Greetings from Las Vegas, NV where 170,000 tech-hungry attendees gobbled up products and services from hundreds of exhibitors. Pictured is our motley crew at the first Sunday Brief CES dinner held this year at Gordon Ramsay’s Pub at the Caesar’s Palace. Everyone had a terrific time – no one lacked an opinion and GRs has a diverse menu that accommodated any palate.
This week, we’ll divide our focus between show observations (there are many), and some commentary from Verizon, AT&T, and T-Mobile executives at the Citi TMT conference which was concurrently running in Las Vegas.
CES Observations – out of the lab and onto the production line
Many CES shows focus on concepts, and this year’s show was full of them (see here for Business Insider’s take on the Mercedes Benz Avatar concept car – one of many futuristic automobiles in Vegas this week). But for every “could be” invention at the show, there were several “in or near production” items that showed how far concepts from the last decade have come.
First up comes from the smart home, where several of us really liked the concept of mixing lighting (which has to have AC power) with air purification. Many of you remember the concept several years ago of mixing lighting and Wi-Fi access (called Li-Fi) which is now available widely online from companies such as Sengled and de.Light – early reviews were mixed, and mesh Wi-Fi extensions from Google and Eero (now owned by Amazon) proved to be a better value.
Now, there’s a new lamp product from Puripot (parent company is dadam Micro – more on them here) that brings air purification to the tabletop (in addition to a wall mounted version). The nearby diagram from the Puripot website shows how it works. The company describes the technology as follows:
“The puripot airLamp is a lamp-type air purifier that applies two innovative and environment [sic] friendly technologies to household lamps that are used universally in most every life: 1) a polyester-based non-woven fabric filter treated with meta-doped TiO2 photocatalyst, and 2) a market proven visible light-based titanium dioxide photocatalyst technology together to removes harmful VOCs viruses, bacteria and fine dust.
The transition meta-doped titanium dioxide non-photocatalyst filter used in the device is an eco-friendly, inorganic material-based fiber filter that is made by coating polyester non-woven fiber with the TiO2 photocatalyst. The filter has strong destructive effect on almost all kinds of virus regardless of the light irradiation. The performance of the filter is not deteriorated even after long hour use and periodic washing to remove dust attached. The filter has more than 50% better dust removal efficiency than the general HEPA filters.”
For people who have allergies or live in polluted areas (or improperly maintained office spaces), this could be a productivity-improving device (less sick time, improved employee psychology, etc.). The company indicated that the solution would be available in 2020 (the precursor air filter is available for preorder here and should ship in Feb).
While an excellent invention in and of itself, the concept of a power + light + ______ elicits some interesting ideas for home and office tech. For example, the ability to attach a CBRS or Wi-Fi access point in the base of this lamp would be a useful addition to many offices. And coupling a terabyte storage option for most commonly used DropBox or Box files would also help performance. As we saw from the addition of IoT devices (including Wi-Fi repeaters) to electrical outlets, the concept is not new, but puripot has moved the functionality from the power outlet and the light socket to the table/ desktop. That’s big, and, with the right modular design, could be a boon for technology adoption.
Another widely discussed theme at this year’s CES was sustainability, specifically water reclamation. Live through one drought (ours was in Dallas, but we have had our share of dry summers in Colorado) and you understand the importance of water availability. A new company called Hydraloop had their debut at CES after very successful alpha and beta trials. Their technology takes water used in everyday tasks (showers, washing machines, tubs), and enables it to be reused again through a patented recycling process (see nearby picture).
In Texas, the water bill can frequently be higher than those of other utilities. Being able to reclaim or reuse a portion of the water without being charged twice is an attractive proposition. Hyrdraloop indicated on their website that most homes could be equipped with the new technology for ~ $4,000 plus shipping and professional installation. Assuming this price comes down with volume (and more affordable with financing, similar to that used for solar projects), this could be a self-financing upgrade for many homes. It’s an “edge” application for another utility – water.
For more on the company, CES’s “Best in Show” for 2020, have a look at their YouTube video from CES.
One additional technology closer to telecom and tech that caught our eye is Wi-Fi based motion sensing. This was on display at CES using Cognitive Systems software on Plume Systems adaptive Wi-Fi system (note – Plume is backed by several corporate venture arms, including Comcast Ventures and Samsung Ventures). This technology has been in testing for a couple of years, and Plume decided to launch their Motion product at this year’s CES. Here’s a video briefly describing the product and a short Forbes article authored by Moor Insights and Strategy on various benefits and use cases.
The bottom line for the Plume Motion product is that when a visual recording of an event is not triggered or desirable (e.g., bathroom motion), Wi-Fi motion detection can be a high-quality, cost-effective alternative. For more on the company and their subscription service, check out www.plume.com.
Each of these three products will broadly launch this year. They combine many of the themes we described in last week’s article (compact or eliminated equipment, tied to remote cloud-based systems, and enabled by faster processors) and bring high-value/ high-utility products to the market.
In case you missed the show (or its coverage), here’s six additional articles you should probably read to get a good take on tech:
- For IoT and CES, read the latest weekly blog from Stacey Higginbotham. I was especially intrigued by her panelist’s take on Virtual Reality (VR) tech for aging adults.
- For Engadget’s take on Samsung’s NEON avatars (apparently a viral topic), read here.
- For a good summary of laptop announcements that will have 5G available as an option, read here.
- The Samsung release on their digital companion product called Ballie is here. (I think the company should revisit their pet friendliness assumption).
- I missed the AMD keynote on Monday, but if you don’t believe that speed is still a theme, check out this condensed presentation.
- Quibi (short-form video service) held their launch announcement at CES (Bloomberg interview is here). T-Mobile is going to be a key partner and will include the service for most of their current customer base.
Lastly, we leave the CES discussion with a picture of the Hyundai Uber drone. About a decade ago, cars started to take over the show, and now we have the S-A1, an Urban Mobility Vehicle prototype developed by Hyundai and Uber:
Fourth quarter hints from the Citi Conference in Las Vegas
There were three wireless companies (Verizon, T-Mobile, and AT&T) and one notable Local Telco (CenturyLink) participating in the Citi Global TMT West Conference that paralleled the first two days of CES. While we do not have enough space in this week’s column to fully cover each presentation, here are the high points of the wireless participants:
Ronan Dunne, EVP at Verizon and Group CEO for the Consumer Division, spoke first. “We have laid the platform for growth… We have all of the assets we need to execute the strategy…. We are not a business that’s waiting on the outcome of someone else’s strategy.” Verizon is aggressively developing an information-led platform that lays the groundwork for large experiences like Disney. While not disclosing any specific numbers, Ronan went on to convey that “the momentum we saw in Q3 continued into Q4.” On personalized base management, he said “We have 100 million consumers, and my ambition is to personalize the experience for every one of them.”
On Disney, Dunne offered no specific numbers, but he did convey that there might be some short-term dilution primarily as a result of higher than expected demand. He was quick to point out that if the Disney relationship could extend the customer/ family account life even one month, it was a terrific investment.
On cable, Dunne talked about his personal investment in the relationship, and the fact that Verizon’s network-as-a-platform strategy lends itself well to a relationship with cable. On 5G, he went on to reiterate their investment in millimeter wave technology, citing that 70% of Verizon’s traffic occurs in metro areas. On devices, he predicted that new models will be introduced that carry millimeter wave technology for under $800 ($33.33/ mo. for 24 months) “soon” with sub-$600 ($25/ mo. for 24 months) devices by the end of the year.
On home broadband, Verizon is likely holding their marketing power until higher-power chipsets are available to expand their reach (likely date = 2H 2020). The most likely deployments of highest-speed networks will be in dense traffic areas that tend to have lower residential concentrations.
On the economy, Dunne commented that that holiday season shifted to more digital than retail storefront (re: Verizon charges less for online conversions than in-store or customer-service assisted transactions). Verizon seems to be seeing a fair amount of pricing optimization as well as some upsells into higher unlimited categories.
On the Verizon relationship with Amazon AWS, Dunne praised the partnership, emphasizing that their new edge relationship was completely built within their (Verizon’s) infrastructure.
The most important “drop mic” comment came from an audience question at the end about Wi-Fi offload. “The thing that we see that may be different from the world of others is that we don’t see the need for Wi-Fi in the future because we have a more secure network environment, we have much higher performance criteria, and we have the ability to hand off sessions… When we are fully deployed, there are entire environments where public Wi-Fi can be eliminated.” We could not find any other statement from Verizon in which it sought to absorb Wi-Fi volumes (a 3x growth given Wi-Fi is ~ 75% of total data traffic for wireless subscribers today).
- T-Mobile released preliminary subscriber figures prior to their participation in the conference, which feature current President and COO (and future CEO) Mike Sievert, President – Technology Neville Ray, and EVP and CFO Braxton Carter. In the press release, the most telling figures were as follows:
a. 86 million total subscribers
b. 1.0 million branded postpaid net phone additions (on par with Q4 2018)
c. Gross postpaid phone additions up 5%, and postpaid churn up to 1.01%. Braxton Carter’s comment was very telling: “I wish churn was a little bit higher [in the industry]. The hallmark was a more competitive environment with more switching going on, reversing a trend from the rest of 2019. We are very excited about a higher switching pool.”
d. Prepaid net additions of 77K for the quarter, up from 62K in 3Q but down from 135K in 4Q 2018
e. Wholesale net additions of 472K for the quarter, down from 611K in 3Q and 909K in 4Q 2018
f. “A beautiful quarter” was Carter’s description of the total operating performance, leading many to believe that the margin pressures from increased gross adds were able to be readily absorbed.
“Our team is focusing on all cylinders” was Mike Sievert’s lead comment. Key objectives for 2020, per Sievert, include a) Get the integration with Sprint underway in a very significant way, b) Get off to the races in building the world’s best 5G network, and c) turn a) and b) into great operating performance for the business and lay a foundation for growth under the context of the new company.
On the Sprint merger, the audience seemed split on the judge’s verdict but Mike Sievert was not worried. “We have to see where it all shakes out.” On the prospects of a settlement, he stated “Through the process… we have been an open book about what we were willing to do. Nothing has changed with that approach. So far there hasn’t been a settlement, but you never say never.”
On 5G, the executives were quick to reference that the current activities were just the beginning. “The breath is coming along nicely, and the breadth will come with the [Sprint] transaction” said Neville Ray. Mike Sievert used the 5G discussion to launch into his confidence in the network synergies from the Sprint transaction, citing T-Mobile’s progress with 600 MHz deployment which is two quarters ahead of the originally announced plan.
“The base business case for 5G is capacity” answered Braxton Carter. “We have been consistently ahead of the cost curve, and 5G is a critical piece.” On a super cycle, it’s clear that nearly every new device will be 5G capable on T-Mobile’s network, although Neville Ray seemed to imply that the momentum would start in 2020 but that 2021 would likely be an even greater year.
Braxton conveyed that the industry is probably at the low point of the upgrade cycle. “We should see higher switching as the 5G cycle accelerates.” On increased competition entering 2020, Sievert talked about cable and it appeared to him that “cable is taking share from Verizon… their share gains are not coming from us.” Mike was also quick to discuss how despite lower promotional activity in the quarter (their advertising focused on their 600 MHz network reach), T-Mobile still delivered healthy net additions with low postpaid churn. “We have not unlocked the potential of having not only a great value but also having the best network.”
“If this transaction does not occur, we would immediately reinstitute a $9 billion board-approved buyback” was Braxton’s response to an audience survey question about T-Mobile’s direction should the transaction be rejected.
On targeting, Mike Sievert commented that T-Mobile has “good network quality for 326 million Americans, including low-band spectrum for over 300 million. We market in just 265 million, and 35 million of that is recent – in the past 2-2.5 years. There remains plenty of opportunity.” On share, Sievert commented “We continue to have disproportionately low share in suburban, rural, small towns and enterprises. While these segments have been feeding our growth over the past couple of years, we continue to have disproportionately low share.”
On the economy, Sievert commented “Things have changed a lot since the last recession. Smartphones weren’t really deeply embedded into scale usage yet – that’s amazing. When you are forced to choose, the smartphone is not going to be the first thing to get downgraded. You will see a lot more optimization, and we are well served for that situation. I think our business is positioned to be resilient regardless of economic circumstances.”
The following day AT&T CFO John Stephens spoke on a wide variety of topics. After checking off a long list of operating and financial metrics, he concluded with “we did what we said we were going to do, and we have set ourselves up for a bright future.”
On their asset mix, Stephens talked about AT&T’s bundled (content + network) products and distribution capabilities. “We will be best positioned in the future to bundle wireless services because we have owners economics – it’s really important”
On 5G, Stephens noted that for the first time ever, the network is leading device availability. He considers HBO Max to be an unappreciated asset and is very confident in the prospects for the product. $500 million in content was invested in the fourth quarter but was held back for the HBO Max launch.
The AT&T CFO also touted their spectrum capabilities, especially when AT&T “hotwires it all” with the FirstNet buildout. John Stephens was the most bullish of the executives on the wireless upgrade cycle in 2020. He cited several sources of revenue growth, yet also discussed the need to further reduce costs for network and customer service functions. He also signaled that there would be additional product rationalization throughout the business.
On the communications front, Stephens talked about the need to emphasize the breadth and depth of the AT&T fiber asset, and also the expected decreases in legacy declines due to their diminished size and relative importance to the business. John also separated equipment sales from other profitability sources due to their low margins.
On industry structure, Stephens had some of his strongest comments. Because of FirstNet, AT&T deployed more spectrum, and this improved geographic coverage presents a unique competitive advantage for the company. And FirstNet will expand into the hospital which opens up a large incremental population. AT&T has been growing their postpaid base, and Cricket has grown to over 10 million customers. But the most competitive advantage is content ownership, which is manifested through HBO Max.
Stephens clearly stated that any future spectrum purchases were going to need to be self-financed “If I want to buy some spectrum, I need to find some assets to monetize” said the CFO.
On the economy, Stephens cited lower gas prices (“a dividend to consumers”), lower home costs, real wage increases, and lower unemployment as key health indicators. “Our economy has much less risk” because housing has a lower weighting in the economy. “We see a fairly stable, reasonable economic picture.” On the business side, because there are more employees “we are seeing more demand for mobility, both hardware and services.”
The bottom line from these three presentations is that challengers have more fun, wholesale partnerships are becoming more important to Verizon and AT&T, and that HBO is viewed as a strategic asset by AT&T (versus the network platform as the strategic asset by Verizon).
That’s it for this week. Next week, we’ll hit the CenturyLink presentation and discuss specific questions we have for the wireless carriers as we enter the quarterly earnings cycle. Until then, if you have friends who would like to be on the email distribution, please have them send an email to [email protected] and we will include them on the list.
Have a great week – and GO CHIEFS!
