In case you are having trouble sending and receiving email on your at&t Wireless smart phone, or are unable to get connected using your data card, there is a wireless network outage affecting at&t Wireless users in the Midwest and Southeast.
In its most-recent 8K filing with the Securities and Exchange Commission, Sprint Nextel Corp. says it may have to write off the full value of the $31 billion worth of "goodwill" carried on its books as an asset related to the Nextel acquisition. The move will not affect Sprint Nextel's cash balance or future cash flows but will affect the company's statement of assets.
One way of looking at the impact of the overpayment is to analyze the former Nextel's contribution to Sprint Nextel's overall business. In the most-recent quarter, Sprint Nextel reported $8.04 billion worth of service revenues, of which the former Nextel business contributed 35 percent, or about $2.6 billion. On an annualized basis, call that $10.3 billion of gross revenue.
Sprint's profit margin on wireless services is about 32.4 percent. So call the former Nextel profit as $3.3 billion a year. The magnitude of the overpayment is 9.4 times the annual profit from owning the business.
In its most-recent 8K filing with the Securities and Exchange Commission, Sprint Nextel Corp. says it may have to write off the full value of the $31 billion worth of "goodwill" carried on its books as an asset related to the Nextel acquisition. The move will not afect Sprint Nextel's cash balance or future cash flows but will affect the company's statement of assets.
The coming write down essentially means Sprint overpaid $31 billion to acquire Nextel. Blunders of that magnitude often are enough to spell the end of independent life for any corporation that makes such a sizable mistake.
The C Block of 700-MHz frequencies today hit the minimum amount required to trigger the "open access" provisions Google had been so anxious to foster. So now we have to wait and see who ultimately wins the spectrum. At this point, Google's minimum business objectives have been met.
And speaking of cable cuts that massively disrupt global communications, it was just over a year ago, in December 2006, when an earthquake took out a number of Pacific cables.
Those cable cuts took out much voice and Internet communications in many parts of Asia, as well as 60 percent of capacity between Asia and the United States.
The 2006 Hengchun earthquake occurred on December 26, 2006 at 12:25 UTC (20:25 local time), with an epicenter off the southwest coast of Taiwan, approximately 22.8 km west southwest of Hengchun, Pingtung County, Taiwan, with an exact hypocenter 21.9 km deep in the Luzon Strait ( [show location on an interactive map] 21.89° N 120.56° E), which connects the South China Sea with the Philippine Sea.
In the winter of 2000, Telstra, Australia's biggest Internet service provider had a cable cut of its own on Nov. 19, when its Internet backbone cable, sitting in less than 100 feet of seawater about 40 miles off Singapore, was damaged by unknown causes.
Telstra at that time relied on the cable, known as SEA-ME-WE 3 (for Southeast Asia, Middle East and Western Europe) for more than 60 percent of its Internet transmission capacity.
About 23,600 miles long, the cable connected 33 countries, touching places as diverse as Singapore, Malaysia, Thailand, India, Saudi Arabia, Egypt, Djibouti, Turkey, Greece, Italy, Portugal, France and the U.K.
Clearwire touts its vision of the future as mobile Internet. But so far, its customer base is a replacement for dial-up, cable modem or Digital Subscriber Line service. Just four percent of its customers appear to substituting a mobile service for WiMAX.
That isn't to say the customer base and apparent value proposition will remain as it currently is. WiMAX someday may compete more directly for the broadband-equipped mobile customer base.
That isn't the case today, where Clearwire seems to be competing with cable and telco fixed broadband services. At some point, the mobility play is supposed to have Clearwire and WiMAX competing more robustly for the data card and smart mobile phone customer. But lots of challenges remain.
WiMAX might someday primarily be a platform for mobile broadband. In Sprint's case, it might primarily be the next-generation replacement for 3G broadband. If the former winds up being the case, cost control will be more important. If the latter, feature richness will be more important.
The reason cost control is more important for a mobile broadband network is that the revenue sources will be less robust, on a "dollar for bit" basis, compared to networks that make lots of revenue from voice and texting services, which are highly efficient, on a "revenue for bit" basis.
Advertising also is more important if mobile broadband winds up being the primary attraction for WiMAX users. That suggests content access is more important than communications, and that in turn means media, and media always means advertising.
Cable cuts that damaged two undersea Internet cables off Egypt's coast now are disrupting call centers in India, the Wall Street Journal reports. Reportedly, about half of India's Internet bandwidth now is disrupted, and voice traffic to the United States and Europe also are affected.
It could take a week or two to fix the cables, in part because of bad weather, some executives say.
Users in India, Egypt, Qatar, Saudi Arabia, the United Arab Emirates, Kuwait and Bahrain are affected by the outages.
Observers think an anchor might have snagged the cables. At least that's what Flag Telecom Group Ltd. now believes. The incident took place 8.3 kilometers (5.2 miles) from Alexandria beach in northern Egypt.
Emirates Integrated Telecommunications Co., the United Arab Emirates' second-biggest mobile-phone company, is working with the cable operators, Flag Telecom and SEA-ME-WE 4, to find out why the cables were cut and to determine when service can be restored.
The outage is a reminder that physical infrastructure, however mundane, underlies all of modern computing and communications. It's also a reminder that if your business or life depends on Internet-based communications, commerce and content, you need a diversity strategy. It costs more money. But so does inability to do your work.
A growing computing architectural theme is the move of functions out of proprietary data centers and "into the cloud," a return in some ways to the days of time sharing as a computing architecture. So it is that 330,000 or so developers have registered to use Amazon Web Services, up more than 30,000 from the prior quarter.
And those users are driving traffic and compute cycles. Amazon Elastic Compute Cloud (EC2) and Amazon Simple Storage Service (S3) consumed more bandwidth in fourth quarter 2007 than was consumed in the same period by all of Amazon.com's global Web sites combined.
At some point, the availability of cloud computing resources is going to fundamentally alter the tradtional "build versus buy" equation that has had enterprises and other large entities building and maintaining their own data centers. At some point the computing framework used by smaller entities and individuals is going to change as well.
Revenues from Packet8 Virtual Office hosted business phone service now contribute 48 percent of total 8x8 revenues, up one percent from the previous quarter. Virtual Office revenue grew eight percent over the prior quarter. That's important given 8x8's intention to focus on business customers, even as it fills out its revenue with consumer customers.
In the consumer segment, revenue was flat, and declined by three percent year over year. So the consumer business appears stable.
During the December quarter, 8x8 gross margins were 65 percent, an improvement 8x8 attributes to improved scale. Overall service margins rose to 70 percent. Packet8 Virtual Office service margins increased to an all time high of 83 percent, an impressive figure rivaling the sort of return an efficient provider gets from far-simpler T1 services.
Many years ago, wireless and wireline minutes of use were sold on a metered basis. These days voice and texting are sold by the bucket. There's now more experimentation with that sort of model for broadband access as well.
It might seem odd, but changing the way broadband access is priced at retail, using a model similar to wireless minutes of use and texting, might be beneficial for end users, not simply for Internet Service Providers.
The reason is that if a user wants to buy a bigger bucket to move more packets for peer-to-peer video, the user is happier and so is the provider, who is able to match revenue with use of network resources.
That's arguably a better solution that having ISPs deploy sniffing and packet inspection capabilities so they can inspect all packets (as happy as some solution providers would be to sell all that capability).
Since deep packet inspection has to impose some overhead and latency, the user's applications arguably should work better as well (also avoiding privacy concerns). If any user is found to be shipping around video bits in violation of copyright, there are other remedies.
That's the way enterprises and businesses buy bandwidth, by the way. They pay more money but have unrestricted right to use the bandwidth they've purchased. Pricing consumer access in the same way wireless text and voice now can be bought would allow users to make their own choices about what applications they want to use, and how much.
It isn't metered usage in any way more objectionable than buckets of minutes or texting are. And it might allow ISPs to avoid the DPI effort.
Two international submarine cables in the Mediterranean Sea were damaged on Jan. 30, causing significant disruptions to Internet and phone traffic in Egypt, Saudi Arabia, India and all of the Gulf states.
The two damaged cables are the FLAG Europe-Asia cable, operated by FLAG Telecom, and SeaMeWe-4 (South East Asia-Middle East-Western Europe-4), a consortium cable owned jointly by fifteen telecommunications companies. These two cables account for the majority of international communications capacity between Europe and the Middle East.
The two cable cuts leave the older SeaMeWe-3 system as the only cable in service connecting Europe to the Middle East via Egypt.
The cable cuts have reduced the amount of available capacity on this direct route to Europe by 75 percent (620 Gbps). Until service is restored, many carriers in Egypt and the Middle East must now route their European traffic around the globe, through South East Asia and across the Pacific and Atlantic oceans, or use satellite transport to some extent.
Global capacity executives are watching to see whether a new boost in undersea capacity on some routes across the Pacific will disrupt trans-Pacific pricing. Some also have expressed concern that new routes between Europe and India might have the same effect. The latest undersea cable disruption shows how important multiple and diverse routes have become, though.
If you go to the Dell Web site and try to buy a Dell Axim, a Windows Mobile-powered personal digital assistant, you can't. So maybe Dell simply is coming out with a new version of the device.
Still, 3GSM happens in February. And 3GSM is the place you'd want to be at if announcing anything important in the wireless space.
Of course, the Axim was a PDA, not a phone. But 3GSM is a phone show. And many of us stopped using our Palms some time ago when our smart phones provided all that functionality inside the phone itself.
If Dell were to introduce a mobile, 3GSM is where they'd want to do it.
Ofcom Chief Executive Ed Richards is lobbying European Commission telecom regulators to slash the allowed prices of international text messaging and mobile Internet access, says Jonathan Prynn, Evening Standard reporter. It appears Richards has in mind prices lower than currently offered by mobile operator O2. O2 charges £3 for one megabyte of data transferred.
So it appears Richards seeks prices significantly lower than the £4.11 per megabyte level that tends to be the average now. European mobile carriers probably will hope to stave off such regulation by voluntarily dropping their tariffs in time for an announcement at Mobile World Congress meeting in February.
The moves would be good for consumers, and obviously financially damaging for carriers. As always is the case, the lower tariffs also would make it harder for upstart competitors to grow their companies by undercutting the high tariffs.
With new reports out that Sprint might try to resurrect its failed alliance with Clearwire, this time perhaps with new minority investors (Intel, Google and Best Buy), one wonders whether Sprint ought to do what wireless operators are doing elsewhere and create a separate transmission company from which it can buy wholesale capacity.
Functionally separating retail operations and network functions might make sense in this case, given the other pressing demands for capital Sprint also faces. It isn't clear that Sprint derives significant competitive advantage from retaining ownership of the transmission facilities.
Best Buy might also be more inclined to invest in the new WiMAX network if such wholesale access were built into the investment agreements, as Best Buy might want to brand its own services.
Google is more interested in fostering an open networks environment and might not be that interested in any sort of Google-branded service. But wholesale access might be interesting if Google wants to experiment with applications that require such access, and wants to do so in a "real world" environment.
Ethernet continues to gain a more prominent role in networking capabilities being deployed by service providers in North America, Europe, and Asia Pacific, with most carriers reporting 90 to 100 percent increases in Ethernet traffic for the past two years, according to analysts at Infonetics Research. IP and MPLS traffic has grown 70 to 80 percent over the same period, Infonetics says.
A new optical transport layer also will emerge, Infonetics believes. This new layer will be a fused Ethernet-WDM packet transport with circuit-like capabilities via Ethernet transport tunnels, also known as COE, or connection oriented Ethernet. That means more adoption of T-MPLS and PBT, Infonetics believes.
There was a time when some argued that "connectionless" protocols such as IP would replace "connection oriented" protocols such as time division multiplex, SONET and asynchronous transfer mode. As it turns out, there's a reason why connection-oriented protocols, or at least protocols that emulate connections, are important. Some traffic types, especially video and voice, are susceptible to impairments that can arise when connectionless protocols are used.
Communications services in the past have been priced based on usage (minutes or distance, for example). These days, there's a greater range of retail pricing, including flat fee for buckets of usage, for example.
B ut with the advent of IP-delivered video services, service and application providers have a chance to price services in a more natural "value to me" basis. If one looks simply at retail pricing and "bandwidth consumed," text messages "cost" the most based on bandwidth consumed, with voice second. Video and Internet services "cost" very little on a "bandwidth consumed" basis.
But that isn't the point. Text, voice and other communications applications are valued one way; video entertainment or simple Web access another way. In other words, in the communications space, "cost" is not the same thing as "price."
Target and Wal-Mart sell some products as loss leaders to get traffic into the store, so people buy lots of other products with varying profit margins. Communications services aren't any different. Some have have margins for providers, others have slim margins. The key, though, is value to the end user, not "bandwidth consumed."
Text messages "cost" very little, as the network to enable sending and receiving them is a sunk cost. But cost isn't price. Users demonstrate by their behavior that they value text messaging highly, on a "bandwidth consumed" basis. If one letter of a text message requires one byte, then sending or receving 6,553 messages consumes about a megabyte of data.
So a 160-character or smaller message might "cost" 10 to 15 cents. So a megabyte worth of text messaging represents as much as $655 to $983 for domestic usage. International messages obviously "cost" more.
A month's unlimited usage of entertainment video might cost $50, consuming more than a megabyte in a single second of use.
The point is that the retail price of any particular message or service has little to do with the actual "cost" of providing it, any more than the "price" of perfume, luxury automobiles, shoes or applications.
"Price" for a video service has to be vastly lower, on a "bandwidth consumed" basis, than texting, instant messaging or voice. That has little to do with user-perceived value, though.
Nokia has acquired Trolltech, a development platform for applications that can run on the Internet, accessed from a PC or a mobile phone. That might mean support for applications that run across operating systems, for example. The acquisition illustrates a couple of trends.
Mobiles need to acquire the ability to run Web applications, and need to do so in ways that are similar to the use of those apps on a PC, so users don't have to relearn a behavior. Cross-platform support also means Nokia can benefit from the huge numbers of developers working in the C, Flash, Java and other environments, for example.
The high bid on the national 700 MHz spectrum block stood at about $3.4 billion on Tuesday. Bidding is proceeding slowly and about all we know is that it will go higher until the minimum to compell an open network framework is reached. Google has pledged to bid at least that much and we have no reason to think it will not. Another billion and some odd to go until that point is reached, though.
One year after the passage of a law designed to ease the entry into the cable market of competitive providers in Michigan, only 110 of 2,000 communities in the state have a choice of cable providers, according to Multichannel News.
Of the four largest U.S. mobile carriers, all but Sprint seem to be posting strong gains. T-Mobile USA says it had added 857,000 net new customers during its most-recent quarter. Average revenue per user also was up to $53 in the quarter, rom $52 in the third quarter of 2006.
Operating income was up 15.1 percent compared to the same quarter of 2006, while churn was down to 2.0 percent from 2.3 percent in the third quarter of 2006.
Contract customer net additions in the third quarter of 2007 made up 65 percent of customer growth, down from 80 percent in the second quarter of 2007 and 96 percent in the third quarter of 2006. Prepaid additions are the reason.
Contract customers represented 84 percent of T-Mobile USA's installed base.
Blended churn, including both contract and prepaid customers, was 2.9 percent in the third quarter of 2007, up from 2.7 percent in the second quarter of 2007 and down from three percent in the third quarter of 2006.
Blended ARPU was $53 in the third quarter of 2007, the same as the second quarter of 2007 and up from $52 in the third quarter of 2006.
Contract ARPU was $57 in the third quarter of 2007, the same as in the second quarter of 2007 and up from $56 in the third quarter of 2006, driven by increasing data services revenues.
Data services revenues were $666 million in the third quarter of 2007, representing 15.4 percent of blended ARPU, or $8.10 per customer, compared to 14.7 percent of blended ARPU, or $7.80 per customer in the second quarter of 2007, and 11.3 percent of blended ARPU, or $5.90 per customer in third quarter of 2006.
Text messaging still is the most significant driver increasing data ARPU. The total number of short message service and multimedia messaging service messages increased to almost 21 billion in the third quarter of 2007, compared to 18 billion in the second quarter of 2007 and 10 billion in the third quarter of 2006.
SureWest Wireless is being bought by Verizon Wireless for $69 million in cash. SureWest Wireless holds spectrum licences covering 3.8 million people in the Sacramento area and had around 50,000 subscribers at the end of September 2007.
SureWest, which operates triple play services in Roseville, Calif. and Kansas City, seems to have decided that mass market wireless is a scale business inefficiently operated by a purely local operator. Also, now that SureWest operates in more than one geography, it is unable to offer the same set of services in Kansas City that it now offers in Roseville, complicating the firm's marketing efforts.
Necessity often is the mother of invention, and SureWest seems now to be betting its future on broadband services, not wireless and broadband. In similar fashion, Qwest has decided to take a similar posture, having outsourced its wireless offerings to Sprint and its video entertainment to DirecTV.
It's worth keeping in mind: business strategies appropriate for scale players do not often make as much sense--if sense at all--for niche players. It is less a matter of what one would like to do and more a matter of what one practically can do.
Verizon says it has 8.2 million broadband access subscribers. During the fourth quarter, Verizon added 245,000 net new FiOS Internet customers and 19,000 net DSL subscribers. So here's the question: is T1 (1.54 Mbps) a different product from a DS3 (45 Mbps) connection? Is T1 a different product from an asymmetrical cable modem or Digital Subscriber Line service? I suspect most people who create and deliver such services would say "yes."
So if a customer buys a FiOS fiber to home service, is that a different product than the alternative it replaces? If Verizon added just 19,000 DSL subs and an order of magnitude more FiOS subs, what does that suggest? Right now it is hard to tell what it means, as Verizon does not appear to be providing detail on DSL penetration as distinct from FiOS Internet.
So far, Verizon says it has 21 percent FiOS Internet penetration where it can sell the service.
Presumably that includes virtually all of the DSL subs who converted over to FiOS. At the end of March 2007 Verizon said it had overall broadband penetration of about 16.8 percent.
So it is conceivable that FiOS availability boosts broadband access penetration by something slightly less than four percent of marketable homes, as well as garnering 16 percent of homes as video subscribers.
For the moment, FiOS Internet appears largely to be a substitute for DSL. That should change over time, as nearly all major market consumers in Verizon's footprint have a chance to buy Ethernet services ranging from 10 to 50 Mbps. It's hard to imagine that not emerging as a differentiated product.
In football, they'd call his "tough yards on the ground." Verizon's four percent increase in fourth-quarter profit came primarily from the mobile business, as traditional land-line metrics continue to drift lower, despite gains in FiOS broadband access, Digital Subscriber Line sales and FiOS TV services.
Still, quarterly revenue in the consumer segment was up 2.7 percent, a significant achievement against a backdrop of share losses in the legacy consumer wireline voice business.
Verizon added about two million net wireless customers in the quarter, offsetting wireless declines of about 616,000 lines. For the full year 2007, Verizon lost about three million residential lines, or 10.6 percent of total, while business lines dropped 3.7 percent.
In essence, Verizon is getting higher average revenue per unit in its wireline business, even as the total number of customers is dropping. If you wanted any proof about the revenue impact product bundling has, Verizon is providing the evidence.C3IP Communications, a privately-held VoIP provider based in Scottsdale, Ariz., has integrated its communications functions with the Act! customer relations management software. As a result, C3IP clients using Act! have access to customer histories, account information and other resources whenever customers call in.
Verizon has broken the one million TV customer mark for the first time, growing its subscriber base 356 percent in 2007. Clearly, Verizon's network construction and video franchising phase now is yielding to the marketing phase. The next couple of years will provide us with a better handle on just how well Verizon will do as a provider of video entertainment services, but FiOS TV does not appear to have suffered the technology or performance challenges that have beset at&t's U-verse offering in the past.
So the issue now is how well Verizon will do in the market share battle with cable companies, as each swaps share in their legacy businesses while trying to gain the upper hand in the broadband access business. Up to this point cable has had the advantage, gaining more voice customers than Verizon and at&t have gained video customers.
Depending on whose data one wished to cite, telcos either have closed the gap with cable or are taking more new share in the broadband access business than cable companies are. The installed base generally is seen as reflecting a lead for cable, but the installed base gap is expected to close over the next couple of years, by most estimates.
It appears 8x8's Packet 8 hosted VoIP service for businesses gained about 4,000 net customers last year. In December 2007 the company reported having 10,000 customers. In December 2006 it had about 6,000.
BT plans to launch its 24 Mbps service in April 2008 with available coverage reaching in excess of 50 percent of the U.K. market by April 2009. It will be using a fiber-to-node network very similar to at&t's FTTN network, with copper drops. Both BT and at&t believe that is sufficient bandwidth for anticipated customer demand. In at&t's case that also includes IPTV and HDTV services.
They might be right. But there is something more than bandwidth at issue here, and that is the marketing platform. If you have Millenial children, ask yourself what their preferences are in the area of broadband and video entertainment providers (You know they all rely on their mobiles).
Up to this point, though, it has been the common pattern to buy both video and broadband from the cable company. What we need to watch is what happens when services such as Verizon's FiOS fiber to home service are available. The issue is not just how much bandwidth they need or will pay for.
The issue is whether FiOS or fiber to home services are a more compelling product than cable modem services.
Wireless has been the perennial favorite for believers in facilities-based access competition to the entrenched telephone and cable companies. Some 25 years ago, proponents argued that Multichannel Multipoint Distribution Systems (MMDS) based on 2.5 GHz spectrum were going to be the way new video entertainment providers would gain a foothold.
That effort failed. Similar spectrum then was touted by the likes of Winstar, Teligent and others as a solution for high-speed access in the business market. The effort failed.
Much spectrum then was acquired by firms such as Sprint Nextel, BellSouth and MCI and spend years essentially languishing. Now Clearwire and Sprint say the former MMDS spectrum will be the foundation for WiMAX.
We shall see. A smaller new company, Towerstream Corp., is selling 8 Mbps broadband connections for $1,000 a month in eight markets, and currently plans to operate in 20 cities within two years.
In its Seattle market, starting February 1, new customers will be able to buy 3 Mbps connections bandwidth for $499 a month, with free installation. Towerstream offers businesses a range of bandwidth options including T1, T3, 100 and 1000 Mbps connections
The company has established networks in Los Angeles, Miami, Chicago, Seattle, the San Francisco Bay Area, and the greater Boston, Providence and Newport, R.I.
Using WiMAX technology, the company can “light" a city with just a few antennas. Its New York City network uses four antennas, including one on the Empire State Building.
TowerStream undercuts competitor prices for a T1 line by 50 percent or better. The small antennas that the company locates at the customers’ premises are installed by contract DISH or DirecTV installers.
Provisioning intervals normally are two or three days, compared with three to six weeks for a T1 line from a telephone company or competitive local exchange carrier.
Mid-band speeds in the 8 Mbps to 10 Mbps range seem to be the "sweet spot."
TowerStream appears to be using both telesales and direct sales approaches. It is said to have a 180-seat telemarketing center and is in the midst of expanding its sales force to 160 people, according to Morgan Joseph analysts, who say the company won 27 contracts in eight days, on the strength of 58 proposals. The company appears to have 100 or so direct sales reps trained and ready to call on prospects.
Be careful when anybody declares this or next year the "year of X." Such predictions inevitably are wrong. That doesn't mean the direction of a trend is wrong, just the timing.
So when Google CEO Eric Schmidt says the recreation of the PC and Internet stories are before us, he's right about the direction. When he says it is "very likely it will happen in the next year," he's most likely wrong about the timing.
The mobile Web will be a "huge revolution", as Schmidt argues. But it isn't going to reach the tipping point next year. Proclamations of the "year of the anything" are universally incorrect.
Research In Motion's move into the retail consumer market, including lifestyle features such as television, music players, cameras and Facebook social-networking software, is a good thing for consumers. That that includes a goodly number of professionals and workers who use email a lot for work.
Obviously a consumer device has to be priced lower than a "business class" device. But one thing I do notice, as a "business" BlackBerry user, is that the keyboards being supplied on devices such as the Pearl and Curve have a distinctly unpleasant feel. RIM might be doing this on purpose, but the feel of the keyboard is as important to this user as the keyboard is on a PC.
Every other element of the experience is outweighed by this one fact. Again, RIM might be doing that on purpose, to differentiate the market segments each device appeals to. If so, it's working. The 8800 class of devices are the only ones with a tactile experience I can tolerate. That's one way to create differentiation of user experience, I will say.
The omission of cameras and so forth also are design features intended to make the 8800 appeal to enterprises. But sometimes it comes down to other simple features. Like the feel of a keyboard.
The conventional wisdom now is that movie downloading will replace DVD sales and rentals, and that this replacement is only a matter of time. The conventional wisdom may well be correct, up to a point. On-demand viewing, in one form or another, has been increasingly for decades.
To some extent, the rise of the cable industry was an early and crude form of on-demand viewing, to the extent that viewers began to break away from the "three networks" experience, starting a process of audience fragmentation that continues today in much more diverse forms.
But movie downloading isn't the only future. In fact, the way new visual media are being used suggests that consumers are taking an "all of the above" approach to media.
People might continue to rent DVDs as well. But maybe not in the same way. "Unless video stores are reinvented, it may be that in five years, there are tens of thousands of kiosks, millions of online DVD renters and very few video stores," says Reed Hastings, Netflix CEO.
If you look at any sort of DVD media as an example of "sideloading," as people sideload music onto their iPods and MP3 players, you get the idea. People download songs. But they also may stream or sideload. And though one often thinks online delivery is the only viable business format, one can imagine other ways to do things.Cable and Internet VOD costs something on the order of $4.00 per movie, and the content has to be viewed within a certain period of time, sometimes within 24 hours.
Selection probably will be an issue as well. It is hard to imagine an equivalent lineup of online titles as the Netflix catalog represents, especially in the "long tail" area of niche content."Despite the growth of VOD over the last five years, DVD rental has been stable, with online rental and kiosk rental making up for store losses," says Hastings. "In the United States, DVD spending, including purchase, is still approximately 20 times larger than cable and Internet VoD combined, according to Adams Media Research."
Just about everybody thinks this will change, at some point. The issue is whether online delivery is the only choice, or whether other delivery methods still will remain a significant part of the mix. Price, release windows, immediacy, and depth of catalog suggest there is room for multiple consumption modes.
Google OneBox is an example of how search will change as mobile queries increase. In an enterprise setting, OneBox delivers real-time information from enterprise sources, such as CRM, ERP and business intelligence systems, based on a user's search query. In a consumer application, entering a movie title might yield a top result showing screening times for that movie at the closest theater.
The search algorithms have to anticipate what need a user has for a particular bit of information based in part on what device is used to make a query. In a mobile setting, it is a fair bet that a query for any type of product is related to some immediate need for using that product. Starbucks coffee, Italian food or bagel, perhaps.
So adapting applications such as search for a mobile use case requires more than adapting the display for a smaller screen, oriented in a different horizontal-vertical dimension and often with limited navigation tools and less bandwidth than a wired environment provides.
The reason for queries, as well as the types of queries, arguably are different in a mobile context. One is more likely to be querying a customer or inventory database in the office. One is more likely to be looking for someplace to eat when out of the office.
And then there's there the time of day, day of week dimension. People will be asking different questions on weekends than weekdays. They'll be seeking different answers after 5 p.m. or 7 p.m. than at 10 a.m.
All of which increases the value of locational knowledge and mapping. But you probably already had that figured out.
Some things never seem to change. For several decades, competitive providers of communications services, not to mention value added resellers, interconnect companies that install business phone systems, Internet access providers and broadband services providers have found that the small and medium-sized business segment has been the sweet spot for competing successfully with large incumbents. Cable companies now are preparing their own assault on the lower end of the market as well.
The news that Dell now will be selling the Fonality VoIP Phone System through its global SME sales organization, as well as its channel is simply more confirmation of the trend.
At the same time, there is abundant evidence that not all providers are equally advantaged in the SME space as the technological complexity of services intensifies. Some providers used to selling connectivity services with a clear network demarcation are going to find the going much tougher as the demarc moves to the desktop and the handset.
VoIP, in particular, requires more active assessment, management, monitoring and installation activity and support. And that's just at the network layer. As voice and communications become more embedded in actual end user applications, the level of complexity will take another leap. So, going forward, every provider inevitably will wind up more involved than perhaps desired in all sorts of implementation, optimization and management activities.
More skill and more cost are the inevitable result.
As many of us had feared, if Vonage is infringing patents, why aren't other independent VoIP providers doing so as well? Well, we now have a possible answer. Sprint Nextel Corp. is suing four competitive VoIP providers for the same patent infringements Vonage has been found to infringe. Sprint has sued NuVox Communications, Broadvox Holdings Paetec and Big River Telephone Co.
On the heels of Verizon's new lawsuit against Cox Enterprises for VoIP patent infringement, we might be seeing the materialization of the threat. Executives in the competitive VoIP community have privately worried about just such a turn of events for some time. It now looks as though those fears are justified.
Justin McLain, Endeavor Telecom CEO, partly in jest (but only partly) recently said at a panel at the Internet Telephony Expo that any independent, "over the top" VoIP provider had better have all the funding they need for 24 months, because if not, the companies will fold within that period. "You might want to look for another job," McLain said, again partly in jest, but only partly.
Competing against well-established providers who own their own access facilities and have huge customer bases, plus the ability to bundle entertainment video and broadband access or mobile services simply is going to be too tough, at least in the consumer market segment.
"No bring your own broadband provider really is successful," McLain said. In fact, a good part of any independent provider's success in the consumer market is driven to a large extent by customers who recently have immigrated to the United States and have high needs for international calling back to their home countries, McLain says.
Some other part of the market is composed of price-conscious callers, but the problem is that the average revenue per user a provider can generate from that segment is not enough to support a business, says Sanford McMurtree, RNK Communications VP.
Among the other possible changes in strategy are a shift to multi-level marketing on the Amway pattern, says Gary Coben, deltathree director. "For all the money spent marketing VoIP services, there aren't that many customers," Coben says. "That means people aren't comfortable buying."
It looks to be a tough year for independent VoIP providers who cannot reposition from a consumer focus to serve smaller business customers.
Not to count chickens before they hatch, but Japan's DoCoMo says it has begun a process leading to Android-powered devices being offered to customers, according to reporting by InfoWorld writer Martyn Williams. "We are starting discussions to offer handsets that will have the Android operating system," says Takeshi Natsuno, NTT DoCoMo managing director.
The talks include getting support for I-mode, DoCoMo's hit mobile Internet service, on the Android platform. Nearly 48 million of DoCoMo's 53 million customers subscribe to I-mode, so having it on Android will be key to the Google platform's success in Japan.
The availability of Android-powered phones on the DoCoMo network of course was expected. The point is that tangible steps now are being taken to make that a reality. Since nobody is going to be able to assess how important Android might be until people actually get to use devices running the new operating system, it's an important step.
It isn't clear how much actually has changed except the semantics, but application providers finally are getting better at explaining the benefits to be gained from IP-based communications capabilities. Several years ago the buzzword was "unified messaging." Last year it was "unified communications." This year it is "communications-enabled business processes.
However meaningful the change, it seems fairly clear that the terrain now is shifting in a subtle way. In the old days "telephone service" "dial tone" or even "messaging" was a discrete point solution, not requiring understanding of what the end user actually was doing at the use site, Martin Suter, Objectword president says.
By definition, a supplier has to understand much more about what a user or organization actually has to accomplish at a site, and what software is used to support those tasks, to "communications enable" those processes.
Almost by definition, value added resellers and other technology support organizations have had to know more about what users wanted to accomplish, compared to retailers of "voice" services. And that probably will be telling over the next several years as the CEBP or "next acronym" business moves forward.
In the meantime, expect to hear lots more about how communications can affect everyday business or organizational processes, ranging from safety to inventory management and customer management. It isn't "old wine in new bottles," though some will rush to try that. It's a new role for communications: enabler of better software.
Sprint Nextel faces big problems. New CEO Dan Hesse is wasting no time "doing something." First Sprint announced significant headcount reductions (4,000) and closing of a number of retail operations (125 stores and 4,000 retail partners) Now Sprint says CFO Paul Saleh, Chief Marketing Officer Tim Kelly and Mark Angelino, president of sales and distribution, are leaving the company.
The executive changes involve officials most responsible for building the telecom company's brand and customer base, or more accurately, a declining customer base. The earlier set of moves will help Sprint reduce its overall and cost structure. The resignations allow Hesse to bring in a new team to change course. The issue now is what course Sprint Nextel will take.
IP Multimedia Subsystem seems to be moving from concept to deployment, if recent observations by Manuel Vexler, IMS Forum VP, are any indication.
For starters, billing and operations support software firms are starting to be more active. That suggests their carrier customers finally are thinking about generating revenue from deploying IMS features (IMS is a platform allowing services providers to rapidly and cheaply create new services, test and then deploy them).
Carrier chief financial officers also seem to be asking tougher questions, which suggests carrier technologists are asking for authority to buy platforms. Many of the questions seem to be of the "you bought ATM 10 years ago, soft switches five years ago and now you want to buy IMS?"
IMS backers also now seem to be more aware that it really is infrastructure, and that the search for services will have to follow. "You don't have Google until you have the Internet," Vexler notes. Up to this point some have worried about identifying some "killer app" that would justify IMS deployment. Now there may be more awareness that until the platform is in place we won't really know what apps will resonate.
It probably still is a fair bet that wireless apps will be early candidates, as IMS originally was created by mobile carriers.
Forget the hype about "voice mashups," the integration of communications capabilities with applications. The idea is about as simple as mating the BroadSoft call control and feature set with the Act! customer management application.
The VoIP AddOn developed by C3IP seamlessly integrates ACT! with BroadSoft’s BroadWorks platform Basically, BroadWorks users now can access those features directly from Act!
That means the ability to "click to dial" from the database, automatic logging of calls and screen pops on inbound calls, for example. So far, voice mashups largely have been developed as a way to improve the efficiency or effectiveness of current business processes.
That's just the way such innovations are introduced, because in a business context there has to be some measurable benefit on either cost or revenue fronts. The easiest way to demonstrate such effects is to "save money" or "save time" doing things that already must be done.
It will be a while before people start to redesign whole processes in light of ubiquitous communications embedded inside the applications themselves.
EarthCaller (http://earthcaller.com), a new PC-to-phone service developed by Jaduka that allows its users to call any landline in the U.S. market for free, has been launched.
EarthCaller is said to run the calls over the Public Switched Telephone Network, with obvious call quality benefits. That's really a teaser for international calling, offered on a prepaid basis.
EarthCaller currently is PC-compatible at the moment.
About 62 percent of global network service providers (telcos) say they do not today have enough information about how their customers behave, according to a new study commissioned by Apertio.
About 76 percent of respondents say customer profiling is important, closely followed by identity management. (64 percent of respondents say that is important. That sort of knowledge is important since 67 percent of respondents say "personalization of services" is a key revenue opportunity for IP and data services
The situation won't be too surprising to anybody who has been in the service provider industry long enough. The problem arguably is easier to deal with in the IP realm, but even there network service providers might not have access to as much granular data as IP application providers do.
Some observers continue to think that demographic information is helpful, and it is, up to a point. More significant, others think, is actual user behavior expressed in application use, and what users do inside those applications. Since telcos and cable companies don't have much useful information on their customer demographic profiles, ability to capture clickstreams, when legal, is much more useful.Bidding begins Jan. 24 for the 700-MHz spectrum that will, among other things, allow creation of a new broadband network with significant open access requirements for devices and applications. The auction also will allow some regional players to acquire new spectrum on a local basis, either to fill in a national footprint or to serve some new local need. The biggest unknown is whether Google will place an initial minimum bid only, and then watch other bidders increase their bids to win the auction, or make some move to try to win the spectrum. Under FCC rules, the identities of daily bidders will be kept secret although bid amounts will be posted on the agency's Web site on a daily basis. So we'll know soon enough. Most observers saay the requirement to support any technically compliant device on the C block national network, as well as any lawful applications, has contributed to a recent "embrace" by Verizon and at&t Wireless of open-network policies even on the existing mobile networks.
At least so far, many observers say Verizon Wireless is the most motivated bidder as it needs additional spectrum more than at&t, for example. Some think at&t will look to the regional allotments in other blocks as a way of filling in its footprint.
At&t says it will soon launch VoIP for U-verse customers. The service has been launched in the Detroit market. The service is a replacement for traditional landline service and is priced accordingly.
A $40 monthly fee provides unlimited domestic calling while a $20 a month plan provides 1,000 long distance minutes. The service includes an online call manager portal, unified messaging, click to call from the TV, and simultaneous ring of up to four separate telephone numbers.
So the long march towards VoIP by dominant telcos begins. As just about everybody now recognizes, VoIP will in some cases represent an incremental change in user behavior, in some cases a replacement for traditional calling and in some cases a better way to do traditional calling with a better user experience.
Pretty soon we'll start to get some insight into the ways VoIP helps traditional telcos, in addition to representing a threat to established revenue streams. Without widespread fiber-to-customer networks and a complete shut-off of traditional time division multiplex infrastructure, it will be hard to say for certain.
But Verizon executives think they will save operating expense when they are able to shut off the TDM voice network and shift everything over to IP.
Global U.S. enterprise travelers spend about $693.50 on an 11-day trip, about 12 times more than the average monthly wireless bill, according to a new survey conduced by Harris Interactive and sponsore dby Brightroam.
“The study shows that 15 percent of employees make at least one international trip per year, which translates into costs of more than $950,000 annually per 10,000 employees," says Jeff Wilson, Brightroam general managers. Voice accounts for about 80 percent of the charges while data charges for Web browsing or testing represent 20 percent of total roaming charges.
About 62 percent of calls are made directly for business purposes while the balance of calls are personal, at 38 percent. Cell phones account for half of the devices being used to make those calls while 29 percent are originated from landlines.
The average number of calls is nine to 10 calls a day. About half of business users have smart phones rather than traditional wireless phones, the survey finds.
About four out of five companies surveyed say cell phones or smartphones are the primary communication tool used when employees travel internationally and 57 percent of all calls made on a trip are made on these devices. Users also are more likely to use a cell phone rather than a land line phone whether they are calling locally, to another country or calling back to the United States from abroad, the survey finds. If not using their cell phone, 60 percent will use a calling card and half will use the hotel phone.
Half of calls are placed back to the United States while 40 percent are local calls within the country traveled to.
With a change of presidential administration, and the high possibility that the White House will be occupied by a Democrat, all bets are off where it comes to the composition, leadership and therefore direction of Federal Communications Commission policy. But it is fair to say that a more heavily regulated approach is likely if Democrats win the White House. Incumbent tier one U.S. telcos won't like that. For other reasons, cable industry leaders will be happy as well. Competitive providers might well think their chances improve as well.
So it might be all that significant that Commissioner Michael Copps, a Democratic member of the FCC, seems to want to give incumbent wireless providers a bit of time to make good on their recent pledges to move towards more open networks, allowing any devices or applications compliant with their networks to be used.
That's an obvious counterweight to any thinking by an eventual owner of a new national broadband network that construction and activation of that similarly open network should be built as slowly as legally possible, essentially "warehousing" spectrum as long as possible. The motivation obviously is to extend the life of current revenue models as long as possible.
Pressure to keep those promises about openness on the Verizon and at&t Wireless networks will remain high if Democrats win the White House. In fact, pressure to open up wireless networks more than before is likely unstoppable if Republicans retain the White House as well. The 700-MHz auction rules about openness were pushed through by a Republican FCC chairman and the market seems to be shifting inevitably in the direction of open devices because of the market force exerted by the Apple iPhone and Google, in any case.
Dominant wireless carriers really would prefer not to deal with more openness. But it appears they no longer have a choice. That's going to be good for some new handset providers, application developers and end users, both consumer and business.With its stock price now so low, it is inevitable that speculation will grow about the fate of Sprint Nextel as an independent company. There has always been some level of speculation about Comcast's possible interest in Sprint. Most likely there also will be talk of what Google might want to do with those assets. There are lots of plusses and minuses for either company.
Given the growing importance of product bundling, as well as wireless, it might make sense for Comcast to have its own wireless assets, it is argued. Comcast is a part owner of some wireless spectrum through SpectrumCo and also uses the "Pivot" offering developed by Sprint to offer a branded wireless service to cable customers.
Then there is the fourth-generation WiMAX asset Sprint could provide. But there are lots of arguments why Comcast can't, or shouldn't consider buying Sprint. Start with the WiMAX network, which obviously would operate outside Comcast's cable franchise territory. There is one big unstated "no no" among leading cable operators, and that is that one never competes with another cable operator. "I have mine, you have yours" has been the rule since the industry began in the late 1940s. Comcast would not likely want to be first to break the taboo.
Comcast shareholders also seem to be terrified that Comcast might embark on just such an expensive acquistion. The last time Comcast tried, attempting to buy Disney, the stock was pounded. Any Sprint acquisition would likely have the same effect this time, and Comcast's stock price already is beaten way down.
Comcast also says it continually monitors what is happening in the wireless industry, and one could make the observation that as crucial as wireless has been as a revenue growth engine, slowing has to occur as the market reaches complete saturation in just a few years. Nor is it clear that cable customers see wireless as a "natural" part of a bundle. That's arguably not the case for buyers of "phone service," who may well see a wireless-broadband-voice bundle as "natural" and "logical."
Google, on the other hand, might also be seen as a logical consolidator. It clearly wants mass in the wireless market, and control of Sprint's customer base would be helpful. The price tag is really low. The 4G network makes much more sense for Google than it does for Comcast, and the cost of the spectrum is already baked into Sprint's share price.
On the other hand, Google wants to work with all the major wireless carriers, and becoming a competitor doesn't help. Nor will Google want to mess with operation of three networks or Sprint's marketing challenges. Still, to the extent that ownership of a national broadband wireless network might be helpful, and if the eventual owner of the 700 MHz C block spectrum is a company like at&t or Verizon, who might drag their feet putting that spectrum into service, Google and other supporters of a mobile Web approach untethered from legacy considerations about voice might want a chance to move ahead with WiMAX using a new business model.
Perhaps Google could even work out a pre-planned buy of all of Sprint, and then immediately spin off the non-WiMAX assets, to avoid becoming a competitor to at&t and Verizon. Other scenarios obviously will make sense to people if Sprint's share price doesn't climb soon.
It's going to be easier to read and respond to text, attachments and image-formatted documents on Research in Motion BlackBerries sometime later this year. RIM says it will upgrade its software so users can edit documents directly from the device and to view messages in their original formatting. That sort of functionality is obvious on Windows Mobile devices, so RIM has to keep pace. Apple's growing presence and market share also might be an issue, as the "easy to use, the whole Web" philosophy has got to be changing user expectations about what they ought to be able to do, and how, on their smart phones.
In the third quarter of 2007, Apple captured 20 percent of all U.S. smart phone shipments, Gartner Inc. says. RIM got 39 percent.
Enterprise iPhone users now have a specific set of plans and a financial inducement to sign up for a minimum two-year enterprise iPhone plan. The inducement is a $25 a month discount through December 2008 for new accounts. Users can sign up for the typical voice plans, and then pay a new enterprise data fee. At least that appears to be the case. The Web site isn't crystal clear about the matter.
The enterprise data plans include visual voice mail, unlimited data with both email and Web inside the United States, plus a bucket of text messages.
Data plans range from $45 to $65 a month. For users requiring data access outside the United States, at&t also offers data global roaming plans costing $24.99 a month with 20 megabytes of global data access, and a $59.99 a month plan offering 50 Mbytes of data access in 29 countries outside the United States.It doesn't appear to be a done deal. In fact, it might be premature to say the deal will get done, but Thailand’s Advanced Info Services is collaborating with shareholder Singapore Telecom and Australia’s Optus to win the right to bring Apple’s iPhone to Thailand and the southeast Asia-Pacific region.
AIS Chief Marketing Officer Sanchai Thiewprasertkul says " up to 60,000 iPhones have been smuggled into Thailand so far," according to TeleGeography.
China Telecom, the nation's largest fixed line company, reported a decline of 2.7 million local access lines in 2007, as a result of great competition from wireless carriers. The number of fixed line subscriptions fell by 1.48 million in December, its fifth consecutive monthly loss, to takes China Telecom’s total to 220.3 million.
China Mobile added 68.1 million users in 2007 to take its total to 369.3 million, while Unicom added 18 million subscribers to reach 160.3 million subs.
Fixed line substitution isn't just a problem occurring in North America and Europe, apparently.
If engineers, analysts and marketers at Google are smart, and we would agree they are smart, lots of really important data is being gathered about what it is that mobile Web users do on their mobile browsers. The reason is that the preliminary data suggests that iPhone users are much more heavy browser users than users of other makes and models of mobile devices.
That sort of information is going to be really important as software designers at Google and elsewhere try to unravel the secrets of mobile search. So far, everybody seems to think there are contextual factors to mobile search that make it different from desktop PC search. In other words, people probably are going to be asking different questions and trying to do different things when initiating a mobile Web search. Directions have to be right at the top.
My own usage tends to be "what's the address of the place I am going to" and "where can I find the closest book store." Another favorite: "where can I find good Thai food close to where I am?"
Everything beyond that remains to be discovered.
Residents of Longmont, Colo. temporary have free access to the municipal Wi-Fi network operated there by Gobility. Access is free because Gobility lost its billing contract and literally can't bill for access. It's bad news because the network is for sale, Gobility apparently finding it cannot raise additional funds to keep the network in operation.
Kite Networks, owned by Texas-based Gobility, provides wireless broadband service in Longmont and to approximately 17,000 customers across 21 markets.That works out to about 809 customers per market. So it is probably no surprise that Gobility is finding the business a really tough proposition.
Longmont’s city council is taking a look at whether the city itself could buy and run the network. But Longmont has Digital Subscriber Line service available from Qwest starting at about $20 a month and Comcast offers cable modem service for about $40 as a stand-alone service. There are no particular signal coverage limitations that prevent use of wireless broadband from the major national suppliers and perhaps a dozen third party ISPs offer DSL service as well. It just isn't clear that a municipal Wi-Fi network is needed or that paying customers exist in sufficient numbers to sustain a business, even if operated by the city.
A vote of Longmont residents would be required before Longmont could consider a bid.
For many observers anticipating the soon-to-begin auction of valuable 700-MHz wireless spectrum in the U.S. market, there is some combination of great hope and fear that it will all be business as usual and that nothing much will change.
The great hope scenario calls for some new entrant to win the C block and create a national, open, Internet style broadband wireless network. The great fear is that at&t or Verizon will be the big winner, stifling innovation once again.
For mobile industry service providers, you can reverse the hope and fear positions. Incumbents hope at&t or Verizon will win, precisely to prevent the emergence of an open national broadband mobile network. They fear an outsider could snatch the spectrum away and actually do that.
In the end, he outcome will not be so wildly good for innovation, but not stultifying either, even if an at&t or Verizon wins the spectrum. Change is coming simply because the mobile Web is coming, and no contestant can stop that. Innovation will continue to flourish on the Web side of the business, no matter what is done on the walled garden sides of the business.
Consider the mobile music business. We are far from knowing how the use cases and business models play out. But we already can point to some facts. Walled garden services featuring downloads or rental have been seen as the logical evolution, and that certainly is where early efforts have focused.
Over time, users might do other things. They might sideload their music, then share with their friends using Bluetooth, Wi-Fi, 3G or 4G. You might say this is a laborious process, and you would be right, if all we have is today's tools. That will change. Somebody will author an elegant program for syncing sideloaded music with other handsets. It might not be iTunes that drives this, since iTunes is quite sharing-unfriendly by design.
But somebody will do so. And then the business might shift as it grows. Online downloads and sideloading will increase. But then sharing will kick in. Then it might turn out that walled garden download services aren't as big a deal as we once thought, but open download services are. Maybe the sharing software is simple enough that users can see each others' playlists and trade songs, one for one.
Maybe there's even some monetization scheme possible where songs are traded or shared. Most people don't seem to mind paying a fair price to get a song they like. Maybe they won't mind paying some amount to share songs with friends or even bystanders.
The point is that walled gardens might be the logical way a service provider approaches building a new business. That doesn't mean other ways are precluded, especially when the mobile Web really gets to be popular.
In a sense, the very existence of the mobile Web ensures that innovation will happen. Some might argue a better way to approach things is structural separation, where transport and access are separated from the retail side of the business. Others will argue that it is more feasible simply to "functionally" or "operationally" separate wholesale transport and access from retail operations.
Even in the absence of those mechanisms, the mobile Web is going to allow innovators to do things "without asking permission" of the retail wireless operators. The Federal Communications Commission's rules on open network attachment for the C block will help ensure that regime, as the operator of the C block network will not be able to block the use of "open" or "third party" devices.
The likely outcome of the C block auction is that either at&t or Verizon wins it. Whichever contestant does not win the C block will pick up A and B block spectrum where it is needed to reinforce existing operations or extend the current service footprint.
Verizon and at&t simply have the business motivation to win the auction. Sprint won't be bidding and T-Mobile arguably can't afford to bid. Still, it won't halt innovation, though we won't see as much change as if an outsider with no vested interest in today's revenue models were to win the auction.
But the mobile networks are going open in some significant ways, even if the basic business model doesn't change as fast. But T-Mobile already offers a "data-only" service plan, with no need to buy voice to get the data. In principle, it should be possible for this to happen on a much-wider scale, and then users can draw their services entirely from the mobile Web, rather than using walled garden services.
The auctions probably won't be as good as some hope, but certainly not as bad as feared. And that might be case no matter which viewpoint one has. Those who want change will see measurable "goodness." Those who have reason to fear the coming changes will have time and resources to adjust and embrace the change.
When all is said and done, the auctions will neither be a disaster nor a revolution. Neither will they honestly be anything other than another important step towards more openness and choice, however. It's coming.
Verizon now is selling symmetrical FiOS connections aimed at small and mid-sized businesses at speeds of up to 20 Mbps as well as 50 Mbps downstream with a 20 Mbps upstream. The new offerings will put pressure on data T1 sales, but not necessarily integrated T1s used to support both data and voice, in all likelihood.
In some states (Connecticut, Florida, Massachusetts, New Jersey, New York and Rhode Island) small- and medium-sized business customers can subscribe to 20M/20M service with a dynamic IP address for $99.99 per month; or with a static IP address, the 20M/20M service is $139.99 per month -- both with a two-year term agreement.
The fastest speed available in these states is now 50M/20M for $199.99 per month with a dynamic IP address, or $239.99 per month with a static IP address -- both with a two-year term agreement.
In other states (California, Delaware, Indiana, Maryland, Maine, New Hampshire, Oregon, Pennsylvania, South Carolina, Texas, Virginia and
Washington) small- and medium-sized business customers can subscribe to 15M/15M service with a dynamic IP address for $99.99 per month, or with a
static IP address, the 15M/15M service is $139.99 per month both with a two-year term agreement.
The fastest speed available -- 35M/5M with a dynamic IP address -- has been increased to 30M/15M for $199.99 per month, or $239.99 per month with a static IP address both with a two-year term agreement.
The plans are also available with 12-month agreements at higher prices.
Along with the introduction of FiOS Internet service at symmetrical speeds of 20 Mbps or 15 Mbps, the company has also increased the speed on its fastest business Internet plans and lowered prices by as much as 35 percent.Verizon FiOS Internet Service for Business allows business owners to choose either a dynamic Internet protocol (IP) address or a static IP address.
FiOS Internet service for small businesses is available as part of a bundle including local and long-distance calling services from Verizon, or as
a stand-alone Internet access service.
The entertainment business--music, concerts, TV, movies, downloads, streaming, mobile, magazines, audio broadcasting, CDs, DVDs and other display devices--is fundamentally different from the voice, text and visual communications business in one really important way.
Entertainment is all about the "content" or "stuff" anybody wants to watch, listen to or interact with. For communications, you and I supply our own content, so all we need are compliant networks and devices. Other humans or in some cases machines are the "content."
Everything else about the value chain--discovery, delivery, navigation, display, audio, format, business model, pricing and packaging--is subsidiary to the availability of content one wants to view, hear or interact with. Unlike the communications business, then, it is not possible to "disrupt" or "disintermediate" any parts of the value chain without the willing cooperation of the entities that own the content people want to access.
That's really different from communications, where people can build whole networks to disintermediate or disrupt the dominant providers. You might need permission for rights of way, or a license, or an operating permit. But you don't need the permission of the dominant provider to do so.
And that is what makes video a harder business to "disrupt," even if all one wished to do is create a new distribution channel. Content owners are well aware of how they make most of their money and even how they make that last incremental five percent of their money.
So they are not going to give you access to the best content before they have wrung the expected profit out of that content using the current distribution methods. Of course, that doesn't apply to user-generated content, but the point is that most people still watch commercial video most of the time, despite UGC growth.
That makes it tough for any new distribution platform, much less any new contestant using a new platform, to get access to the "really good and highly-viewed stuff" until it is proven that the new distribution method produces more revenue for copyright holders than the older methods.
The other problem is that "when" a provider gets access is as important as "what" a distributor gets access to. This is a sheer matter of exposure. By the time a popular movie or TV show gets to online or on-demand distribution, people have had a chance to watch in movie theaters, in hotels, on airplanes, on DVDs, on premium cable channels or cable or satellite TV. Not to mention illegal viewing along the way, as well.
By definition, people have had lots of chances to see something before it is made available to emerging distribution channels such as online and streaming services. All of that limits the actual market for online or streaming delivery of content.
In principal, downloads can replace DVD rentals and sales, but only once those older formats generate less than, or equivalent amounts of money as online sales do. And that is going to take some time.
So we shouldn't be too surprised that early forays into online or streaming services face a tough, uphill battle.
Any distributor needs access to the popular content, soon enough to capture some volume, on devices with high penetration of users, in a very easy and convenient way, at prices that make sense to people.
Google has stumbled, Joost might not be doing much, Wal-Mart has folded and even Apple has had to reposition and relaunch its Apple TV service from a "buy" to "rent" model.
Video won't be as easy to disrupt as voice or data.
Verizon Communications has sued Cox Communications Inc., claiming infringement of eight patents for providing telephone services on a data network. So far, only Vonage has had to face lawsuits over VoIP intellectual property. What isn't clear is what happens if Verizon wins the lawsuit, either outright or through a negotiated settlement.
After Vonage was found to infringe patents Verizon, Sprint, Nortel and at&t, many of us have wondered whether lots of other service providers might be found to infringe the same patents. Many independent VoIP providers and even some technology suppliers apparently have wondered the same thing, even if they won't say so in public.
Apparently we might find out relatively soon. The wider implications are pretty clear: it is not clear what Cox might be doing that any other cable company affiliated with Cable Television Laboratories is not doing. So the damage conceivably would not be limited to independent providers of VoIP services but possibly every leading cable company operating in the U.S. market.
And since Cox does not create its own technology but buys it from the same suppliers thouse other cable operators are using, one has to wonder whether there might not be exposure even on the supplier side of the business, though it is extremely unlikely Verizon or other telcos would bother their own suppliers.
Granted, any damage would be annoying, not a grave danger to any leading U.S. cable company. It isn't so clear what the damage might be at a smaller cable company, though arguably the potential size of the infringing revenues wouldn't be that great, so the penalties would be commensurate.
Atlanta-based Cox, the third-largest U.S. cable TV company, should be ordered to pay cash compensation for using the inventions, Verizon says in a complaint filed in federal court in Norfolk, Va.
Vonage's troubles, it appears, might not be confined there alone.
Perhaps nobody outside Google really knows how serious the search giant will be in the auction for C block spectrum in the 700 MHz range. There remains some thinking that Google's primary objectives--getting more openness in wireless networks--are well on the way to being satisfied.
Using that line of thinking, Google will submit the minimum required bid, but nothing more, essentially "bidding to lose."
But one never knows. Given the current economic climate, and the failure of any takers for a smaller segment of spectrum that carried a requirement for public service services, the final auction price might not be as high as some had forecast just a year ago. If it appears prices might be low enough, even Google might decide it is worthwhile to play a while longer.
The 700 MHz spectrum is attractive for any number of reasons. It is the last chunk of spectrum likely to be made available for mobile use. And it's nice spectrum, with greater range than the 2.5 GHz spectrum used for much of today's mobile service. The signals also have greater ability to penetrate walls and buildings, a big advantage, as anybody who uses a mobile phone inside a building can attest.
Those signal propagation characteristics also might mean lower costs to construct the network. True, it can be argued that Google doesn't need to own that, or any other spectrum, to accomplish its mobile Web and mobile advertising objectives. But you never know. The auction might not require as much capital as many had thought just a short while ago. An opportunistic buy always is possible.
With the caveat that "network neutrality" means different things to different people, it is striking that some observers think bandwidth caps for excessive use have anything whatsoever to do with network neutrality.
That's a little like arguing bigger or smaller buckets of mobile voice or text usage constitute some sort of "neutrality" issue. It's a business issue, nothing more.
The discussion is sparked by news that Time Warner is testing usage-based pricing for broadband access in a few markets, for new customers. The idea undoubtedly is that the new plans will be price neutral for 95 percent of customers, and affect only "extreme" downloaders or really-heavy peer to peer customers.
Once the test starts, new customers will be offered a choice of four plans that allow them to download set amounts each month--5, 10, 20 or 40 gigabytes. The typical user now consumes something on the order of three gigabytes a month.
Grande Communications appears to be in play. Its board of directors has authorized management to "explore strategic alternatives to enhance shareholder value." That's a "for sale" sign posted by one of the largest "overbuilders" in the U.S. market.
Grande has retained Waller Capital to assist the board and management in exploring strategic alternatives.
Grande is in the process of building a deep-fiber broadband network to homes and businesses in portions of Austin, Corpus Christi, suburban northwest Dallas, Midland, Odessa, San Antonio, San Marcos and Waco. The San Marcos-based company offers high-speed Internet, local and long-distance telephone and digital cable.
Sprint shares lost about 25 percent of their value Jan. 18 as Fitch Ratings lowered its credit rating. The Fitch downgrades reflect the ongoing concerns over Sprint Nextel's financial and operating results and the lack of visibility as to the company's performance going forward.
Fitch now believes credit metrics will experience greater near-term deterioration with leverage worsening. Sprint's difficulties with stabilizing its core operations and improving the company's competitive position were cited as evidence for the downgrade.
Fitch believes Sprint will experience difficulties in increasing its mix of prime subscribers given the high industry penetration rates, the low postpaid churn rates of its national competitors, the slowing economy and its competitive position. Of course, Sprint has had a churn problem for a couple of years now.
On the other hand, Sprint's continues to hold a good liquidity position and balance sheet. Cash was $2.2 billion at the end of the third quarter of 2007. Free cash flow (FCF) for the last twelve months was $2.2 billion.
The problem is that Fitch expects material free cash flow erosion during 2008.
Still, Fitch sees no issue with ability to service debt obligations. With manageable maturities over the next two years of $1.3 billion coming due in November 2008 and $600 million in May 2009, Sprint Nextel has more than sufficient liquidity through its cash position and bank lines to finance its current maturities and current commercial paper levels.
Considering Sprint Nextel's other strategic initiatives such as and including the share repurchase program and WiMAX deployment, Fitch expects Sprint Nextel to conserve liquidity and conservatively finance those initiatives.
Fitch's negative outlook is an indicator of weaker operating trends and the potential that further erosion could occur to Sprint's operations if the company remains unsuccessful in stabilizing its business.
The Internet has proven problematic for communications providers in any number of ways. Aside from mobility, the Internet and private IP services provide the foundation for most growth initiatives. Without it, there would be no demand for broadband access services, music downloads, video downloads and streaming, videoconferencing or Web services.
On the other hand, IP-based services also allow creation of services outside the traditional service provider walled gardens, creating competition for captive provider services. As a rule, IP also lowers the cost, and therefore the retail price, of just about any communications, content or information service.
So it is no surprise that wireless providers have mixed feelings about wider use of mobile instant messaging services that compete, at least in part, with lucrative text messaging services.
By the end of 2013, as many as 24 percent of mobile consumers will be using mobile IM services, say researchers at Forrester Research. That likely will cannibalize some amount of text messaging and shift brand awareness towards the IM providers (Microsoft, Google, Yahoo, AOL) rather than mobile carriers.
It looks like Sweden will join the ranks of countries believing that creating a separate wholesale broadband access entity will spur innovation in domestic telecom markets. A law giving Sweden’s telecoms regulator, the PTA, powers to impose a separation of network operations and retail services on TeliaSonera or any other infrastructure-based telco deemed to have significant market power now is under review.
But TeliaSonera has seen the writing on the wall and preempatively launched a wholesale unit on its own. TeliaSonera Skanova Access now offers equal wholesale terms to rivals and its own retail operations.
If approved, the new law will emulate BT’s "functional" separation. Swedish regulators say they will wait to adopt the new rules when the EU has formalized its own rules on functional separation.
There's a key challenge for North American regulators here. The grave potential danger of such structural or functional separation moves is that it will scare off investors who must provide the investment capital to build robust new optical access networks. As the trend continues to grow, not simply in Europe but in the Asia-Pacific region as well, we will accumulate a track record demonstrating whether, in fact, a capital strike is a realistic fear.
If functional separation can be made to work, if it continues to provide an attractive basis for investing capital in networks, pressure might mount on North American regulators to make similar moves. That will be especially true if market abuse were perceived to be occurring under the current "inter-modal" competitive regime that now prevails, under which competition between cable companies and telcos is expected to provide competitive benefits.
It's not wonder Sprint is axing 4,000 employees, closing stores and halting distribution agreements with some partners. In the fourth quarter Sprint Nextel reported yet another quarter in which it lost more customers than it gained.
True, Sprint reported a "net gain" of 500,000 subscribers through wholesale channels, growth of 256,000 Boost Unlimited users and net additions of 20,000 subscribers within affiliate channels.
Bu those gains were offset by "net losses" of 683,000 post-paid subscribers and 202,000 traditional pre-paid users. In other words, Sprint lost 885,000 customers in the quarter and gained 776,000.
In other words, Sprint had a net loss of 109,000 customers.
In the churn area, where Sprint has arguably its single greatest challenge, post-paid churn (customers billed monthly) was 2.3 percent, slightly better performance than the previous quarter, and within striking distance of the slightly less than two percent range Verizon and at&t now have.
Unfortunately, Sprint Nextel's rate of involuntary churn, where it has to cut off service to a customer, rose over the prior quarter.
At the end of 2007, Sprint Nextel served a total subscriber base of 53.8 million subscribers including 40.8 million post-paid, 4.1 million traditional pre-paid, 500,000 Boost Unlimited, 7.7 million wholesale and 850,000 subscribers through affiliates.
As this chart from Bear Stearns shows, churn creates a couple problems. First, it directly reduces the number of revenue-generating units a company has. Secondly, it almost always raises the cost of acquiring new customers as well. The former hits revenue, the latter costs.
Apple's iPhone is selling better than mobile carrier Orange (France Telecom) expected, Didier Lombard, Orange CEO, says. Orange expected sales to slow after the start of the new year, but that hasn't happened, Associated Press reports.
Orange had sold 30,000 iPhones in the five days after it went on sale in France, and planned to sell a total of 100,000 of the handsets by the end of 2007.
It doesn't appear too many customers are anxious to buy the unlocked iPhone, sold without a service contract and therefore for a significantly higher price.
Orange has sold "very, very few" iPhones without a contract, Lombard says.
The Carphone Warehouse Group (U.K. market), which might formerly have been thought of as an electronics retailer, now points out how much communications service distribution channels can change.
Carphone Warehouse now has 2.6 million Digital Subscriber Line customers. It is by no means certain that mass market retailers in other markets will do as well, but both Best Buy, Office Depot and Circuit City, for example, are distribution channels in the U.S. market, with differing degrees of active involvement in the integration and broadband access businesses. In the U.S. market, Best Buy has taken the boldest steps by buying Speakeasy, a national provider of DSL connections.
In 2007, Hewlett Packard earned 67 percent of its total revenue outside the U.S. market. In the fourth quarter along, Asia-Pacific grew by 20 percent, Europe, Middle East and Africa by 19 percent and the Americas region was up by 10 percent. The Brazil, Russia, India and China group grew 37 percent year over year in the fourth quarter. Growth rates of that sort are one reason new submarine cables are being laid between North America and the Far East, and being planned or talked about between Europe and India. Add mobile phones to the growth of PC and associated electronics and it is clear Asia, the Middle East and Africa is where the growth is, at least in terms of mobile and other sorts of communications.
Of course, there are other reasons for laying additional cables across the Pacific. Earthquakes are capable of taking out multiple cables and routes in an instant, so carriers logically want more redundancy on trans-Pacific routes than has been the case up to this point.
One way to look at current trends in where advertising is being bought is to note that "ad dollars are leaving the cable, broadcast TV and the newspaper business at a rate of roughly $5 million per day, says Paul Woidke, Comcast Spotlight VP.
As exemplified by this chart showing how utilities price usage by time to day to discourage use during periods of peak load, one theoretically could price broadband access, voice or virtually any other communications good based on time of day or day of week. Long distance pricing used to do so, in fact.
Of course, what we now know is that users vastly prefer flat rates, often because it is a way to avoid steep "overage" charges, and even when the actual price for usage is much higher than one might think. Based on what one did in a single billing period, for example, average prices for wireless calling might range from two cents a minute to eight cents or more. When one is on vacation, per-minute pricing might be as high as 20 to 25 cents a minute for the actual minutes used.
Most U.S. consumers probably don't worry about "per minute" pricing for domestic calling. They pay a flat rate for a certain number of minutes in a bucket, and that's about as far as one normally thinks about the matter.
Not so long ago, though, wireless calling and wired network calling routinely used time of day pricing. In principle, broadband access could be priced the same way. It is doubtful the potential benefits are worth the effort. Customers clearly prefer buckets and flat rate pricing. Also, there are costs associated with tracking usage so closely, so in most cases it might not be worth the effort.
The other issue is that pricing by the value of an application makes more sense than tracking raw bandwidth usage. The value of a text message or voice bit is quite high on a price-per-bit basis. On the other hand, the value of high-quality video video or audio bits is not determined so much by price-per-bit as by quality of the streams.
One movie might be "worth" the $3 or $4 a user pays for the stream. But the value will be determined by the quality of the delivered images. Two hours of continuous talking might be valued just as highly, even if the perceived price is $2.40 (two cents a minute for 120 minutes).
Time of day pricing also arguably makes less sense for broadband because network load tends to balance out, if one includes business broadband and consumer broadband load. Business load is high from 8 a.m. until perhaps 4 p.m. while consumer usage peaks in the evening. Average load therefore tends to balance on any given network from 8 a.m. to 11 p.m. local time, though usage obviously is lighter from midnight to 6 a.m.
At some point, as more Internet service providers begin to adopt "buckets" of use as the dominant subscription model, there will be outcries about whether this is fair, since most users in the U.S. market have come to expect flat fee pricing for "unlimited" use.
That has not been the dominant model in Europe, for example, and though there might be some incremental impact in usage patterns, I don't think anybody would argue that metered usage is terribly and inherently unfriendly.
It also is highly unlikely to the point of implausibility that ISPs in the U.S. market will move to a strict metered usage regime. The reason is simply that the objective--matching consumption to the cost of providing access--can be addressed more simply and palatably by using the "bucket" model, much as mobile calling or texting plans can be purchased based on expected usage.
In that regard, it might be helpful to recall that consumer pricing has used any number of models. Pay-as-you-go had been the dominant packaging and pricing model for all long distance plans, mobile and fixed, until at&t introduced "Digital One Rate." Local calling, on the other hand, has used a "fixed fee, all you can eat" model.
Cable TV has used a mixed model: essentially "flat fee, all you can eat" for ad-supported video and movie channels, but usage-based pricing for on-demand pricing.
The model used for Internet access started at the other end of the continuum: unlimited use (subject to some acceptable use policies) for a flat fee. Only recently have some voice providers moved to that model.
Of late, though, there has been a bigger move to "buckets" that match usage to price. There's no particular reason to believe a move in that direction will affect the vast majority of users. Most customers have usage patterns that fall within a reasonable zone, and won't, in practice, notice anything different even if usage-based pricing becomes more prevalent.
Providers obviously will want to minimize disruption, and there's no question but that lower prices have driven high demand. Nobody will want to jeopardize their market share by raising prices for most customers other than the small percentage who consume a disproportionate share of bandwidth.
Over time, more attention will have to be paid to the relationship between retail pricing and usage as video starts to change usage patterns, though.
There are many reasons lots of people ought to be paying attention to streaming and downloaded video. Lots of people work for companies making a living delivering video products and everybody watches video in its various forms. Lots of companies are making expensive bets about what people want to watch, how and where they want to watch, what features are required and how much they will watch. The two mid-January developments in the area of particular note are the Netflix "unlimited online viewing" offer and Apple's launch of a video download service.
Up to this point Netflix has allowed its subscribers to watch online movies on a limited basis, corresponding to their monthly plans. Basically, hours of online viewing roughly correlated to the monthly subscription price. The big change is that Netflix now allows users on unlimited rental plans starting at $8.99 a month to stream as many movies and TV episodes as they want on their PCs, choosing from a library of over 6,000 familiar movies and TV episodes.
Now, subscribers on unlimited plans can stream as many movies and TV episodes as they want from the smaller instant watching library, unconstrained by any hourly limits. The move widely is viewed as a preemptive response to Apple's launching of its own video download service, using a rental model rather than "download to own" approach. Up to this point Apple has seen modest success with an approach based on Apple TV hardware and content from two studios, Disney and Paramount.
All major Hollywood studios have agreed to make their content available as part of the new Apple service. They include Paramount, Universal, Walt Disney, Warner Bros, Sony Pictures, Metro-Goldwyn-Mayer, Lionsgate, New Line and News Corp's Fox.
Using Apple's iTunes online store, US consumers will be able to hire new-release movies at $3.99 for 30 days. Older titles are priced at $2.99 for the same duration.
These movies can be viewed on iPhones, iPods and television. One can debate the impact of Apple's more-aggressive move into online downloads and streaming. In fact, one can argue that the streaming business is a different segment from the "download to own" market or the "rent by downloading" segment.
One also can debate who wins and loses in the video rental business: Netflix, Blockbuster, Amazon.com, Joost, iTunes or others. Even the impact on Netflix is debatable. If consumer use of the streaming feature increases, Netflix will pay more money in licensing fees to the studios who own the content. It also will incur more bandwidth charges. On the other hand, Netflix might spend less money on postal charges, shipping and handling of physical DVDs.
Probably more important is the strategic impact: Netflix's ability to retain existing market share as new competitors enter the market.
The other issue is which market is affected. To some extent the "view on PC" segment is where Apple, Netflix and others compete head to head. There are other segments, such as the "watch on my iPod" market, where Netflix and others delivering to the PC do not play.
Also, one might debate whether a subscription service is different from a pay-per-view model. Heavier users arguably will prefer a subscription model. Lighter users might well prefer the "pay as you go" model. Also, there is little question but that mobile, iPod, PC and TV viewing segments will emerge as full-fledged markets at some point, irrespective of the payment model.
Business motivations also are different. Apple sells content at prices as low as possible so it can create a market for its devices. Its market is rNetazors (devices) not razor blades (recurring revenue). Netflix has the opposite business model: it only cares about devices as platforms to sell content on a recurring basis.
To some extent, then, Netflix and iTunes ultimately compete with telco, wireless and cable on-demand programming offerings, in addition to competing with each other to some extent. Netflix and iTunes now are in the video on demand business, not the "DVD rental" business.
Telcos and cable companies investing heavily in broadband access networks play in the linear TV space as well as the on-demand video space. They compete directly with each other and satellite providers. But over time each of the three main linear programming providers also competes in the on-demand entertainment market, especially as such viewing can be supported on TV screens at some point.
Time Warner Cable is testing usage-based broadband access pricing, according to Broadbandreports.com. The move is hardly surprising. Most Internet service providers report that a fraction of all users, about five percent or so, use over half of all access bandwidth.
The Time Warner test presumably aims to discover how such usage can be monitored by end users themselves, how scalable the process might be, and possibly whether such heavy users will upgrade to higher-usage plans or flee to another provider.
Over time, it seems inevitable that heavier users will find themselves facing universal caps on their usage and the ability to buy plans that support their higher usage levels.
Broadandreports.com says the test will involve new customers in the Beaumont market, not existing customers. Those users will be placed on metered billing plans where overage charges will apply, and provided a web site where they can track their usage and upgrade, if required.
In principle, the approach is akin to how mobile pricing plans now are structured, where users can choose higher usage or lower usage plans for voice and text usage.
One way or the other, as video becomes a bigger part of overall broadband usage, it is inevitable that usage-based plans supplant current "all you can eat" plans. Video is the reason.
Video consumes vastly more bandwidth than Web surfing, email or voice, requiring across the board capacity increases in the network backbone and access networks. That obviously costs money, and those costs will have to be recovered.
Usage-based pricing is coming because it has to.
Entertainment video of the sort delivered by cable, satellite or telephone companies often is thought of as a consumer application. But there's new evidence that lots of small and mid-sized businesses and organizations buy video services. To be sure, bars have long been a key business customer for video services.
What is striking is the degree to which lots of businesses now want to have video services available at the workplace. Whether for employee benefit or keeping up with the news (branch offices of financial services firms, for example), SMEs now appear to be far more willing than formerly to buy entertainment video services.
The smaller the business, the more likely it is to prefer a hosted IP PBX solution over a premises-based solution, says Yankee Group VP Steve Hilton. The pay-as-you-go
approach coupled with minimal on-site IT support makes hosted solutions desirable for
small businesses.
Based on Yankee Group survey data, businesses with fewer than 20 employees are three times more likely to want hosted IP solutions, compared to organizations with 99 employees.
Buying preferences are about evenly split in the 20-to-99 employee range.
Demand for hosted solutions also seems to be quite a bit higher in the retail segment, as you might expect, as these are deployment situations where most people will not need voice or text communications most of the time.
Small businesses in retail segments (a segment with more branch or franchise locations per firm) are almost three times more likely to want hosted IP solutions, whereas firms in professional services and manufacturing sectors are more evenly split between hosted and premises-based IP solutions, says Hilton.
There are some obvious conclusions. Service providers able to deliver hosted voice soltuions over a wide geographic area are positioned to sell hosted PBX services to retail enterprises with lots of franchises to support.
Service providers without wide geographic reach will largely have to content themselves with a focus on professional and manufacturing prospects that more often operate out of one or just a few sites.
The paradox is that there is no simple answer to the question of whether hosted PBX service makes more sense for small or enterprise-sized organizations. Large retail entities often operate thousands of essentially small sites, even though a sale will be made at an enterprise level. Geographic scale then matters, even when the actual use case is a gas station, convenience store or fast food outlet.
XO Communications has launched XO IP Flex, a new converged IP services bundle that upgrades and replaces XOptions Flex, XO’s VoIP services bundle. The new service positions XO as a better provider of voice and data for larger businesses, and also packages voice services as a broadband access feature.
There are a couple noteworthy elements here. The offering is Ethernet-based, and so moves beyond the bandwidth formats dictated by the T1 and SONET frameworks. An organization can buy bandwidth between 1.5 and 45 Mbps, eliminating the abrupt cost and bandwidth jump between a couple of T1s and a DS-3.
Also, the offering positions the new product as "Ethernet access" and voice as an included application. Some will argue this is merely a marketing position, but it is an important shift in positions.
XO IP Flex extends XO’s VoIP services to larger business customers by offering new higher-speed bandwidth options including 4.5 Mbps and 10 Mbps. XO IP Flex works with existing phone systems.
The service eliminates pricing based on the number of voice lines. Unlike other approaches to IP pricing that still are based on traditional TDM services pricing models, XO’s bandwidth-based pricing acknowledges that voice is simply another application on the IP port and offers rates based on the size of the port, not on the number of voice lines.
Standard IP Flex features include:
* Voicemail, caller ID, call waiting, call forward, three-way calling, and one toll free number
* Dedicated Internet Access with Dynamic Bandwidth Allocation
* Unlimited local calling
* Unlimited site-to-site calling for multi-location customers with IP Flex, IP Flex with VPN and XO SIP locations
* Long distance calling with choice of calling plans
* Online Feature Management through the XO Business Center
* Optional features, including Auto Attendant, Call Center, Account Codes and Voice Virtual Private Network.
The company also has launched XO SIP, which delivers converged voice and data services to businesses with IP-PBX systems over a single, high-speed IP connection. XO SIP is a fully integrated solution designed to support the needs of businesses with the most demanding voice and data applications at single locations or multiple locations nationwide.
Session Initiation Protocol uses a native IP-based facility to manage all traffic between a customer’s IP-PBX system, the XO IP network, and the Public Switched Telephone Network. The service provides greater efficiencies by eliminating the need for businesses to maintain multiple access facilities for voice and data services and eliminates the need for bandwidth-consuming protocol conversions, thereby, simplifying the overall deployment and management of customers’ enterprise IP telephony services.
XO SIP includes a broad range of bandwidth options to maintain optimal network performance. XO SIP features include:
* Dedicated Internet Access with Dynamic Bandwidth Allocation
* Unlimited local calling
* Unlimited site-to-site calling for multi-location customers with IP Flex, IP Flex with VPN and XO SIP locations
* Long distance calling with choice of calling plans
* Optional Voice Compression
* Online Feature Management through the XO Business Center
XO SIP is currently interoperable with Avaya IP Office, Cisco Call Manager, Cisco Call Manager Express and Digium Asterisk Appliance. XO SIP also utilizes the BroadSoft BroadWorks VoIP platform to provide customers additional advanced IP-PBX features, including auto attendant, call center and voice VPN.
Customers simply select an IP port speed from 1.5 to 45 Mbps, a calling plan and any additional features. Because voice is just another application on the IP port, customers pay nothing for incremental lines or voice channels provisioned within the port speed they have with their service. The bandwidth-based pricing is now being offered with XO IP Flex, XO IP Flex with VPN and XO SIP plans.
We might disagree about why the change is occurring, but it does seem that discussions of "voice peering" are moving in a different direction. Early on, there might have been more emphasis on how electronic numbering or native IP interconnection could save providers money, disintermediate legacy carriers or disrupt the voice business. If recent discussions are any indicator, there now is much more emphasis on solving basic interconnection tasks in a world of IP traffic, as well as creating a platform for introducing new services.
That isn't to say all peering supporters dismiss advantages of the disintermediating sort. There is no question but that cable companies as an industry segment are anxious to avoid interconnection payments to telephone companies whenever possible, as GSM-based mobile carriers likewise are interested in avoiding transit costs where possible.
The point is that there is a new practicality about the issues. Arbinet CTO Steve Heap, for example, points out that "peering is interconnection between two or more service providers to preserve quality, lower costs and create new services." In fact, Heap points to new problems created by number porting as a mundane but important problem peering can address. "In the Belgian market, for example, 18 percent of mobile numbers are ported," Heap notes.
And since every operator has different termination rates, peering can help service providers determine what the settlement rate ought to be when a mobile call is terminated, where to send a call and make those sorts of decisions in real time. Peering can also help with the time-consuming but relatively mundane issues of negotiating termination agreements with hundreds of discrete carriers. "Not every carrier has a relationship with every mobile operator, so maybe you want to route to provider who does have a relationship," says Heap.
One measure of how the discussion is changed is that a major service provider such as Tata views peering as a simple matter of ensuring call quality under conditions of increased routing complexity. "It isn't just about free calling," says Christian Michaud, Tata SVP.
In fact, routing complexity now appears to be a problem in its own right. "There are more choices of endpoints in the IP world," says Georges Smine, Nomin um senior director. There also are codec transcoding issues that will grow as more voice traffic shifts to IP origination.
In a business increasingly using IP transmission, "what we actually deliver changes as well," says Sarina Tu, Telcordia senior director. "These days, you really don't know where to send a call, what the class and quality of service are supposed to be or what the business relationship is between the originating and terminating networks."
Then there is a growing class of "presence" information that has to be exchanged, not simply the bearer traffic and signaling.
Then there's the matter of supporting all sorts of new services and applications over discrete physical networks, says Shrihari Pandit, Stealth Communications CEO. In many cases there will be advantages to terminating traffic without touching the public switched telephone network, especially when some features simply cannot be passed between networks based on PSTN switches.
The general notion of application-aware networks also applies to voice communications. "Types of calls are more diverse" and peering fabrics can provide the intelligence to support that diversity, Smine argues.
"Who can access and control your information and preferences," Tu asks, especially when that information might be scattered among any number of discrete databases?
"Who would be the central repository for the various databases?" asks Heap. "What do you do about conflicting returns if multiple databases provide different results when a query is made?"
"Service providers want all routing information processed internally, not by a third party," says Heap. "The issue is how all that information gets there."
Nor "do we want to create a new monopoly," Michaud adds.
Time Warner Cable once pondered offering a network-based digital video recorder service called "Mystro." Time Warner decided against introducing the service after legal threats from the broadcast industry. Cablevision Systems Corp. also tried to introduce a similar service before running into a content industry buzz saw.
Comcast now is testing a less-ambitious service like the "Start Over" service Time Warner now offers, allowing users to start a program at the beginning in case they missed the start.
At a recent industry meeting, a question arose: Where is the logical place to put such technology? Should it be in a consumer, edge of the network device or "in the cloud"? From a pure technology perspective, one might reasonably argue such functionality should be "in the network."
Of course, that is a technology answer. The problem is that rights holders fear such a move would damage their control over content and ad revenue attached to that content. In principle, one could strip out the original advertising inserted into a "live" stream and replace it with other advertising sold by the network distributor, not the program originator.
In similar fashion, another question arose at a separate "voice peering" panel about why proponents were spending so much time focusing on voice peering rather than other sorts of application peering or bandwidth.
Legitimate questions both. There is a place where advanced technology intersects with copyright law, national or local taxation regimes, rights of way issues, consumer protection laws and conflicting bodies of law governing voice communications, radio, TV, newspapers and data communications.
Technology enables us to cross many of those old boundaries. What technology does not allow us to do is transcend the legal, regulatory and tax laws that come attached to services, applications and activities. And that is the rub.
There are many things we can do. There are many things we want to do. The problem is that some of these things can only be done in certain ways without running afoul of laws, regulations or business models built on the existence of those rules.
It gets us only so far to say the rules increasingly are illogical in a genuine sense. Some of the rules might change over time. Others might simply have to be endured. The point is that simple logic and technological capability sometimes do not trump legacy ways of doing things.
Merrill Lynch forecasts handset volume growth at a 21 percent cumulative average growth rate CAGR from now to 2010. They expect combined India and China will account for 26 percent of the overall handset market in 2007 and 28 percent in 2010, up from 16 percent in 2005, implying nearly 332 million handset units in 2010.
Mobile penetration in India is set to ramp and will reach 35 percent by 2010, up from just seven percent in 2005. This implies Indian mobile subscribers will reach 411 million by 2010, up from just 76 million as of 2005, a CAGR of 40 percent.
China's penetration rate should reach just over 50 percent in 2010, ors 682 million Chinese mobile subscribers in 2010.
China Mobile has decided it doesn't want to carry the iPhone, and has stopped negotiations with Apple, opening the door to talks with the second-largest mobile provider in China, China Unicom.
It is sais that China Mobile and Apple could not agree on revenue-sharing terms. An unnamed China Mobile source was said by Dow Jones Newswire to be unwilling to pay between 20 and 30 percent of future user fees from the iPhone to Apple for the right to carry the device.
One of the odd justapositions out there right now is the recent move by music companies to drop encryption measures (digital rights management) online music sales through Amazon.com as a way of increasing sales. Given the general vested interest in protecting content from copying, this is a bit strange.
Why would music labels voluntarily drop DRM measures that make it harder for users to port their music around? In this case, a move that essentially is more open is a competitive measure. Apple, which uses a DRM format to restrict downloaded music to playback on its own devices, essentially has gotten too much market power in the music business, the studios think.
And in this case, one way to wrest back more control is to stimulate sales of unprotected music through rival retailers such as Amazon.com.
Amazon MP3, the DRM-free music store of Amazon.com, now sells DRM-free MP3s from the four major music labels - EMI, Universal, Warner Music, and Sony BMG - and 33,000 independent labels.
Apple iTunes has more than two-thirds market share of paid online music donwloads.
The top 100 songs at Amazon MP3 come at a price of $0.89 each and most other tracks are offered at a range of $0.89-$0.99, underpricing iTunes titles which are sold for 99 cents a song.
It's a bit unusual to find any industry's leaders pushing a trend towards openness, rather than upstarts. But that's what happens when an upstart becomes too successful in a new line of business. If "open" sells better than "closed," they'll try it, despite an obvious interest in copyright protection that might be furthered by DRM measures.
Of course, the problem with DRM is that it angers legitimate customers as much as it deters piracy. It is a blunt instrument.
New Edge Networks will offer its managed network customers in April the ability to tag and prioritize data applications traffic over low-cost, high-speed digital subscriber lines commonly used for wide area networks. The move is a challenge to T1 services that sometimes are alternatives to business-class DSL services, and which can offer tagging and prioritization.
New Edge says it also will support tagging and traffic priorities end-to-end through private networks
Businesses in various industry segments can use up to five classes of service to tag and prioritize their applications so that critical services such as VoIP telephone calls or inventory and price lookups move across DSL-based networks ahead of email or other less important business functions.
Currently, traffic tagging and prioritization with class of service are available only on more costly high-capacity T1 lines with MPLS technology, short for Multi-Protocol Label Switching.
New Edge will honor DSL class-of-service tags end to end throughout its customers’ private wide area networks.
The move means enterprise branch offices and remote locations or smaller businesses that cannot justify a T1 line will be able to buy class of service features at a business DSL price.
A typical DSL connection used as part of a managed, private network costs about $150. Monthly costs for T1 lines range from about $500, depending on distance and geographic area.
On Christmas, traffic to Google from iPhones surged, surpassing incoming traffic from any other type of mobile device, according to internal Google data made available to The New York Times, says staff writer Miguel Helfta. So apparently the design of a mobile phone brower really does stimulate high levels of usage.
The data shows that although iPhone's used to access Google fell back into a more normal range after that, levels of access still were higher than from Symbian mobiles. Keep in mind that Symbian has something like 63 percent of the installed base while iPhone has perhaps two percent.
Yahoo also saysiPhones accounted for a disproportionate amount of its mobile traffic, Helfta notes.
There might more upside for Web application developers. If they can develop for mobile-optimized browsers, rather than for the details of individual devices or operating systems, there arguably is an easier path to ubiquity.
Telecommuting may boost morale for telecommuters, but it can have the opposite effect on those left behind in the office, according to Professor Timothy Golden, a management professor at Rensselaer Polytechnic Institute.
"Those who do not telecommute are more likely to be dissatisfied with their job and leave the company, says Golden. Golden's research suggests that their co-workers tend to find the workplace less enjoyable, have fewer emotional ties to co-workers and generally feel less obligated to the organization.
About 37 percent of U.S.-based and international companies now offer flexible work arrangements, with the number of those programs growing at a rate of 11 percent per year, according to the Society of Human Resource Management.
With a greater prevalence of telecommuters in a work unit, he said, non-telecommuters find it less personally fulfilling to do their work.
Greater face-to-face contact between co-workers when all employees are in the office and granting greater job autonomy can help, Golden argues.
He studied a sample of 240 professional employees from a medium-sized company.
It doesn't appear to have been a good Christmas selling season, as this graphic by the Wall Street Journal illustrates.
But Best Buy says its December sales were up 1.5 percent over last year, compared to an increase of about seven percent in the 2006 over 2005 comparison. The company says the slower growth rate is due where the post-Thanksgiving week data was recorded. This year, that key week fell into the November numbers, instead of in the December reporting period.
Best Buy affirmed its 2008 guidance, suggested the company really did have stronger sales than it might appear. The contrast in sales might point to the increasing importance of consumer electronics as a component of discretionary spending.
That would accord with increasing broadband and mobile penetration, plus continuing interest in high-definition and flat screen TV displays, gaming, digital audio and even personal computers.
Over the past decade, for example, the percentage of disposable income now going to communications and electronic entertainment goods has been rising in virtually all North American, Far Eastern and European regions.
If you are the sort of user who uses iGoogle, and you put Real Simple Syndication feeds on the iGoogle page, this is helpful. Also, Google has authored a number of its other applications, including Docs and Spreadsheets, the RSS reader, Picassa, Gmail, Google News and even the basic search function in ways that are compatible with a mobile screen. Very nice.
After dipping one percent in the previous quarter, enterprise telephony equipment manufacturers saw an 11 percent jump in worldwide sales in the third quarter of 2007 to reach $2.6 billion, according to Infonetics Research. But IP-based phone systems did not get all the growth. In fact, Infonetics researchers say the rate of growth in the legacy time division multiplex segment actually outpaced that of the IP PBX segment.
In fact, hybrid PBX systems account for 64 percent of all PBX and key system line shipments worldwide. Pure IP lines account for 18 percent of shipments while TDM lines represent 17 percent of total.
It looks like lots of buyers still are hedging their bets or have reasons to support TDM systems even as they migrate to IP.
One wonders how long mobile carriers will wait before launching their own lower-cost global calling plans. At some point they will. The only issue is how much market share they are willing to tolerate losing to VoIP providers before they counterattack. Raketu is the latest contestant in the business calling space, by virtue of its compatibility with RIM BlackBerry devices.
What is emerging now is the IP equivalent of "over the top long distance" calling plans that used to be prevalent in the U.S. market. Under such plans, created in large part for reasons of regulatory compliance, users selected one provider for local calling and then another provider for long distance. At one point, one could not select one's local voice carrier for that purpose.
So you see the business effect: a regulatory framework creates an entire "long distance calling" business. It lasts for a while, as competition knocks prices way down. Then, at some point, regulators decide markets are competitive enough to allow the local phone companies back into long distance.
And then the independent long distance industry collapses.
VoIP over mobile, indeed VoIP itself, is headed for such a day of reckoning, at least for that portion of its use as a substitute for landline or wireless calling. Nobody knows when the day will come. It might come carrier by carrier. But at some point, mobile and wired service providers are going to reach a point where it makes sense to offer much-lower global calling from their existing services and devices.
That isn't to say independents will not gain share and build businesses in the short term. Nor is it to say VoIP features embedded into other experiences are likewise susceptible to telco repositioning and pricing. It is to say that past telco responses to regulatory and technologiccal change offer some obvious clues about what they will do in the future.
As scale players, they tend to ignore new threats and markets until some critical mass or clear strategic interest emerges. Then they move, and fairly quickly. They'll do so again.
Raketu has launched a new peer-to-peer VoIP application designed to run on Research in Motion Blackberries. The app furthermore is intended to be used by enterprise, small and mid-sized business users.
Raketu does not require a client download and is accessed from the BlackBerry's Web browser at www.BlackBerry.raketu.com.
The application obviously will make most sense for business users who need to send and receive text messages from international locations, as well as users who need voice communications in a global context.
The February issue of Consumer Reports features a survey of broadband access providers, and names the Verizon FiOS service, best for reliability and performance for its Internet, television, and telephone services.
Better cable companies include Cox, Bright House and Wow, the survey indicates.
For Internet service offered through a cable company, Wow, Cincinnati Bell and Bright House also did well in the survey. Verizon's DSL Internet service was rated "average" for value, reliability and support, but scores for performance were lagging, according to Consumer Reports.
That's the question as at&t Chief Executive Officer Randall Stephenson claims slowing economic growth has led to "softness" in the home-phone and Internet businesses while Verizon COO Dennis Strigl says that's not the case.
“We have seen virtually no economic impact,” Strigl says. "Any challenges facing the company have more to do with competition," said Strigl, than the economy.
It is possible Verizon's customer base simply isn't feeling the economic pinch or hasn't felt it yet. It is possible Verizon simply is faring better in the competitive battle with cable and other contenders. Maybe there is some other explanation.
Could it be FiOS? Also, Stephenson pointed to wireline voice and broadband growth. In some ways, that is no surprise. Landline share continue to shrink, in large part because of wireless substitution and cable market share gains.
Broadband adds have been slowing for a couple of quarters, at least, in part because most people who rely on the Internet already have broadband, and suppliers now are facing customers who don't own PCs, so have no need for broadband; customers who think dial-up still is adequate; and customers who have PCs but don't use the Internet. It is no surprise that broadband additions are slowing.
One difference between 2006 and 2007 was that global telco executives began to shift attitudes about the importance of working with third party application and service providers. Where they might arguably have been more focused in 2006 on cost cutting and other internal measures, 2007 found executives more focused on how to position themselves for new services.
Though there arguably is more recognition that advertising operations will demand partners, there also seems to be more recognition that core communications capabilities can be leveraged as a revenue stream if those features are made available to other application and service providers.
This is a very big and quite important shift in thinking.
Telephone subscribers in Oklahoma City and 223 other communities throughout the state will be required to pay a two percent "line inspection fee” on the basic residential rate beginning in February. The fee has been assessed by cities for decades, but up to this point at&t has simply "eaten the cost." It now will pass the fee through to users.
Apparently at&t pays a fee to maintain the rights of way for its telephone lines in 224 of about 490 communities it serves in Oklahoma.
And that's one of the reasons VoIP-as-a-replacement-for-wired-voice will not forever escape regulation of the sort legacy voice services are subject to. There are many vested interests at the local and state level, as well as at the national level, that generate revenue from voice services. As IP-based communications begin to displace huge chunks of the services base, those interests inevitably will move to protect the revenue by pulling VoIP into the older framework.
Now, the way this gets done might change. Where a "subscriber line charge" now is assessed for each "voice line," it might someday be assessed on a "broadband access connection." The revenue won't be allowed to evaporate.
BT is installing what amounts to a test fiber-to-the-home network at Ebbsfleet, Kent, U.K. What's interesting about the 10,000-home network is the early announcement of prices.
Because U.K. broadband access operates under the wholesale Openreach model, the first thing BT is doing is announcing wholesale prices to be charged to competing service providers and BT itself to use each of the lines. Retail pricing will be set by each of the wholesale partners.
Rates range form £100 a year ($195) for a basic line to £530 ($1,038) a year for the fastest connection, at 100 Mbps.
BT still is wranging with U.K. regulators about the ultimate shape of regulations surrounding widespread fiber-to-customer networks. BT wants more freedom to use its own assets, of course, including freedom from mandatory wholesale regimes of the current sort, in the best case scenario.
From a U.S. perspective, it is striking that the first pricing information is about wholesale rates rather than retail pricing, a measure of how different the regulatory frameworks now are.
If you casually stroll past displays of PCs on the shelves of any electronics retailer, you'll see at least a few notebooks preconfigured for one brand of wireless data card access. Now, in one sense this is the same strategy used when software comes preloaded on your brand-new machine. Dial-up Internet access services, anti-virus, firewall and security, media players, browsers, games and so forth provide examples.
In the same vein, there has been an argument that the notebook screen represents real estate that a provider's icon must occupy to get more usage or attention. Up to a point there's a clear logic to such thinking.
But there's some point at which the strategy breaks down. Lots of machines sport RJ-11 connections for dial-up Internet access. I don't know how many of you think that's a "feature" instead of a "bug" anymore, but it's clearly not an important feature for many.
The point is that USB and Ethernet ports, like RJ-11 ports, are general purpose computing capabilities. They don't lock anybody into a continuing commercial relationship with any single provider. The user has choice.
Providing that a new notebook has sufficient hard disk capacity, most users probably just ignore all that preloaded software and most of the offers. Norton might disagree, of course, and that might be one of the salient exceptions. Others of us have to spend some time removing all the unwanted software from the machine or at least disabling their ability to start up automatically.
Suppliers might think otherwise, but the incremental cost of preconfiguring a PC for one flavor of 3G data card access probably outweighs everything but the revenue the manufacturer gets from the service provider for preloading the software.
Most people don't seem to have any problem buying a card when they want to use wireless broadband services. To be sure, there might be some instances where a particular buyer of a particular model actually wants to buy wireless broadband from the precise supplier whose access software is preloaded on that machine. But not very often.
Perhaps an argument can be made that the revenue gotten by the PC manufacturer from such deals helps in some small way to control the overall cost of the device. In that sense, there is a consumer benefit. So maybe this is the PC equivalent of advertising. Users might not "like" it, or "want it," but it might help lower the cost of acquiring and using something else (their PC).
Still, it's hard to imagine that preloading broadband wireless for a single provider can be done on a wide-enough scale to produce incrementally-significant customer additions.
The way this could work, though, is to do the reverse: sell a cheap device that actually is configured to use one broadband access provider. Consumers can do the math. If the value of getting a general-purpose computing device is low enough, and the price is lock in to one broadband access supplier, some buyers will do so.
It isn't your imagination: more people are going to YouTube and other video sites than did a year ago. So say researchers at the Pew Internet and American Life Project.
Nearly half of online adults now say they have visited such sites. On a typical day at the end of 2007, the share of Internet users going to video sites was nearly twice as large as it had been at the end of 2006.
About 48 percent of surveyed Internet users say they have visited a video-sharing site such as YouTube. A year ago, in December 2006, 33 percent of internet users said they had ever visited such sites. So year-over-year growth was 45 percent.
About 15 percent of respondents said they had used a video-sharing site “yesterday". A year ago, just eight percent said they had visited such a site “yesterday.” So, on an average day, the number of users of video sites nearly doubled from the end of 2006 to the end of 2007.
Some suppliers might like format wars, at least to the extent it allows them to gain some business advantage in licensing streams. Consumers generally lose when they buy devices and software built around the losing standard.
Just days ago Warner Bros. threw its weight behind the Blu-ray standard. Now Daily Variety says Universal's commitment to backing HD DVD exclusively also has ended.
Paramount, one of the few remaining majors to release content in the rival HD DVD format, apparently has an escape clause in its HD DVD contract allowing it to release content on Blu-ray now that Warner Bros. has decided to back that format exclusively.
Retailers such as Best Buy and Blockbuster Video now will contribute to the Blu-ray trend. If retailers think Blu-ray is the future, they aren't likely to devote much shelf space to HD DVD players or content.
Even Apple will be shipping Macs with Blu-ray drives. So the good news for buyers of DVD players is that it is just about drop-dead safe to go buy a high-definition player.
You can do your own survey. Visit a Blockbuster and compare the space devoted to content in Blu-ray rather than HD DVD.
If analysts at In-Stat are right, and the WiMAX chipset market is driven primarily by embedded Mobile WiMAX chips in mobile PCs through 2012, we might conclude that some suppliers are betting WiMAX will be about mobile and tethered PCs, much more than dual-mode cellular/WiMAX handsets, at least for the foreseeable future.
In that view, WiMAX is, at least initially, a replacement service for cable modems, DSL and 3G data cards, rather than a platform for newer services. There's nothing wrong with approaching a possibly-new market by snagging revenues for legacy applications. What will be interesting is to see whether WiMAX can develop into something more than a 3G network with more bandwidth.
To be sure, there are several potential "disruptions" here. There is the "open networks" challenge, the possibility of disruptively-lower prices, opening up Web connections for whole new classes of devices as well as the potential creation of a mobile-Web-optmized network for the first time.
“The total WiMAX user terminal chipset market will reach almost $500 million in 2012, growing from $27 million in 2007,” says Gemma Tedesco, In-Stat analyst. “Furthermore, WiMAX base station semiconductor revenues are expected to be approximately $1.4 billion in 2012, compared to $130 million in 2007.”
Verizon has launched a new 7 Mbps broadband access service availabe in about 400 Verizon-served communities. Prices begin at $39.99 for contract plans. Verizon will expand the program into more communities throughout the year.
Verizon has begun installing Gigabit Passive Optical Network (GPON) optoelectronics as part of its FiOS deployments in California, Maryland, Massachusetts, New Jersey, New York, Rhode Island, Pennsylvania, Virginia and Texas. GPON will replace the former broadband passive optical network (BPON) technology Verizon has been using up to this point. Users won't notice anything different, at least at first.
In years to come, they well might. BPON delivers 622 Mbps to 32 potential users in the downstream, with a shared 155 Mbps in the upstream.
GPON supports 2.4Gbps downstream and 1.2Gbps upstream that can be shared among 32 to 64 users. Basically, that means a downstream bandwidth increase of four times and an upstream improvement of eight times.
At some level, GPON is a logical and improved enhancement to BPON technology, and its price now is closer to BPON than was the case some years ago. At another level, the move is protection against the cable industry's upcoming upgrade to Data Over Cable Service Interface Specification 3.0, which will support channel bonding and shared downstream bandwidth as high as 160 Mbps.
Depending on customer take rates, the FiOS GPON network can support much more bandwidth that DOCSIS 3.0, absent some sort of major network upgrade by a cable operator.
So long as on-demand techniques are used to deliver video, most of the additional bandwidth can be allocated for other data-focused uses. As this chart from the IEEE shows, after video, it is data demand which grows most.
Sprint Nextel says it will launch it Xohm WiMAX service at the end of April. Associated Press also reports that Xohm will not use subsidized handsets, will offer daily, weekly, monthly and longer-term contracts. In an attempt to differentiate itself from simple "access" services, Xohm will feature location-based services tied to advertising and search and portal services created by Google.
But Xohm will have to do more than that. As the first widespread network created expressly for broadband-based services, Xohm will be an early test of the economics of networks anchored on broadband access revenues rather than voice. And that is going to be a challenge in the early going. By definition, Xohm is soft launching service in three markets with established cable modem and Digital Subscriber Line service.
Chicago, Washington D.C and Baltimore, to be specific. Other markets are supposed to be added in April. The point is, if the offering is positioned as a terrestrial broadband substitute, how big is the opportunity? Conversely, if Xohm is positioned as a mobile broadband alternative to existing third generation services, are location services enough of a differentiating factor?
It is conceivable that customers will defect to Xohm for prosaic reasons: no-contract service or lower prices, for example.While helpful, that is hardly an objective requiring construction of an entirely-new network. Many years ago, when new blocks of spectrum were auctioned off for what was then called "personal communication services," the thinking was that the spectrum would be used to create new services, used in new ways. A prime example was a sort of quasi-cordless, quasi-cellular service that offered call handoff when the user moved at pedestrian speeds, but wouldn't be usable at freeway-driving speeds.
What happened is that all that spectrum wound up being used as the basis for CDMA and GSM-based 3G mobile networks instead. New services were created, of course, but not the ones everybody expected. People thought the access mode would be the difference. Instead, it was text messaging and mobile email that wound up driving new service revenues.
It is conceivable that some new use mode will develop for WiMAX networks, based on game platforms or media devices rather than phones, for example. The issue then will be about whether the cost of building and operating the network, and securing the spectrum, can support the revenue generated by the new use cases. It's not going to be easy.
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The Associated Press says the Federal Communications Commission will investigate complaints that Comcast Corp. actively interferes with Internet traffic as its subscribers try to share files online.
This should be very interesting. One one hand, there's an issue about packet blocking. On the other hand there is an issue of exposure to copyright law, since much peer-to-peer traffic that Comcast and others appear to be blocking infringes copyright laws.
A coalition of consumer groups and legal scholars asked the agency in November to stop Comcast from discriminating against certain types of data. Two groups also asked the FCC to fine Comcast at a rate of $195,000 for every affected subscriber.
It is possible there are two intertwined issues here: packet blocking and copyright violations. The former might be technologically necessary to prevent the latter.
French satellite operators Eutelsat SA and U.S.-based ViaSat want to leapfrog current and emerging generations of satellite-based broadband, and are putting money behind the effort, according to the Wall Street Journal.
To put the effort into perspective, the ViaSat satellite will have bandwidth exceeding the combined signal capacity of nearly all the two-way commercial communications satellites serving North America, ViaSat calculates. Basically, the two new satellites will offer price-per-bit performance an order of magnitude better than the advanced satellites in orbit today.
For its part, Eutelsat's one new advanced satellite will have a capacity equal to Eutelsat's entire 24-satellite existing fleet.
Each company has committed to separately build and launch a satellite with 10 to 15 times greater capacity than the most-advanced birds already in orbit. The companies say they plan to share some marketing and capital expenditures in securing wholesale customers.
Eutelsat hopes to launch its satellite in 2010, with ViaSat scheduled about a year later. In the U.S., the Internet connections are expected to cost between $49 and $79 a month.
By some measures, business customers have better fiber access than they used to. By other measures, most businesses still do not. One has to be in a building with enough private line potential to support something on the order of four T1 circuits, says McLeodUSA CEO Royce Holland. And as recent data from service providers such as XO Communications shows, most business customers are not in those buildings.
In fact, despite strenuous efforts by all sorts of companies that make a living providing fiber-based services to business customers, lower T1 prices over the last decade arguably have made the "fiber to building" business case tougher. Lower T1 prices obviously reduce the amount of recurring revenue any provider can hope to make from a single site.
The countervailing trend is higher demand for optical services such as Ethernet. Though the cost of hardware has declined over the last 10 years, the cost of installation and construction has not, and that's most of the cost.
Whatever concerns eBay might have about Skype's ability to attract new users, Skype recently hit the 11 million concurrent users level, after passing the he 10 million user milestone was passed 83 days ago on October 17, 2007. Since 2006, there has been concern about some slackening of the pace of new user additions and at least momentary dips in Skype usage. Concurrent usage arguably is a better metric than client downloads, and that growth rate seems consistent.
If ChangeWave Research is correct, wikis, blogs and social networking are being adopted by corporations at an explosive rate.
ChangeWave Research recently surveyed 2,081 companies and found 24 percent already using social software, while eight percent say they will start using it within a year. Wikis apparently are used by 20 percent of respondents, blogs by 18 percent, social networking by 15 percent, says Joshua Levine, ChangeWave researcher.
While current users find wikis to be most useful, future adopters think blogs (26 percent) and social networks (21 percent) will be most beneficial.
About 39 percent report their company is very or somewhat willing to use Web 2.0 social software for business purposes.
Current users say they use social networking to improve internal employee collaboration as well as to increase internal efficiency and productivity.
Users who say their firms will be adopting social networking also agree about the merits of internal communications, but also are more focused on using the tools to
improve external customer service and support, increase brand awareness and loyalty
and drive sales of products and services.
Apparently, at&t wants to buy a stake in the mobile arm of state-controlled phone firm Telekom Malaysia , a Malaysian newspaper has reported.
Telekom Malaysia is spinning off its mobile business into a separately listed firm, TM International, which will include its domestic Celcom unit and operations in nine other countries, including India, Indonesia, Bangladesh and Sri Lanka.
Separately, there is talk of Vodafone or Best Buy buying Carphone Warehouse. There also are rumors that KPN is being eyed by Telefonica (KPN denies talks are underway).
Given the success Western European mobile providers are having in Eastern Europe and elsewhere, we might make one observation: though wireless has underpinned carrier revenue growth over the past several years, internal growth now is slowing sharply, meaning growth will have to be sought "out of territory."
Typically, when that sort of situation develops, it is a clear sign that internal growth prospects are limited.
Once upon a time, telecom analysts tracked the volume of a carrier's access lines in service, applied a revenue per line metric, and got pretty close to that carrier's annual revenue. No longer.
Given the mutltiple lines of business and products, if anything gets tracked as a more accurate predicator of how a carrier is doing, it is revenue-generating units.
Keep in mind that most tier one "telco" service providers get something on the order of 20 percent of revenue from consumer landlines these days. To be be sure, lines still are important cash flow generators, but no longer are driving growth.
That honor is reserved for mobile and broadband products. Businesses are a different matter, but for consumers, most of whom are equipped with wireless phones in any case, there just are more questions every day about why to keep a wireline circuit.
Some analysts predict that, by 2010 (two more years) wireless-only households should rise to 27 percent, from at least 13 percent in 2007, according to the Pew Internet & American Life Project. Other analysts think the figures already are higher, in the 17 percent range.
8x8, provider of Packet8 voice and video services, has launched a no-obligation, no-fee trial program that lets customers of any U.S. based wireless carrier experience the dialing simplicity and call quality of the Packet8 MobileTalk mobile VoIP international calling service at no charge.
Wireless customers can download the MobileTalk application onto their mobile device and use the service at no charge until a total of $2.00 in per minute fees is reached. Packet8 MobileTalk service offers rates of $.02 to $.05 per minute for most locations in Europe and Asia.
Users can dial calls directly and natively from their mobile handset, contact list or speed dial directory without the additional keystrokes required by calling card and other reduced rate international calling services. Once the destination number is dialed or selected, the Packet8 MobileTalk software application identifies the international prefix being called and redirects the call to a local Packet8 network access number.
Over 450 Windows, Palm, RIM and Symbian-based mobile phone models, including the entire family of Blackberry phones running version 4.0 of the operating system and above and 25 Nokia models running the Symbian OS, are supported by the Packet8 MobileTalk service.
The plan requires a one-time $9.99 activation fee for the service and a monthly fee of $9.99 for non-Packet 8 subscribers.
Mobile VoIP is growing, no doubt, as shown by this Sound Track Partners forecast.
Belkin will offer in March a new sesktop Internet Phone for Skype (suggested U.S. retail price of $99.99) that allows users to make and receive Skype calls without use of a PC, plugging directly into a router.
AOL announced major enhancements to its leading personal media products with new features in BlueString (www.bluestring.com), a free Website that enables users to easily upload, store, consume, manage and share digital media. Both are examples of a growing move to Web-based apps, storage and social networking.
AOL also says it will release a new beta version of Xdrive (www.xdrive.com), a "personal hard drive on the Internet" allowing consumers to store, access, share and backup their files. Both products are scheduled for general release in the first quarter of 2008.
Also, a series of embedded applications called, "My Memory Gallery," which allow consumers to access and use BlueString on Facebook can be found at http://apps.facebook.com/mymemorygallery.
Generic versions of these applications will soon be available for inclusion on blogs, other Websites and personal homepages.
BlueString will include an enhanced user interface based on Adobe Flex and Adobe AIR enabling simple drag-and-drop of photos, videos, and music across online and offline storage, and eliminating the need for consumers to explicitly upload files before they create with or share their digital media.
BlueString also will offer consumers the ability to access personal photos, videos and music from a variety of third-party media sites and popular photo, video and music-sharing sites.
The new Xdrive beta will feature a simplified and easier-to-use design. Also built on Adobe AIR, this version of Xdrive will integrate the consumer's desktop directly into the online application, giving users the ability to simply drag and drop files directly from the desktop into Xdrive.
The updated version of Xdrive will also be fully integrated into AOL Mail, allowing users to send attachments larger than the current 16 MB limit, creating a seamless email experience for people sending files up to 5 GB.
Microsoft Corp. says it now has partnerships with Walt Disney Co., NBC Universal and Metro-Goldwyn-Mayer Inc. giving Microsoft the ability to sell online videos to Xbox 360 game consoles.
Yahoo has announced a new mobile homepage and an updated version of Yahoo Go, the company’s downloadable mobile program. It also is launching a developer platform that will allow outside applications to be built for both offerings. And no, Yahoo executives are not pitching the moves as a response to Google's Android and Open Handset Alliance initiatives.
The idea is to make the company’s mobile destinations a one-stop shop for wireless users, in part by by opening them up to third-party applications.
In what appears to be a major bid to ignite the mobile broadband market, Vodafone NL has reduced data plan bundle prices as much as 50 percent for domestic usage and up to 85 percent for international use in 42 countries. That sort of thing might ultimately have direct implications for U.S. high-speed mobile services as well. And the reason is that if it appears WiMAX or any other mobile broadband alternative is getting traction, incumbent mobile service providers have a potent weapon: pricing.
While no carrier would be thrilled about slashing its prices in the manner Vodafone has done, the fact remains that incumbent mobile providers have and texting revenues to prop up their revenue streams. Upstart mobile broadband providers will have less margin to drop their prices. Which leads one to wonder what will happen when Clearwire and Sprint fire up their new WiMAX network on a continental basis (assuming Sprint perseveres).
All discussion of technology advantages and attributes will become irrelevant if the pricing leadership changes in any significant way. Pricing also is key to creation of some potential new mobile Web business with different pricing and use cases than today's mobile devices provide.
In other words, will WiMAX develop as a cable replacement, 3G replacement or foundation for mobile devices other than phones? In the first or second cases, pricing policy is pretty simple: offer comparable service at lower prices. In the last case, the issue is whether a sustainable business can be built around non-voice devices: cameras, game platforms, music players, navigation, mobile Web. In that case, prices probably have to be quite aggressive.
So part of the equation and business model is whether a WiMAX network can be built cheaply enough, and operated efficiently enough, to offer such lower pricing. In any event, it appears at least some leading mobile providers aren't going to wait to find out.
And as this forecast from In-Stat suggests, most of the future WiMAX market is going to be mobile, not tethered.
Pre-paid Vodafone mobile users in the U.K. last summer also found themselves offered new lower pricing of £2 per Megabyte for mobile data rather than the original £7.30 per MB. While not a complete flat rate plan, it's a possible step in that right direction.
It isn't yet clear which road Australian regulators have in mind for that country's contestants. An inter-modal framework such as that used in the United States is one option. So is the intra-modal, robust wholesale access model prevalent in Western Europe. In Australia, it would be Telstra that builds the fiber-to-home network that other competitors would have wholesale access to.
At some point, the log jam has to be broken or consumers and businesses in Australia are not going to have access to the bandwidth they are going to need. Up to this point Telstra has been able to rely on wireless and new Internet access services to offset declines in voice revenue. But nobody really thinks that can go on forever.
Neighbor New Zealand already has opted for an "operational separation" regime that separates wholesale network operations from retail sales operations for all players in the market that want to take advantage of the wholesale access network.
It sort of depends on what sort of end user you are, as this analysis by Motorola suggests. Power users require more than lighter users, to be sure. The issue for a network engineer, of course, is that a network has to be engineered for the needs of the most-demanding user, not the least-demanding user. Which suggests that the supply of bandwidth will continue to climb, though it isn't so clear that power users will escape the requirement to pay more money for the privilege.
Motorola thinks about six percent of users require 58 Mbps by 2010, while a quarter of households will require 40 Mbps service. About 44 percent of households will be able to get by with just 19 Mbps.
The American Cable Association, which represents 1100 small, independent cable operators, has called for unbundling of cable channels, though the large cable operators and programmers oppose such rules. On the face of it, unbundling seems to offer an antidote to higher retail prices.
The thinking is that allowing users to pay just for what they want will drive lower prices. Oddly enough, it probably wouldn't. Once consumers start toting up the costs of discrete channels, and assuming most people have seven favorites, costs might be higher than what they are paying to receive lots of channels they don't watch.
Advertising is the reason. When cable channels are carried on the most-popular "expanded basic" tiers, they have a larger number of eyeballs to sell advertising against. Take away that access and advertising becomes a much-smaller revenue possibility, which then means programmers will raise their rates for carriage. So prices go up.
To be sure, smaller video providers do have to pay higher wholesale rates to get program access, but programmers counter that volume discounts account for the higher wholesale costs.
Smaller operators also object to "tying" policies that require carriage of lesser-viewed channels to get access to the most-popular, "must have" channels. The policy obviously is helpful to programmers, as they gain shelf space for niche channels.
Supporters of tying policies say program diversity clearly will suffer if tying policies aren't allowed. There are elements of truth to that claim. Lesser-viewed channels might be forced to on-demand distribution, which will reduce potential revenues, again compelling those channels to raise prices.
Distributors don't like tying policies since scarce shelf space gets eaten up by channels with low viewership.
Sometimes the obvious solutions actually produce results counter to what people think.
As this Wall Street Journal graphic illustrates, shares of Verizon and at&t have outperformed the shares of leading U.S. cable companies over the past year. One suspects that a changed investor understanding of the value of broadband access is at least partly the reason.
Verizon executives, in particular, took lots of heat from the investment community for embarking on what was seen as an expensive and unproven fiber-to-home upgrade. Verizon's compatriots at at&t essentially were rewarded, at least in part, for taking a less-ambitious, less-costly upgrade tack.
The cable companies have been saying for decades that all telco fiber-to-home networks were uneconomic compared to cable's hybrid fiber coax alternative.
And though other forces are at work, investors seem to have warmed to the idea that the upgrades are value-producing, after all. If we have learned anything over the last decade or so, it is that bandwidth demand can change quite sharply, quite quickly, and always, so far, in the direction of more demand.
Getting caught shorthanded could be quite destabilizing.
Also, Verizon has shown that it is able to compete effectively for consumer dollars in the video entertainment area, while the FiOS service has drawn raves from users who have access to it. There might be nothing so churn-reducing as knowing there is one provider of fiber-to-the-home in one's service area.
The point is that Verizon executives were right to stick to their guns, despite the avalanche of criticism they received for building the FiOS network. In the competitive race with cable operators, Verizon might be positioned quite well.
It isn't that cable operators cannot push their upgrades further, by pushing fiber closer to customers. It is that they will face opposition from their investors for the same reasons Verizon got slammed. Investors get nervous every time the cable industry starts talking about the need to increase leverage to upgrade the networks in some serious way. And it wasn't so long ago that the HFC 750 MHz networks were described as "the last upgrade" cable ever would have to make.
It no longer looks that way.
LG Electronics Co. says it has developed a low-cost way for North American TV stations to transmit digital signals to cellphones and other portable gadgets.
LG's technology, which it calls MPH for mobile-portable-handheld, requires TV stations to buy relatively inexpensive add-on devices to their digital transmitters and the makers of cellphones and other portable devices to install a reception chip. The reception technology can also be incorporated into other chips in portable device.
"We're not afraid of occasionally falling flat on our face," says Richard Branson, Virgin Group CEO. And therein lies a noteworthy difference in thinking about innovation that obviously has implications in the global telecom business. One of my business associates at Verizon would react in horror if anybody suggested Verizon itself should be more venturesome in trying new things. "We have a reputation to protect," he constantly says.
Of course, so does Virgin Group. But that's one reason why innovation is going to come from outside the ranks of the tier one global carriers, though some carriers are showing themselves more amenable to working with innovators.
Virgin, like Google, has a culture that values experimentation and risk-taking. And if the game is innovation, as I suspect virtually everybody in the global telecom business would acknowledge is the case, then the likes of Virgin and Google, which also isn't afraid to try things that don't work, is the way forward. on the innovation front.
What the incumbents can do is figure out how to work with Google. That's heresy in some quarters, but the conclusion seems logical enough. If innovation is essential, and if one knows one cannot innovate quickly, or take many risks, as a matter of policy, then one has to have partners who will do that on one's behalf.
And as the graphic suggests, even successful and important innovations ultimately can run out of steam. Dell turned the PC distribution business upside down at one point. But its competitors have long since caught up, leaving Dell the contestant that has to change.
Motorola has developed a stand-alone media player, the DH01 device that works with the DVB-H mobile video standard and also plays on-demand video clips and programs saved on digital video recorders. Motorola, Nokia, Samsung Electronics and LG Electronics already make phones that can receive live TV streams. What is different here is that Motorola wants to gauge demand for a stand-alone video device.
At some point, the user desire for simplicity will outweigh the desire for multiple functions in a single device, even as designers work to simplify inherently-complex devices so they will support multiple applications.
Up to a point users seem to enjoy having multiple functions in one device. Email and text plus voice is one example, while voice plus text plus music provides another example. What is less clear is what happens when users are offered devices that add Web services, enabled by Wi-Fi as well as mobile broadband, as well as video. At some point, the cost of a "do everything" device starts to get pretty high, while the functionality has to be balanced, possibly decreasing user satisfaction as a multi-function device will tend to perform less elegantly than a purpose-built device.
The issue is that the range of applications people want to access is growing all the time: gaming, navigation, video, audio, radio frequency identification and sensor network access. At some point, the complexity overwhelms the user experience, which has to be kept as simple as possible.
The other issue is how much tolerance end users exhibit for higher device prices when those devices break, get lost and wear out fairly frequently. It might be one thing to expect replacement or loss of a $100 device. It might be quite another to risk the loss and replacement of a $700 device. With volume and time, the issue arguably becomes less pointed, as features found in $700 devices migrate down the product lline.
Still, some point likely will be reached where users simply find "do it all" devices less desirable than carrying a couple devices that are highly optimized for the applications those people want to use most.
Something interesting might be happening in the mobile-only household segment. Wireless-only households, especially households including only a single resident or multiple young adults, have been increasing for some years.
But there is now some indication that mobile-only usage is higher in the general population than it is among more technologically-savvy users. If that trend holds up, it indicates that cutting the landline now has reached a possible tipping point.
In the first six months of 2007, 13.6 percent of households did not have a traditional landline telephone, but did have at least one wireless telephone, according to the National Center for Health Statistics.
Now here's the other bit of interesting data: The Harris Poll, which surveyed Internet users only, found that 11 percent of those respondents were mobile-only. Going only slightly out on a limb, let's assume Internet users are more open to new technology-use behaviors.
Indeed, the Harris Poll shows that two percent of Internet users only have VoIP services, and do not use mobile or landline phones. Another five percent say they use mobiles and VoIP.
Adding the "mobile only" users with the "mobile and VoIP" users gives you 16 percent of users who do not use a landline. Add the two percent who use only VoIP and one has 18 percent of Internet users who do not have a landline. So it still appears that Internet users are "different" from the general population.
That is as many of us would expect. Still, it is startling that "wireless only" usage seems to higher in the general population than among the arguably more-advanced Internet users.
Overall, the percentage of adults living in wireless-only households has been steadily increasing since 2005. In the first six months of 2007, one out of every eight adults lived in wireless-only households. One year before that just one in 10 adults did.
What might be new is some new spread of such behaviors beyond what we have tended to see, up to this point.
Sony BMG has been the last of the major music labels to insist on the use of Digital Rights Management for sales of its music in digital form. Apparently even Sony now has thrown in the towel, according to Business Week.
Sony is expected to start offering some portions of its catalog in a no-DRM format sometime in the first quarter, probably using Amazon.com's download store. Oddly enough, though music labels earlier insisted on DRM as a way of deterring piracy, DRM arguably accounts for Apple iTune's dominance of the download business, as DRM means songs can be downloaded only to specific devices.
Presumably, the announcement will helpl boost sales of downloaded music, as this projection by Enders Analysis suggests.
There are all kinds of music business models developing these days, including donations, music as loss leader, music as a "free razor," live performance, pay service, merchandising and so forth. People still consume in the old ways as well. Some people listen to radio, buy CDs or singles. People still go to live performances. But lots of people simply download single songs they like for 99 cents, or do so illegally.
The point is that the music ecosystem is developing lots of business models. My kids insist that 99 cents is the right price for a song, based on what a CD costs, and the number of songs on it. But they don't generally buy many CDs, unless an artist manages to pack so many songs on a collection that the incremental cost of buying the CD is quite low. But the business model behind 99-cent songs is the sale of hardware called iPods.
For Target or Wal-Mart, selective deep-discount sales of audio and video are loss leaders for the business model called "retail." Some acts have tried a donations model, with results being that 15 percent or fewer people actually donate.
Madonna, though, illustrates the shift as well as anybody. She last year signed a historically unusual recording and touring contract with concert promoter Live Nation. No record label: a concert promoter.
Traditionally, companies like Warner Music Group have focused on recorded music, while other firms have arranged tours, managed artists and sold merchandise. But shrinking CD sales have led artists and entertainment companies to consider wide-ranging deals that bring all activities under one roof, helping cross-promotion and boosting profit margins.
She is the first major star to choose an all-in-one agreement with a tour company over a traditional record deal. The point is that all albums, tours, merchandise, websites, DVDs, sponsorship, TV shows and films now are seen as parts of the business model.
"The paradigm in the music business has shifted," she is reported by BBC to have said.
In the old days, a musician would go on tour to promote a new album. The new model is more likely to take the form of albums being released for free or very low cost, to promote higher-priced tickets for live performances and other forms of monetization. In the past, promotions such as concerts were intended to sell records. In the future, records might be merchandising to build a reputation to sell concert tickets, create TV shows and sell merchandise.
It isn't immediately clear how changes in the music business might one day filter over into the video business, or how the basic principles might be applied to the communications business. But there's something to be learned here.
Among the insights is that the value users place on something change over time. What is the value of a car radio for someone who does not commute 60 minutes to two hours a day? What is the value of a car radio for somebody who can use an MP3 or CD player in the vehicle? The point is that the value of different types of music listening, as well as the cost, vary from mode to mode.
The "cost" of listening to the radio is virtually free (the radio came with the car), but maybe unsatisfying and rare. The cost of listening to MP3s is the cost of the content purchased and the player (unless the player came with the car), and might cost a bit more, but get used more, both inside and outside the vehicle.
In other cases the cost of music might be a satellite radio subscription and the cost of the receiving hardware (again, unless the hardware was built into the vehicle), but used only inside the car.
Also, the value of the ecosystem surrounding a product can produce more revenue than the actual tangible product. Let's say you buy a $250 phone (subsidized by the carrier to the tune of $200) and purchase a $5 a month insurance policy on the device, on a $55 recurring monthly plan. Say you never actually lose or break your phone, and you use it for three years.
Say a carrier's gross margin on services is about 30 percent (after paying employees, operating and marketing expenses, but before taxes, depreciation or debt service). Before subtracting the handset subsidy, the gross profit would be $16.50 a month on the service, or $198 a year and $594 over three years. Back out the $200 handset subsidy and one derives $394 as the gross profit on service.
Assume the insurance policy has a 90-percent gross margin, equating to $4.50 a month, $54 a year or $162 over three years. In that case, the $5 insurance revenue stream produces 29 percent of the gross profit, compared to the $55 revenue stream for service.
New business models for music are evolving. The issue is whether new business models for communication also might evolve.
I have to admit that I have not tried to use Google Presentations, though I do use Google Docs & Spreadsheets. The reason simply has been that normally, if I am creating a presentation, it is for use at a speaking engagement of some sort, and that means I want to ensure that it runs on the projection system and PC that will be on the dais, and that it can be copied and viewed by attendees later, in a format I think they will use. Microsoft PowerPoint, in other words.
But Google coders have enhanced the Presentation application in ways that immediately made sense to me. Presentations now can be saved in a file format that allows them to be embedded directly into Web sites. Now that is something one cannot really do with a Microsoft Powerpoint.
In fact, there is now a new use case. If I want to create content in that format for Web distribution only, I don't have "native application" issues. I can simply embed the presentation directly onto a blog or other site. Cool.
The format war between Blu-ray and HD DVD might be over. Warner Bros. Entertainment had decided to back the Blu-ray standard exclusively, beginning June 1. That means roughly 70 percent of available content will be in that format.
Sony's music download service uses the Windows Media Audio (WMA) format, not MP3. So it is interesting to find this bit of advice on the download site about how to take the copy-protected Sony music and transfer it to an iPod, an operation that is the equivalent, after a bit of work on the users' part, to supporting an MP3 format free of digital rights management.
"Attention iPod users:
Our download service provides files in the WMA music format or the WMV video format, which is not supported by Apple Macintosh computers. To use your music with an iPod, simply follow the steps below:
1. Save each downloaded song to your PC
2. Burn a music CD (in CDA file format)
3. Import the music from the CD into iTunes
4. Update your iPod"
If this forecast by Strategy Analytics is correct, most of the action in the music download business, exclusive of phone-specific ringtones, will not be generated by mobile service providers.
And you thought BlackBerry was an enteprise email device! Sling Media has announced that SlingPlayer Mobile software will run on RIM BlackBerry smart phones. Sling Media will release SlingPlayer Mobile for BlackBerry later this year.
SlingPlayer Mobile will be available for a one-time charge of $29.99. If you're thinking about doing this, make sure you have a device with Wi-Fi, such as the Curve. Sure, you might be able to watch using your carrier's data plan. But depending on where you are, and who your carrier is, the results might not be worth bothering with. Even Wi-Fi connections are going to be difficult in hotel and other settings.
If you are tempted to do this in the office, remember that IT is going to figure out pretty quickly that network congestion has gone way up, and why.
Warner Music has decided to offer its complete catalog, free of digital rights management, through Amazon's new MP3 store. EMI, Universal, and Warner now offer their catalogs in DRM-free digital formats, leaving Sony BMG the lone major music giant still clinging to the DRM approach. Amazon now claims to offer for than 2.9 million songs in MP3 format from over 33,000 unique labels.
Now, with the move to MP3, the labels that have chosen to open their music have a way to encourage multiple download services to flourish, keeping labels safe from being dominated by any single digital distributor, namely iTunes.
Sling Media has announced a new version of its Slingbox Pro set-top box that has its own HD TV tuner and can send out a 1080i HD picture over the network. The Slingbox Pro-HD will be initially aimed at the U.S. market.
So forget about what P2P is doing to the backbone and access networks. Now users will be streaming HDTV from their homes, stressing the entire network at its biggest chokepoint: the upstream. Ouch!
Opera Software has released Opera 9.5 software developer kit for Devices. The release will include a new beta visual effects layer that will give users an emotionally heightened Web experience with fluid transitions, panning, zooming and interactivity.
Opera 9.5 SDK will also include an improved evaluation kit that allow device manufacturers to quickly experience the potential of a product aimed to deliver the latest end-user experiences for Internet browsing, Web applications and Web-based user interfaces.
It appears lots of online publishers think vertical search is one way to survive the Google assault and prop up their walled gardens. It's too early to tell. It won't hurt. Not so clear to me that it helps much.
One might quibble with the precise Yankee Group numbers indicated here for voice and data average revenue per user. What remains incontestable is that there is a revenue gap between voice and data services, on either the wired or wireless business segments. So as broadband starts to become the foundation service upon which other applications and revenue streams are built, there is immense work to be done. I suppose everybody knows this, by now.
Much as Google dominates search and search revenue, Apple's iTunes dominates legal music downloading. Aside from ringtones, it isn't so clear to me how well mobile service providers will do with their own music-selling efforts. Every little bit helps, I suppose. But music doesn not look anything like a "killer app" for mobile service providers.
Shares of Carphone Warehouse Group, Europe's largest mobile handset retailer, rose the most in more than five years in London trading on speculation the company may receive a takeover offer, says the Bloomberg news service.
"Rumors about bid interest from Vodafone and Best Buy have been doing the rounds for some time," says Jimmy Yates, a London-based trader at CMC Markets.
What is interesting is the strategy context driving some of the rumored suitors. Best Buy has a small stake in Carphone Warehouse, which operates 2,400 stores across Europe. Best Buy also is collaborating with the U.K. chain to boost sales of mobile products in the U.S. Best Buy stores.
So you might argue that Carphone is simply a way for Best Buy to expand its footprint in its current business.
But keep in mind that Carphone also has 2.5 million Digital Subscriber Line customers. It also has a backbone network. Consider that Best Buy's Geek Squad is in the technology services business.
And recall that Best Buy owns Speakeasy, a provider of business-class broadband access and voice services in the U.S. market. Sure, Best Buy can grow its retail footprint. But by acquiring Carphone Warehouse, Best Buy makes an even bigger bet to become a more-significant provider of broadband access, business voice and mobile services.
For Best Buy, its core business is more than acting as a retail distribution channel. It is a service provider. Owning Carphone Warehouse would only deepen that commitment.
Now consider the possibility that Vodafone might acquire Carphone Warehouse. The idea there is not so much that Vodafone wants to become a mass market electronics retailer. Vodafone, long a dominant wireless service provider, now must also become a multiple-services provider, and broadband-based services provided over wireline networks are part of the vision.
Carphone Warehouse would give Vodafone much more heft, in that area. It might not strike you as significant that wireless and wireline services are converging. It might be a bit more surprising that retailers are moving from simple channel partners into the service provider business.
A patent application lodged by Google in July 2007 but recently made public seeks to patent a method where by robots (computers) can read and understand text in images and video, notes Duncan Riley at TechCrunch. That would be a big step forward in indexing visual media, since there would be no need to manually attach tags to such visual media.
Basically, the patent covers a method whereby any visible text in an image--a street sign, for example--can be automatically indexed. Obviously, as with any of the developing Web-based technologies, there are privacy issues. As someone who has to work with lots of images, and spends lots of time wading through images that a search suggests are appropriate, and aren't, this is really helpful.
as someone who arrogantly and wrongly has accused whole industries of "not getting it" at points in the past, I never like to presume I understand executive thinking better than they themselves do.
What sometimes appears as "cluelessness" often has more to do with deliberate timing. and rational calculations about how long to let one revenue model atrophy before heating up a replacement revenue model that will cannibalize the older model.
So let me be charitable. Perhaps U.S. music executives do have a plan for changing their business model and packaging. Perhaps they are executing on that plan even now.
Album sales declined 9.5 percent last year, while digital song sales grew 45 percent, according to Nielsen SoundScan. Physical product sales were down 15 percent, including sales of "singles."
So maybe the issue is simply figuring out better ways to handle digital rights that aren't unfriendly to consumers who have paid for their music, nor damaging to copyright holders. It's a tough problem, to be sure.
And the problems extend far beyond copyright issues. As someone who has made a transition to iPod as my primary music playback system, and as someone whose PC-embedded hard drives need to be replaced once a year or so, the issue of storing and managing the music collection is a serious problem.
The reason, of course, is that each iPod syncs with just one hard drive. Lose that hard drive and one has two options: completely erase the contents of the iPod, or never change the data already on the iPod.
So now I have to take two paths to make sure the music isn't lost: store the copies on an external hard drive that hopefully "never" dies; and then keep the compact disk as well, since the external hard drive will ultimately fail, forcing me to restore or simply forget about the music stored on it.
As a simple music customer, this is a problem. Unless I have physical media backup, the music always is at risk of loss, for mechanical reasons. But keeping those CDs is not ideal, either. And the process of restoring lost music is time-consuming. So music storage "in the cloud" seems promising, at least to me.
Amazon's top-10 "Most Wished For in Computers & PC Hardware" list includes, in order or popularity:
1. Asus Eee PC 8G
2. Asus Eee 4G
3. Asus EEE 4G
4. HP Pavilion DV6662SE
5. Nokia N810 Portable Internet Tablet
6. Nokia N800 Internet Tablet PC
7. Apple MacBook
8. Apple MacBook Pro
9. HP Pavilion DV6626US
10. Apple MacBook MB062LL
A couple of things strike one about this list. First, the prevalence of Linux-powered machines at the top three spots. Second, the prevalence of smaller form factor, highly portable devices among the top 10. Third, the prevalence of operating systems other than Windows in the top 10. Fourth, the prevalence of devices optimized for Web and Internet use.
On Amazon's "Bestsellers in Computers & PC Hardware" list, five of the top 10 devices use operating systems other than Windows. On Amazon's "Most Gifted" list, six of the top 10 devices use operating systems other than Windows.
Here's the other angle: some people carry smart phones with them when traveling, and leave their PCs behind. Top management and sales personnel are more likely to do so than people who have greater needs for text entry and Web app access. The point is that at least for shorter trips, the smart phone goes, the PC stays.
Almost everybody who owns a smartphone takes it, not a PC, when traveling locally, because email and text communications that otherwise would require a PC still are available.
To the extent that this trend continues, and more-mobile PC style devices also get traction, as the Amazon data tends to indicate, what does it mean? Web. Remote computing and storage. Need for better interfaces.
Small devices almost have to lean more heavily on applications in the cloud rather than local processing and storage. And several of the new devices plow new ground in the form factor/power/price equation, banking on Web apps to reduce price footprint, for example.
Navigation on a small device also is more problematic, so devices get an even-bigger push for new input options. Speech and touch, for example. Finally, taking all notebook PCs and smart phones together, and looking at them as a single market, not separate markets, one can observer that there already is more diversity in operating systems than has been the case in the desktop PC market.
Without proclaiming 2008 the "year of" anything, open source seems to be getting traction in the enterprise computing environment in server farms and on desktops and mobiles. Open source is preparing for additional traction in the consumer mobile markets. Linux has grown its presence in the consumer mobile area, and Google's Android initiative will start to bear fruit sometime after 2008.
Motorola has announced the latest addition to its portfolio of WiMAX customer premises equipment, the CPEi 100, a single data port, 2.5 GHz “plug-and-play” WiMAX solution designed to sit on a desktop and serve as the interface between a computer and the WiMAX network.
It is expected to be available in 2008 for WiMAX operators who have systems in the 2.5 GHz band.
Motorola’s family of wi4 WiMAX solutions support15 WiMAX contracts and more than 57 WiMAX engagements in 38 countries worldwide, including 44 active trials, the company says.
Things are looking up for Linux PCs (even though its share in the OS market still is small) and "computing in the cloud." Good OS, the open source startup that introduced gOS, a Linux operating system with Google and Web applications, on a $199 Wal-Mart PC last November, now says announced that gOS Rocket will be introduced January 7. Think of gOS Rocket as a low-cost Linux-powered notebook that is optimized as a Web device.
Note also that the Asustek Eee PC--also a Linux machine-- was among the top-ten notebook PCs sold by Amazon over the Christmas season, and was ranked at the top of wish lists compiled by Web site CNet. Asustek executives say demand was so strong forthis Christmas season that virtually all available units were bought just about as soon as they were put on the shelves.
“In the two weeks since its launch in the US, the Eee PC has already sold ten thousand sets,” says Sunny Han, ASUS director. Asustek fully expected to finish 2007 by meeting its sales goal of 350,000 units, and is planning for sales in 2008 of three to five million.
Rocket comes with Google Gears, the online-offline synchronization technology from Google that enables offline use of web apps.
gOS Rocket also features gBooth, a browser-based web cam application with special effects, integration with Facebook and other Web services; shortcuts to launch Google Reader, Talk, and Finance on the desktop; an online storage drive powered by Box.net; and Virtual Desktops, an intuitive feature to easily group and move applications across multiple desktop spaces.
At the center of Rocket's new desktop is a gorgeous Google search box, enabling users to perform Google searches directly from the desktop. This new feature launches Google search results in Firefox, the leading, open source web browser. Surrounding the Google search box is an attractive desktop environment comprised of new wallpaper, icons, digital clock, and other new desktop elements.
"Like most of our customers, we absolutely love the gorgeous design and simplified navigation that gOS provides," says Paul Kim, director of marketing for Everex. "With the release of Rocket, the gOS team has once again shown the industry how to make a great looking operating system intuitive and easy to use."
Rocket includes Google Gears to enable offline use of web apps. Google Reader, which allows you to read all your news and blogs in one place, is the only Google application to currently work offline with Google Gears and has been added to the gOS desktop. Launching Firefox will reveal a new custom gOS homepage that prominently features a continually updated list of web apps that work with Google Gears to allow offline access.
Separately, researchers at Informa predict that, by 2012, Linux will ship annually in 128 million mobile phones, or about 8.8 percent of all handsets sold. The report also forecasts a bright outlook for other open source mobile technologies, including Java, WebKit, and others.
According to the report, Linux in 2006 was the second most popular OS for smartphones sold worldwide. During that year it shipped in about 11.7 million handsets, the "vast majority" of which went to customers in Asia. Uptake in Europe and North America during 2007 is forecast to drive overall shipments close to 20 million, or about 17.3 percent of the smartphone market. From there, shipments are expected to nearly quadruple by 2010, reaching 27 percent of all smartphones by 2012.
Apple Inc. is expected soon to announce concrete support for Sony Corp's Blu-ray DVD format as opposed to Toshiba's HD-DVD, according to AppleInsider.
American Technology Research analyst Shaw Wu says his sources say Apple will start shipping Blu-ray-equipped Macintosh computers. At some point, every PC manufacturer shipping DVD drives will have to make similar choices.
Disney, for which Apple chief executive Steve Jobs is a Director, is a firm supporter of Blu-ray, while rival Microsoft Corp. has placed most of its eggs in the HD-DVD basket.
Still, there is "a smaller chance Apple may use a combo Blu-ray/HD-DVD drive to ensure full compatibility and not get involved in the format wars, AppleInsider notes.
The U.K. mobile market is saturated, analuysts at Ovum essentially have concluded. A bruising retention and acquisition war seems no longer to be producing adequate results, as mobile penetration has reached 118 percent.
Ovum researchers predict a shift to longer contract terms of 18 months as operators try to stabilize customer revenues, replacing the 12-month contracts that have been more typical.
Mobile operators also will shift attention to postpaid rather than prepaid additions, as two quarters of flat or negative prepaid connection growth suggest that market also is saturated.
Mobile operators also will shift focus to revenues (including value-added services) and average revenue per user (ARPU) rather than customer growth, Ovum believes.
And though the U.K. market now is dominated by top-tier operators O2 and Vodafone, more mobile virtual network operator contestants are expected.
Despite being saturated and highly competitive, the U.K. mobile market has avoided the fate of the German, Danish, Dutch and Belgium markets as ARPU and revenue still are relatively high, Ovum says. That's quite a trick!
JPMorgan analysts now forecast 31.9 percent growth in search advertising revenues for 2008. Analysts at JPMorgan initially had thought growth would come in at about a 19-percent clip. So they sense acceleration. Me too.
Lots of legacy businesses are flat to shrinking these days. Theater attendance seems to be one of the "flat" sorts of legacy video businesses.
"Ticket sales at North American movie theaters totaled $9.7 billion, a four percent increase over the previous year, according to Media by Numbers, which tracks box office receipts. More important: attendance was flat, after a narrow increase in 2006 and three previous years of sharp declines.
Some of that sluggishness historically has been attributed to the rise of alternate formats: cable, satellite TV, widescreen TVs, DVD rentals and VCR tape rentals. Add HDTV, larger screen sizes, PC viewing, download-to-TV services and user-generated content and one has a recipe for continued sluggishness at the box office.
No business based on communications, information or entertainment now is immune from the rise of new electronic alternatives.
