sharing--Skype's founders are also behind the most popular music service, Kazaa--Estonian entrepreneurs are testing the limits of business and law.

And by tapping its scientific legacy from Soviet times and making the best of its vest-pocket size, Estonia is developing an efficient technology industry that generates ingenious products-often dreamed up by a few friends--able to mutate via the Internet into major businesses.

These entrepreneurs grow out of an energetic, youthful society, which has embraced technology as the fastest way to catch up with the West. Eight of 10 Estonians carry cell phones, and even gas stations in Tallinn are equipped with Wi-Fi connections, allowing motorists to visit the Internet after they fill up.

Such ubiquitous connectivity makes Tallinn's location midway between Stockholm and St. Petersburg seem less remote.

Even the short icebound days play a part, people here say, because they shackle software developers to the warm glow of their computer screens. For the 150 people who work at Skype, Estonia is clearly where the action is.


Hat tip to A Step At a Time and, of course Om Malik (no link required......)

Russia warned on poor diet, lifestyle

On the same day that Scotland was acknowledged as having the fattest children in Britain: Russia warned on poor diet, lifestyle.

Anyone for more kolbasa?

Nokia plans phone with SIP client for consumer VoIP

Yup that should go down well with their clients otherwise known as mobile operatorsNokia plans phone with SIP client for consumer VoIP.

As the article notes this will not work with Skype. So it looks as though 30-40% of the cellphone VOIP market just got closed off. Excluding those who will actually go out of their way to install something other than what came in the box. Extrapolated from IE usage that would be 20% of users.

Does this mark SIP's resurrection. It has a certain Bluetooth feel to it; slated for years and then - ubiquitous?

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Lada Theft, Roland Nash and Social Spending

Roland Nash draws an improbable link between having his Lada (why would anyone steal a Lada) stolen, the appalling state of Russian government infrastructure and pre-election mis-spending.



Interviews & Opinions - News - News Agency PRIME-TASS:

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13 December 2005

Russian Liberalism

Konstantin from Russia Blog points out tangentially that different countries have different definitions of liberalism. I would like to think that the liberals that we all hope get to be the future of Russia are those described in the last paragraph. Put in very simple terms they suffer from a branding problem not entirely dissimilar to that faced by the British Labour Party pre-Blair and the current Conservative Party.

It would be better to say that they are believers in liberal economics - that is a smaller role for the state. Which is not entirely unsurprising when you consider the additional burden that the state in its role as truly organized crime applies to their business.

Anyway worth a read.

My Political Credo:
What's my political credo? I'm a liberal intelligent who supports the state although it sounds as an oxymoron. Sergei Roy, the editor of intelligent.ru (you find the English version of this site at the sidebar) defines it better than I do. Here's his thoughts about the poor state of Russian liberalism published by Peter Lavalle's Untimely Thoughts.

Putin is indeed a statist, and thus the opposite of liberal, in that he has stopped the country rolling along an inclined plane into the abyss of disintegration. By the end of Boris Yeltsin, the Liberal Pretender’s, rule, Russia was fast becoming an assemblage of fiefdoms that were “territories of free hunting” (Khodorkovsky’s phrase) for oligarchs/barons of two types, regional and financial-industrial, without a clear demarcation line between them. It came to pass that the biggest and the most impudent of these, Mikhail Khodorkovsky, made a grab for ultimate political power, buying the services of 250 deputies of the Duma and preparing to sell to a U.S.-based transnational 50 percent of the biggest oil company in the land, which would have put him beyond the reach of Russian law.

Putin put a stop to that, in the nick of time, and did some other things to restore the notorious “vertical of power,” which on closer inspection proves nothing more nor less than a functioning system of governance securing a more or less unified legal, political, and economic space.

What about Putin, the Statist Pretender’s, liberal credentials? Alas, they are no better than his predecessor’s. Although some of the oligarchs have been slapped into line, the oligarchy as a system of post-communist order is still with us and, which is more, it is thriving. Some of the members of Putin’s government – Mikhail Zurabov, German Gref, Viktor Khristenko – enjoy the tags of liberals, or neo-liberals, or radical liberals. In my view, these appellations can only be applied to these people if the word “liberal” has irreversibly passed into the swearword section of the Russian vocabulary. Monetization of social benefits was one example of their liberalism, housing and utilities reforms will be another. As a result of these liberal reforms, oligarchic profits (say, Zurabov’s pharmaceutical interests) will swell, while the populace at large will find itself in a still harsher grip of those oligarchic interests and at the mercy of the state’s handouts. Liberalism, forsooth.

I have stressed in the above the primary tenets of liberalism: freedom from state intervention and control over the sovereign individual’s affairs. In Russia, this principle has undergone a fantastic perversion: an owner or top manager of a company is free from state control and intervention precisely because he himself is the State – a government minister or a member of the President’s Administration. That’s what oligarchy is in a nutshell. And that’s what we have.

A few words on the subject of Russia’s political parties and liberalism – simply because they do not deserve more than a few words. I will leave Vladimir Zhirinovsky’s Liberal-Democratic Party entirely out of account; it is the proper provenance for the Public Prosecutor.

The Union of Right Forces, or SPS: Headed to this day by the founding fathers of oligarchic capitalism, it is a graphic illustration of the perversion of liberal principles, as described above. Chubais’s call for a “liberal empire” is a classic, in this respect: it will be an empire for a few “liberals” up top, just as it is now, and the masses vainly awaiting liberation from the slavery of poverty, at bottom.

Yabloko, the left-leaning branch of the liberal intelligentsia: For one thing, it is tarred with the oligarchic brush, much as it would like to expunge that memory. For years it fed out of Khodorkovsky’s hand. For another, it has shown a readiness to take Russian liberalism to a point at which Russia would simply disappear. During the 2000 presidential campaign, Anatoly Chubais had every right to call Yabloko head Grigory Yavlinsky a “traitor,” very publicly, on NTV, because of Yavlinsky’s stance on policy vis-?-vis Chechnya. I would hate to agree with Chubais on the time of day, but here he hit the nail right on the head: any concessions in the matter of Chechnya’s independence mean one thing, and one thing only – wave after wave of Islamic fundamentalism hitting Russia from the Caucasus, threatening to split it right down the middle, along the Turkic-populated regions of the Volga. As president, Yavlinsky would one day be crowned with the same laurels of Russia’s destroyer as Mikhail Gorbachev and Alexander Kerensky before him, not counting the scum that started the Times of Troubles.

So, aren’t there any true liberals left in Russia? There are. We are simply looking for them in the wrong places.

One locus is the same as decades and hundreds of years ago: the liberal intelligentsia. True, its role is pitiful right now, reduced to criticizing the current state of affairs and preaching to the younger generation that things can be different from the existing heap of manure as long as they keep the faith. A sad role, but a necessary one, and there are enough memories to sustain the intelligentsia in this role; it has seen much worse times. Words can barely say just how much worse they were.

The other agent is a much more robust one: the non-oligarchic capitalist. His fate is perhaps even worse than the pensive intellectual’s, for it is he who has to grapple with the forces of the bandit bureaucracy, the pressure of bandits in the more traditional sense, and of oligarchic monopolies. These people would be very much surprised if you informed them that they were the brightest hope of liberalism in Russia. Yet that is a fact. Of course, they are mostly extremely rough diamonds, their esthetic taste is abominable – you only have to look at the “castles” they are building all around Moscow or any other city. But, as Anna Akhmatova said, “If only you knew out of what garbage poems grow, unaware of shame.” Liberalism seems to be akin to good poetry, growing out of garbage. Among other things.

12 December 2005

Stasi and the Yukos Sell-off

A Step At a Time posts on the not-so-mysterious relationship between Putin and the Head of DrKW's Russia business. Stasi and the Yukos Sell-off:

Tom Parfitt, the London Telegraph's Moscow correspondent, on a new headache for Gerhard Schroeder:
Opponents of President Vladimir Putin are calling for an investigation into his links with a German banker who was exposed last week as a former East German spy.

Documents uncovered in a Berlin archive revealed that Matthias Warnig, 49, who played a leading role in the controversial forced sell-off of part of the Yukos oil giant, was once an agent of the East German secret police, the Stasi.
The two banya together frequently - which is why presentations have to be laminated. Enough said.

09 December 2005

Nafta Moskva and Mostelecom / Mosteleset

Seems as although the logic of the Mostelecom deal is pretty strong that there is no great strategic or tactical plan for it. Another wasted asset.

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Nafta Moskva and Mostelecom / Mosteleset

Seems as although the logic of the Mostelecom deal is pretty strong that there is no great strategic or tactical plan for it. Another wasted asset.

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Duma passes foreign ownership changes for Gazprom

The painful death march to a fully-tradeable Gazprom share gets a step closer Duma passes foreign ownership changes for Gazprom. The ultimate in the no news story. I wonder what the government will use to keep the financial community happy after they finally pass this in to law when they do something truly stupid (again.)

Skype

Some of the most powerful bloggers on the future, or lack of it, for the telecom industry have had a real go at Skype recently.



Here from Om Malik on legitimate comments on Skype 2.0 (albeit as a Mac user I had to kick an analyst off his PC for a while to play with it - no worries we don't pay him to have a life so he did not mind staying late anyway.)



Here from James Enck on the Yahoo offering and Verso's Skype-blocking.


And then one from Andy Abramson suggesting a little unease inside the company. As James has it the comments emanate from the West Coast and make significant reference to problems in the Estonian development center.


I have no reason to like or dislike Skype as a company (I have a different take as a technology and a further view as a service) but have an opportunity to sell a voice-engine that could replace the stranglehold that GIP's has on Skype so am always interested in a bit of salacious gossip.


Being somewhat closer to Estonia than the esteemed bloggers of the West Coast it was a little easier to have a same time of the day conversations with friends of friends. For those of you who are interested Estonians are a strange mixture of Swedes without the welfare state and Russians without a bottle of vodka. It makes them somewhat reserved and very self-sufficient. If your only interaction with an Estonian of any kind was Steve Jurvetson then you would be very surprised to meet a real Estonian. Steve would also throw many aliens off track if they captured him as a representative of the human race.


Anyway the local Estonian take on the unhappiness in Skype's ranks does not seem to ring true with the Estonian R&D center. Yes its strange having a bunch of strangers constantly wondering through the office - but changes seem to be minimal at the programmer level. There was also a little head scratching at the management change in London allegations.


Now I am not a Skype insider and I was fishing for information on the role of GIPS as a core part of the Skype offering so lets not pretend that I was getting all the story, but it does not fit with what is being blogged as gospel truth.







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07 December 2005

Nafta Moscow Acquires Mostelecom

Mostelecom (Mtk), the inappropriately named carrier of free-to-air television to the older apartments in Moscow has been acquired by Nafta Moskva. Nafta has now acquired Mostelecom and National Cable Networks (can't find a link to the story) in the past 6 months.

Mostelecom pipes between 8 and 14 free-to-air channels to about 3 million Moscow households, the cable network overcomes the frequency and power issues that free-to-air broadcasters cannot overcome from the Ostankino tower. It's a slightly strange network in that Mtk broadcasts to a series of mini-headends around Moscow which then pipes the signal in to the housing blocks via some very old and crappy copper coax. There is no upgradeable capacity in the network. Mostelecom's value is its rights of way access to (admittedly not the best) homes in Moscow and about $6mn in monthly revenues. Which assumes that Moscovites pay their utility bills.

The salacious gossip is that the real purchaser was not Nafta Moskva but the previous TV Minister and VI shareholder, Mikhail Lesin.


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06 December 2005

Reiman vs Alfa - Ongoing

One of my favourite ongoing stories has a brief pre-New Year flourish. Which was of course denied by the MinSvyaz. Also reported in the Moscow Times, but as their archive policy was created by a half-wit in the middle of a zapoi there's f**k all point linking to it. This time it's the WSJ, whose online policy was also designed whilst in the middle of a zapoi (uncertain of my grammar here), who have picked up the investigative torch from the FT.

In trying to find a news source that had heard of Web2.0 I found this piece from Tass on Aton's website from July 2005. The pertinent quotation is:

"So far, it seems that Galmond, apart from the Commerzbank managers who have already fallen on their swords, is the one big name in the investigation truly in the firing line."
I have personal interest in the story and thought that I was pretty much up to date with the news - I had however missed a Zurich court ruling;

"In 2004, the same Zurich Arbitration Court now demanding further investigation into the actions of Commerzbank, Galmond and Telecominvest, made a partial ruling that IPOC Growth Fund Ltd. had not completed the option for the purchase of CT-Mobile, and that Galmond had been guilty of falsifying documents."

Pretty sure that it will end badly for someone, but I am still not convinced that the someone may not be Alfa.

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Another Member of the RenTV News Team Resigns

"Was She Pushed Asks Humpty Dumpty"

Not sure whether this is internal politics, monumental arse licking or active suggestion I don't know. As I posted earlier there is no freedom of news broadcasting. Anyway another one bites the dust. Head of Russia’s Last Independent TV News Service Resigns.


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05 December 2005

NTL Swallows Virgin

I know I really should have been a Sun headline writer.



James Enck on NTL making a formal approach for Virgin Mobile.


Either that makes Renova's acquisition of Korbina (see previous post);


  1. Prescient

  2. Ahead of its time

  3. Not a bad deal but massively over-priced

  4. Stupid

He describes the deal as:



"no respite from the deflationary spiral which is our beloved UK telecom market"
So what does that mean for the PE players trying to forecast stable revenue for their LBO's?

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01 December 2005

Truth Stranger Than Fiction

I posted a while ago about the phenomenon that is the outsourcing at the FSB. It took a while for the NY Times to run it past its lawyers but here's the fuller story.

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Licensed DVDs Cost Too Much

Without getting overly cynical about a member of the Federation Council worrying about DVD prices this is a follow-up piece to My Friendly Local Video Kiosk Is Under Remont and tangentially about Korbina. Daniel Nezerov commented in effect that Hollywood's business model is broken. And to be fair to the VC blogosphere so has everyone else. This piece in the Moscow Times quotes a member of the Federation Council saying that there is little point trying to stamp out piracy if the narod cannot afford to buy licensed DVD's.

Being sure that Hollywood's business model is broken is very different from knowing how to make money from remaking it. It is now a pressing issue. As I pointed out in the Korbina link hi-speed internet ARPU's are on their way from $22 (ex-VAT) to $15 per month over the next three years. Additional services are essential to milking leveraging the investment in the network - however cheaply and well made they are.

For a number of reasons;

  • 1. 14 channels of free-to-air
  • 2. No meaningful cable only content
  • 3. Must-carry provisions
  • 4. The historical development of cable in Russia where crappy 250mhz networks carrying no more than 14 channels
cable TV has yet to take off in Russia yet. We are seeing better results outside Moscow and St. Petersburg where the competition for entertainment disposable income is a bottle of vodka and increasingly beer.

So if film and Hollywood content is the way to lure customers to buying premium packages, sports being the way, and the most recent blockbuster is being sold in every kiosk at Rbl90-120 ($3-4) what should the answer be and how should it be delivered? The simple answer is to make it easier to buy licensed than pirated; and that does not mean making the pirates go underground it means making licensed content really easy to pay for and watch. Whenever, however and over whatever medium. Acknowledge that however strong the DRM (an anti-consumer 4 letter word) protection someone will find a way to rip it off. So be it; as long as content is being sold at a fair price in a way that allows the user to view it as and when he/she wants then the needle will swing (violently) toward licensed versions. If iTunes isn't a lesson in fair-(ish) use there was no lesson.

I asked the head of Micorsoft's business in Moscow how she felt about competition from Linux about a year ago. Not bothered she said. I awaited the M$FT bullshit. She followed up with the view that her competitor was not Linux, OpenOffice (whatever) but pirated versions of Office et al at $10 for Office. Good point well made. The analogy is not easy to make but the point is the same. The competition is the most efficient business machine. It's input cost is close to zero and will charge whatever it can get away with. It will invest nothing in marketing or customer relations.

OK so that was the easy part; Hollywood busted, Russian piracy, poor cable TV uptake, booming consumer market. Any half-baked hack can write that part. The answer that makes money is so much harder than the question. In an environment where the only thing that costs a $ is a $ there are precious few opportunities to play the Hampton Court Maze game. The only way is forward.

Is it better to be the market leader setting the trend or the guy who has the subscribers and an open mind? Answers on a postcard please...

The technical answers are relatively simple; I just can't see the business plan without Hollywood's backing. And that's not an option to bet your hard won cash on.


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GMail

I really like - but I live in and for email so it joins one other account in Apple's Mail as a POP download. Though when I have a bunch of Gmail mail to deal with I'll switch to the browser and work in it. And I love the GMail in Basic HTML view. It feels really clean and to me (de gestibus non est disputandum) way more intuitive.