By next year, more than 80 percent of all Internet users will have done so.
Friday, February 29, 2008
By next year, more than 80 percent of all Internet users will have done so.
Data networks have peak load issues as well, but those issues are mostly about the number of bits to pushed through the pipe, not generally use of circuits or network elements or ports.
Wireless is starting to have other problems, though, as data usage grows. And you instinctively would think bandwidth has to be the issue. It isn't. But take the easy stuff first.
Just as there are two “rush hours” on the road (6 a.m. to 9 a.m. and 5 p.m. to 7 p.m.), enterprises typically experience two “rush hours” on their phone systems, says Art Yonemoto, owner of his own telecom expense auditing firm. For most enterprises those PBX rush hours happen at mid morning (10 a.m.) and early afternoon (2 p.m.). Hospitals, though, tend to have one of their busiest hours at 9 a.m., especially on Mondays, as their patients call to schedule appointments.
For the most part, though, enterprises handle their phone system peak loads quite well. Mobile networks cannot say the same. as they generally are designed to handle about 80 to 90 percent of calls on a non-blocking basis. At peak hours, blocking occurs.
Some calls simply go straight to your voice mail. The other obvious issue is a dropped call, which happens because you are moving from one area to the next, and the next cell tower has no free radio assets to hand off the call.
But there are other problems emerging, and that is amount of data traffic, and the different characteristics data applications impose on the network. Bandwidth alone is not the entire problem, any more than bandwidth is really the problem for voice traffic.
The issue is that radio resources are tied up even when not that much bandwidth is flowing over the radio network. An obvious example is a mobile virtual private network client, which essentially nails up a connection even when actual data is not flowing. The issue then is the strain on radio resources, not bandwidth as such. Other applications that don't actually consume much bandwidth might have lots of signaling and pinging. Some social networking applications and even mobile email devices can create that sort of stress.
So for wireless networks, it now appears application interactivity--not just bandwidth--is becoming a gating issue. It is an issue bandwidth alone does not fix. The additional new issue is occupation of radio resources.
Thursday, February 28, 2008
Though Microsoft Mobile is growing its share, BlackBerry is the device to beat. Apple will keep getting heat for its lack of security as well.
But the main thing is the ability of a user to get company email on an iPhone, not just on a Blackberry.
Sprint Nextel now has responded with a new “Simply Everything” plan offering not just talk, not just unlimited texting, but unlimited Web surfing, email access, GPS navigation services, DirectConnect, GroupConnect, Sprint TV and Sprint music.
The $99.99 Simply Everything plan is available to customers on both Sprint's CDMA and iDEN networks, and goes way beyond T-Mobile's comparable plan that includes unlimited voice and texting.
Sprint has thrown in the kitchen sink.
Existing Sprint customers can switch to the Simply Everything plan without extending their current contract either by contacting Sprint customer service or by stopping by any participating Sprint retail location.
New line activations require a two-year agreement.
For families, Simply Everything includes an incremental $5 discount for each incremental line, up to five lines on the same bill. For example, two lines would amount to $194.98 ($99.99 + $94.99); a third line would cost an additional $89.99. This is in sharp contrast to the multi-line unlimited rates offered by some competitors. The Sprint plan offers significant savings the more lines a customer adds.
Observers were wondering whether Sprint would go nuclear. This move is more "nuclear" that offering an unlimited voice plan for lower prices than the now-industry-standard $100 a month. Sure, Sprint Nextel would have frightened a lot of people if it had gone with an $60, or even an $80 unlimited voice plan.
What it has done, at least for users who really like several of the enhanced features, is create a package so compelling lots of people are going to upgrade lower-priced plans to get them. Don't worry about some high-end voice plans being downgraded.
The big issue here is a potentially significant upgrade of lots of other plans, to get the huge palatte of upgraded features. It is the sort of move one would expect from Dan Hesse.
For users who don't mind the lack of subscriber information modules (SIMs), the plan offers more value than competing plans offered by T-Mobile, which bundles unlimited voice and text messaging. Both at&t Wireless and Verizon Wireless plans provide unlimited voice for $100 a month.
For users who simply want unlimited voice, Sprint will offer a $90 voice-only plan. So far, the feared price war has not broken out.
As for why unlimited plans might not damage wireless carrier revenue, take a look at what Sprint has been finding with its Boost mobile prepaid business. After launching unlimited plans, traditional prepaid growth slowed, but unlimited plans more than made up for the slower growth for the traditional plans.
After operating an MVNO using the underlying Sprint network, Qwest now has concluded it simply hasn't worked well enough to keep doing. "We have a hole in wireless and we don't have the assets and we aren't going to invest," he says.
In Qwest's case, at least, an MVNO isn't financially attractive, but also is weak in the market place," Mueller says. One of the issues is access to the latest, greatest phones. "We don't have scale to get the new phones," he says.
"The financials and economics are really difficult," he says. "Only six percent of our customers bought, where the national average is 200 percent."
"Even if we had access to all the new phones, it would still have been difficult," Mueller says. And he also acknowledges a historic reality resellers of basic communications products of all sorts have faced: low margins. "We won't get rich on this, even if we have wireless that works," he says.
So why bother? "As part of a bundle, though, wireless gives us great stickiness," he says. He likes the resale agreement with DirecTV just fine, for many of the same reasons. "We have nine percent penetration of video," Mueller says.
That's about the same penetration as at&t or Verizon get in some of their markets in the first year. But at&t as well as Verizon expect, and get, higher penetration than that after as few as six to nine months. By the end of a year of full marketing, penetration can be in the 13 percent range.
The real money in wireless over a three-year time frame is data, not voice, Mueller says. "Voice will be a ride-along on the data," he adds.
The other thing is Qwest's interest in fixed mobile convergence, especially ways to use mobile handsets inside the home. "FMC is about strong signal inside the home," he says. "So we want a partner with a data network."
Nor does Qwest want to wait for handsets. "We want to be equally advantaged on the product set immediately, not in six months," Mueller says. "Two of the four wireless networks do not have wireline assets and should be a good fit for us. "
In other words, Qwest doesn't want an MVNO agreement, even if it is reselling another provider's network services.
Wednesday, February 27, 2008
On-demand viewing is convenient, to be sure. But there are countervailing values as well. On-demand purchases introduce an element of uncertainty into monthly budgeting of expenses. On-demand rentals can be cash transactions, with no later unexpected financial impact. It's an underestimated value for physical rentals rather than on-demand purchases.
Flat rate is important for many consumers. So is the "unlimited" number of titles one can buy on some Netflix plans. That adds more value. Think of how parents view texting charges. Why do so many people buy relatively large plans? Because they don't want overage charges.
On-demand viewing leads to "overage" charges. Flat-rate or "cash on demand" services eliminate that uncertainty.
"We do see a slowdown in the economy in our California and Arizona markets," says Maggie Wilderotter, Citizens Communications CEO. And it seems to be housing related.
California and Arizona are "the only two markets that we have that have definitely had the housing issues," Wilderotter says.
"So, from the gross add perspective, what we have seen is a slowdown in gross adds out there, but it is not about the competition necessarily getting them," she notes.
"It is also about housing remaining vacant at the moment until inventory starts to get absorbed," Wilderotter says.
So what might be notably different about this particular dip in economic growth, compared to earlier slowdowns the telecom and cable industries have weathered, is the overhang of unsold homes whose owners might be disconnecting services.
That doesn't mean disconnection or downgrades at the primary residence, but at the second or investment homes.
So far, though, Citizens hasn't seen anything material in terms of bad debt on the small business side of its business. That's important, as small businesses represent roughly 50 percent of company revenues, and about 92 percent of our business customers.
Though Goldman Sachs analysts now forecasts that U.S. IT spending outlook for the remainder of 2008 will slow perhaps two points compared to 2007 levels--meaning growth will come in at fiver percent rather than seven percent--IT suppliers predictably say the slowdown won't hurt their firms.
Executives "said that while they’ve seen some small impacts from the U.S. economy with respect to IT spending, there is little to fear in the bigger picture," reports eWeek reporter Reness Boucher Ferguson.The good news for IT suppliers is that a decline this time is simply a slowing of the rate of growth, not an actual negative downturn. The rationale is that IT spending in recent years has tracked fairly closely with gross domestic product, growing just a bit faster than GDP.
Of course, what else would you expect a CEO to say? It's a bit like running into associates in the hall at a trade show, and asking them how business is. No matter what the reality, the answer always seems to be that "business is great."
And since GDP is forecast to grow at about 3.5 percent for 2008, IT spending should come in above that rate.
IT spending is a different thing from communications spending, to be sure. There is no linear extrapolation from the one to the other. But neither are the two types of spending completely uncorrelated. A deceleration from seven percent growth to five percent growth isn't a disaster by any means.
Tuesday, February 26, 2008
“We believe that our slower subscriber growth was driven in part by competitive factors including the effectiveness of certain competitors’ promotional offers, the number of markets in which competitors offer local HD channels, and their aggressive marketing of such advantages," the company says.
In part, Dish Network was hampered by a delay in the launch of new satellites to support high-definition services. The company argues that the delay lead to gains by competitors better equipped to deliver lots of HDTV signals.
Dish executives also say subscriber growth was affected by worsening economic conditions which included a slowdown in new housing starts.
But there also were "operational inefficiencies" as well, and piracy and other forms of fraud seem to have been issues as well. All of those developments "affected both the growth of new subscribers and the churn of existing customers," Dish says.
Although video entertainment traditionally has been viewed as "recession proof," that thesis might be tested this year if there in fact is an economic slowdown underway, or starting. The problem is that economists need six months worth of data to declare that a recession started, six months earlier. We might not know for sure until the summer or fall whether that is the case.
Any one of the aforementioned developments could lead to slower growth. The problem is that it isn't clear how important each of the factors was. Given the number of new HDTVs being sold, it is conceivable that relative lack of HDTV programming alone could account for slowing growth, even if the other forces were not at work.
To some extent, the satellite delay is simply bad luck. But the fraud issues ought to be largely under Dish Network's control.
Neither are housing starts under company control. The issue is that more weakness likely will follow, not because of housing starts, but because in many markets owners seem to be selling second homes bought largely as investments. In the interim, it is likely many of those locations will be disconnecting some services.
If a slowdown in growth continues, it will be tough to figure out, in retrospect, what actually caused the slowdown, as several forces are operating at once, at least at Dish Network.
Monday, February 25, 2008
The conference will discuss the certification of devices that users can use on the Verizon network, without having to buy a device directly from Verizon.
Other services or products, such as mobile phones, MP3 players, Skype, smart phones or notebook PCs, might more accurately be counted on a "per user" basis.
The difference in broadband penetration, for example, can vary dramatically by the size of a household. In countries where households tend to be larger, for example, "per capita" and "per household" penetration will show a weaker correlation. Countries with lower household size will show a higher correlation between the two measures.
The latest ECTA data shows broadband penetration "per capita." So where we might be used to seeing "household" penetration figures in the 50-percent range, counting on a per-capita basis leads to penetration in the 15 to 35 percent range.
Saturday, February 23, 2008
Consumer spending turned south in the summer of 2007, according to surveys conducted by the ChangeWave Alliance. ChangeWave also found that business IT spending dipped in the first quarter of 2008.
In January, 34 percent of ChangeWave respondents said they planned to spend less during the next 90 days than they did a year ago. About 29 percent said they would spend more.
Some 23 percent of respondents report their company’s IT spending will decrease--or there will be no spending at all--in the second quarter.
About 15 percent say spending will increase.
A total of 2,013 respondents involved with IT spending in their organization participated in the February survey, ChangeWave says.
The last time such negative growth was reported was August 2001. And you might recall that was the time when the Web and telecom industries melted down. The ChangeWave data show a slowdown in businesses of every size.
About 43 percent of respondents say their companies will spend normally. About 53 percent say their firms will slow spending.
In the first quarter, about 10 percent of respondents reported they had spent more than planned.
Another 27% say they’ve spent less than planned. It appears storage has been hardest hit. But spending on enterprise applications, servers and security also are weaker.
That doesn't seem to apply to smart phone activity, though. Respondents say their firms will be spending more on smart phones than before.
It's starting to look like the spending slowdown by business users already has begun, whether or not we find out later that the U.S. economy entered a formal "recession," which is to say back-to-back quarters of negative growth.
Cbeyond, which sells to small business, reports it began to see higher than normal credit issues in the third quarter, forcing it to tighten its credit rules. The result was a churn rate 40 percent higher than is typical for Cbeyond.
Leap Wireless, which sells heavily into lower-income customer segments, likewise saw an unusual and high rate of customer churn in the third quarter last year, an anomaly the company says can be explained by expansion into less mature markets as well as deliberate policy changes in the prepay and handset areas.
Now Henry Blodget of Silicon Alley Advisor says he detects real softness in small and medium business spending on advertising since the Christmas or holiday season. He says a source workking for a digital advertising company has seen severe drops in digital ad spending at small- and medium-sized enterprises in the past few months.
Blodget says he was told one client that had $4 million to $5 million in sales in the 2006 Christmas season had only $1 million in sales this season.
The source believes that Google is seeing, or will soon see, similar drops in spending in the SME segment.
It will be hard to separate out the many threads here. Both Cbeyond and Leap Wireless are in the middle of major market expansions, and each has taken internal actions which could account for nearly all, if not all of the unusual churn activity.
Beyond that, Leap Wireless executives have been watching for signs of economy-specific impact for quite some time, as the background rise in gas prices, sub-prime lending and housing slowdowns also could create higher churn, lower net addition effects.
Even slowing broadband or wireless subscriber growth alone will not be evidence of economic weakness, as both of those markets are nearing saturation. Growth necessarily will slow, and the economy has little to do with the slowing.
Lower housing starts plausibly are an issue, but only at the margin. The simple fact is that both broadband and wireless penetration rates now are nearing a natural limit.
Both Cbeyond, Leap Wireless and any other service providers expanding rapidly into new markets are going to have higher churn for new customers than is typical for customers they have had for several years. The reasons are simple enough. Customers who leave have found reasons not to continue. By definition, customers who stay for several years have found good reasons to do so.
They have learned how to use the services, are getting acceptable levels of service, correct bills, prompt resolution of issues and other "use" experiences that confirm they have made a wise choice.
So higher churn, in and of itself, will not mean economic softness is the culprit, at least for firms expanding rapidly into new markets and adding new services.
Over the next couple of quarters, all observers are going to remain watchful for any signs economic issues are coming into play. So far there are signs--not conclusive by any means--of increased pressure in some consumer and SME segments. But so far it is hard to isolate economic issues from other background factors.
Friday, February 22, 2008
That despite the statement that "it's clear that we're entering a phase of slowdown in the world,'' Loescher says. ``The impact for us as a company, we don't see it yet.''
That means there will be 150 million landlines in service by 2011, where there once were 286,000 in service in 2004.
About 82 percent of consumer voice subscriptions are sold as part of a bundle, up from 14 percent in 2005 and 40 percent in 2007.
Wireless growth slowed to single digits in 2007 for the first time, however. Still wireless revenue of $200 billion in 2011 will exceed wireline revenue by 26 percent.
About 84 percent of wireless service revenue growth comes from data and data will be 35 percent of total revenue in 2011, up from 16 percent in 2007 and six percent in 2005.
Overall wireless penetration will hit 90 percent in 2011, up from 79 percent in 2007.
In 2011, Gruen also predicts VoIP will represent 37 percent of landlines, serving 33 million subscribers.
In practice, that means deregulation for areas covering around 65 percent of all homes and businesses.
Thursday, February 21, 2008
The tests began last June in Seattle and now is providing service in Seattle and Dallas.
The additional monthly cost is $10 for the "Hotspot at Home" feature, which isn't much of an issue. The issue is that the service only works with two phone models, the BlackBerry Curve and the Samsung T409.
Someday handset limitations won't be so big a deal, as more devices come natively equipped with Wi-Fi, and when operators stop disabling the function. But right now, the limitation to just two devices is an issue that will limit adoption.
U.S. competitive local exchange carrier lines in service, on the other other hand, ramped up through about 2004, and then began to decline, even as more telephone and cable companies themselves became "CLECs" for purposes of providing services outside their historic service territories.
In 1998, when Digital One Rate was introduced, mobile subscribers numbered about 69 million. By the middle of 2007, mobile subscribers numbered more than 243 million. At this point, the time is long past when wired lines exceeded wireless lines. These days, wireless accounts far outnumber wired accounts.
In many respects, and without belittling the Telecommunications Act of 1996, Digital One Rate has had far more impact than anything that has happened on the wired side of the business.
TeleGeography estimates that the ranks of European VoIP subscribers had grown to 28.9 million by year-end 2007.
While VoIP is often associated with competitive carriers and cable companies, many European incumbents have counterattacked by launching their own VoIP services. France Telecom has emerged as by far the largest consumer VoIP provider in Europe, while BT, Telecom Italia, and KPN all rank among the top ten European VoIP operators.
The European consumer VoIP market remains fragmented and highly diverse, featuring a wide range of provider types and business models, says Stephan Beckert, Telegeography analyst.
In some countries, incumbents dominate. In others, competitive carriers have gained the advantage. VoIP adoption also differs widely across nations. For example, 34 percent of all French households subscribe to VoIP, compared to only 11 percent in Germany.
At some point, the U.S. markets are going to start resembling the European market. At some point incumbent carriers are going to start pushing VoIP services actively. Recall the pattern set by Digital Subscriber Line services. The technology was available for quite some time. But telcos didn't have a business driver to deploy it aggressively (they feared cannibalization of T1 lines) until the cable operators forced their hand by launching rival cable modem services.
To be sure, an argument can be made that revenue is better managed by allowing traditional phone line sales to shrink gradually, rather than massively converting to VoIP, with the attendant cost and reduced revenue across the board. At some logical point, the benefits will be close to the costs, and the switch will happen.
Verizon Communications has 305,000 single-line Nationwide Unlimited Anytime customers with monthly voice price plans in excess of $99.99 per month. That's important as the investment community now is nervous the introduction of new plans costs about $100 a month will cause those sorts of customers, paying $125 to $135 a month, will downgrade to the $100 a month plan.
Keep in mind that customers paying more than $100 a month for a single line represent just 0.5 percent of Verizon's customer base.
Verizon believes that the reduced revenue from the $100+ customers will be more than offset by other customers on lower-priced plans moving up to the $100 a month plans. The exposure to the downside isn't that high--possibly $109 million or so.
On the other hand, assume just 300,000 customers upgrade their plans to the unlimited plan, out of the base of total 65.7 million users, and that the incremental revenue is $30 a month.
Despite some momentary imbalance, it seems more logical that the upgraders outnumber the downgraders by as much as two orders of magnitude.
Dan Hesse, Sprint Nextel CEO, was CEO of AT&T Wireless Services back in 1998, not many will recall. That was the month Hesse was able to act on a vision he had strenuously to sell to his superiors: that wireline minutes of use could be shifted to wireless, saving at&t money on access fees by doing so.
The Digital One Rate Plan was not primarily aimed against other wireless carriers at all, but rather at reducing a significant cost of doing business on the AT&T long distance side of the house.
At the time, Hesse pointed out that "we're taking a chunk out of revenue usually going to our competitors," meaning by that the Regional Bell Operating Companies that at&t had to pay access fees to.
The point is that major packaging initiatives can have unanticipated consequences. Digital One Rate was just a way to save AT&T long distance operations money on terminating traffic charges paid out to local carriers.
So make no mistake: Hesse is used to launching unusual packaging programs for non-intuitive reasons. But not even Hesse was able to fathom that Digital One Rate would change the way the entire industry packaged its basic product.
If Sprint does launch some sort of "nuclear" strategy to try and shake things up, you can bet Hesse isn't going to choose some sort of simple copycat unlimited calling plan.
Dan Hesse is the guy who got the whole "buckets of minutes" train rolling, and wiped out the difference between local and long distance calling in the U.S. domestic market.
He's the guy who triggered an explosion of mobile adoption and a sharp increase in usage of mobile minutes.
Financial analysts seem to be riveted on what a $60 unlimited calling plan might mean for the fortunes of all leading wireless providers. I don't think that is what they ought to be focusing on. Digital One Rate was about moving "long distance" minutes from the landline network to the wireless network.
That's what "unlimited" mobile calling plans do. That's why Sprint is testing femtocell technology in Denver: figuring out the operational and marketing issues around small in-home transmitters that improve wireless signal quality and also create a marketing opportunity for "home zone" services where a wireless handset can replace a landline handset and service.
Nobody should be surprised if Sprint Nextel comes out with a program of its own in the "unlimited" calling area. But nobody should expect Hesse to confine his initiatives there. At this point, rolling out its own unlimited-calling plan is nothing more than a tactical response to prevailing market conditions on the packaging front.
It isn't the sort of industry-transforming plan Digital One Rate was. But we also need to keep in mind that industry transformation was not what AT&T had in mind in launching Digital One Rate.
Watch out for the unintended consequences.
Wednesday, February 20, 2008
There now is speculation Sprint Nextel is considering an unlimited calling plan costing as little as $60 a month. Aside from disrupting nearly all pricing plans in the U.S. mobile business, one has to wonder what that does for wireless substitution and consumer VoIP as well.
If one can get unlimited calling for that sort of price point, most people who use mobiles and also live in single person, or households of unrelated people, are going to have huge incentives just to go "wireless only."
To the extent that consumer VoIP is mostly about cheap calling, mobile is going to be hugely competitive in a new way, in the event of "nuclear" conflict.
In many ways the VoIP business already has taken a path similar to that pioneered earlier by the "CLEC" business. The CLEC business was lead, in terms of market share, by just two companies: AT&T and MCI. There were lots of independent CLECs, but most had fairly small market share and sales.
Both AT&T and MCI were absorbed into SBC Corp. and Verizon, respectively, leaving the CLEC industry essentially "headless" in terms of national regulatory clout.
The experience of VoIP providers is analogous in many ways. Though the business was pioneered by independents, as was the CLEC business, it now is "lead" by U.S. cable operators, who might be seen as the AT&T and Verizon to the rest of the small independents.
Cable companies have distinct regulatory interests distinct from those of independent VoIP providers, for the most part, and compete directly with VoIP providers in a commercial sense.
One might argue that the independent VoIP providers now also will start consolidating, for VoIP also is a scale business. And some of the more interesting pairing will be of business-focused VoIP providers with business-focused CLECs.
Credit Suisse telecom analyst Christopher Larsen, for example, has reduced his rating on at&t, Verizon, Qwest and Sprint Nextel.
He worries that unlimited calling plans will trigger “a wireless price war.”
UBS telecom analyst John Hodulik thinks the potential impact will affect Verizon and at&t, at least at this point.
Hodulik says Sprint is likely to launch an unlimited voice plan in the next few weeks is considering pricing at $60-$80 a month. If Sprint gets traction, that logically would compel Verizon and at&t to reduce their prices to match.
I am not so sure about that. Each of the carriers might see some lost "overage" revenue from heavy users. But each should gain some customers who upgrade from lower-priced plans, as well as some customers upgrading because they are substituting wireless for wireline service.
It is possible higher subscription revenue will compensate for the loss of "overage" revenue.
The number of IP PBX managed services deals fell to three percent of deals, where in the first half of 2006 managed IP PBX deals were part of 39 percent of new contracts.
Forrester says there was an equally massive drop in the number of deals involving managed security services as well. The only IT service that recorded any increase was the provision of help desks.
Overall telco IT services sales with an IT services component was down from 31 percent to 22 percent.
It isn't yet clear whether that trend was seen in other regions, whether it continued through the balance of 2007, or what it means, if indeed the trend did continue.
Most likely, the data suggest a shift of buying to other channels, rather than a decline in aggregate purchasing. The survey suggests that most of the service provider sales were of the small sort. It is most likely the case that value added resellers and other providers now are increasingly active in that market with services that compete directly with service provider offerings.
The total number of managed services contracts signed in the first half of 2007 by European telecom service providers also showed a decline in the number of deals, compared to the first half of 2006, with slight less contract value.
Where 188 deals were reported by the participating carriers in the first half of 2006, with a contract value of €1.6 billion, contract value in the first half of 2007 was roughly flat at €1.5 billion.
The majority of deals continued to be small, but the increase in the average deal size was the result of a small number of very large contracts.
Tuesday, February 19, 2008
T-Mobile USA will offer consumers an unlimited calling plan including unlimited ationwide text messaging for $99.99 per month. This offer will be available beginning Feb. 21.
Note that the T-Mobile offer includes unlimited text messaging (SMS), picture messages (MMS) and instant messages (IM). Full details of the at&t Wireless offer are not yet available, but it wasn't immediately clear whether at&t Wireless would include unlimited text messaging as part of the $100 a month unlimited voice plan.
New customers can buy on a month-to-month, 12 month or 24 month contract.
Sprint has been offering unlimited calling plans in four markets at about $119.
Monday, February 18, 2008
An earlier partnership between Sprint and Clearwire died last November, when the two parties could not reach agreement on terms of the partnership.
Through a joint venture with Clearwire and a big investment from Intel, Sprint can move the expenses off its books and yet still continue to build a fourth generation network. Intel's interest in WiMAX is creating a new market for chipsets supporting WiMAX devices, including mobile PCs and handsets.
The unusually large investment by Intel Capital, which hasn't invested so much in any single company before, seems to be a signal that Intel worries about the U.S. WiMAX market. Though at one point it might have been conceivable that large incumbent wireless carriers might move to WiMAX on a wider scale, at&t Wireless and Verizon Communications now say they will back Long Term Evolution as the basis for their fourth-generation networks.
The issue is that WiMAX and LTE are different ways of creating capabilities seen as integral for 4G networks, so if Verizon and at&t aren't going to be creating WiMAX networks, Intel has to look elsewhere. T-Mobile USA, the fourth-largest U.S. mobile provider, is a logical candidate to go with LTE as well, as most of the GSM-based network providers seem to prefer that approach.
Aside from that strategic consideration, Clearwire 's part, the deal would provide cash it needs to continue operating and building its network.
Clearwire had about $1 billion in cash and investments at the end of the September quarter, but burned through about $400 million in cash to fund operations in that quarter, according to the company's most recent quarterly filing.
Other plans include a $120 plan with unlimited texting and voice; $140 for plans that add email and VCast content services. For $150 users can get unlimited data, voice and texting.
A $170 plan adds international data capabilities. A $200 family plan reportedly will be limited to additional two lines, priced at $100 per additional line.
It appears there will be no caps on data sent or received.
In one sense the new pricing plans represent an attempt to change the nature of mobile service pricing, making pricing a lot more like VoIP, or wired calling with unlimited, flat rate long distance within the continental United States.
And that might be the thing to watch: not so much a redefinition of mobile pricing as a new rationale for going "wireless only." Assuming a landline costs in the neighborhood of $50 a month, a user might rationally conclude that he or she is no worse off, and marginally better off, ditching a landline and using the mobile for all calling.
Saturday, February 16, 2008
The real difference is that Google accounted for 65.98 percent of all U.S. searches in the four weeks ending January 26, 2008. Yahoo! Search, MSN Search and Ask.com each received 20.94, 6.90 and 4.21 percent respectively. The remaining 48 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.97 percent of U.S. searches.
Comcast, Time Warner Cable, Charter Communications, Cox Communications and Cablevision Systems are named as patent infringers.
Thursday, February 14, 2008
Smart mobile device shipments hit 118 million in 2007, up 53 percent over 2006, reports Canalys. In the fourth quarter, newcomer Apple shipped the third most devices globally. Nokia remained the global market leader, shipping 60.5 million smart phones.
Research in Motion shipments grew 112 percent year-over-year to 12.2 million, to take second place.
Symbian remains the operating system leader, with 67 percent share, followed by Microsoft with 13 percent, with RIM on 10 percent. Apple garnered seven percent while Linux had five percent share.
High-end devices represented around 10 percent of the global mobile phone market by units in 2007, with annual growth of 60 percent.
Apple’s entry into this market in 2007 with the iPhone sparked a lot of media attention and speculation about how much it could disrupt the status quo and take share away from companies such as Nokia, RIM, Palm and Motorola. “When you consider that it launched part way through the year, with limited operator and country coverage, and essentially just one product, Apple has shown very clearly that it can make a difference and has sent a wakeup call to the market leaders,” said Pete Cunningham, Canalys senior analyst. “What it must demonstrate now is that it can build a sustainable business in the converged device space, expanding its coverage and product portfolio. It will also need to ensure that the exclusive relationships that got it so far so quickly do not prove to be a limit on what it can achieve. Apple’s innovation in its mobile phone user interface has prompted a lot of design activity among competitors. We saw the beginnings of that in 2007, but we will see a lot more in 2008 as other smart phone vendors try to catch up and then get back in front. Experience shows that a vendor with only one smart phone design, no matter how good that design is, will soon struggle. A broad, continually refreshed portfolio is needed to retain and grow share in this dynamic market. This race is a marathon, but you pretty much have to sprint every lap.”
Canalys estimates that Apple took 28% share of the fast growing US converged device market in Q4 2007, behind RIM’s 41%, but a long way ahead of third placed Palm on 9%. This was also enough to put Apple ahead of all Windows Mobile device vendors combined, whose share was 21% in the quarter according to Canalys figures. In EMEA, where the iPhone officially launched part way through the quarter in only three countries, Apple took fifth spot behind Nokia, RIM, HTC and Motorola, but ahead of several established smart phone providers such as Sony Ericsson, Samsung and Palm.
For the full year 2007, as in 2006, the Asia Pacific region was the biggest in volume terms for converged device shipments. Apple has of course not yet launched the iPhone in the region, and many vendors who are successful in other parts of the world, such as RIM and Palm, have also made relatively little impact there so far. Nokia continues to lead in the region, with more than 50% share in converged devices, ahead of Japanese smart phone vendors Sharp and Fujitsu. Motorola, despite enjoying fourth place, has seen its Linux-based smart phone shipments in the region fall 28% from their high in 2006.
Symbian led in the Asia-Pacific (85 percent) and Europe-Middle East-Africa regions (80 percent) while in North America RIM was the clear leader on 42 percent smart phone share, ahead of Apple at 27 percent and Microsoft at 21 percent.
“We thought it was a mistake and made our engineers check the logs again,” Gundotra says. "If the trend continues and other handset manufacturers follow Apple’s lead in making web access easy, the number of mobile searches will overtake fixed internet searches “within the next several years."
More mobile searches than fixed! I don't know about you, but my sense is that if that volume of activity can happen on most broadband-connected smart phones, Google won't have to worry much about creating a "Google phone," any more than it has to worry about a "Google PC."
Google has never separated out its mobile revenues but Gundotra says the business was growing “above expectations”, both in terms of usage and revenues.
Executives at at&t Wireless have said average revenue per user for iPhone users was nearly double the average, because iPhone plans come with capacious data plans.
Xohm, slated to deliver mobile broadband services of 2 Mbps to 4Mbps, for $40 to $50 a month, is slated to launch on a more or less full deployment basis in three cities this spring (Baltimore, Chicago, and Washington, D.C.). There's no conceivable way any new service of this sort, selling into a nearly-saturated broadband access market, is going to get that kind of traction so fast.
VoIP net adds are slowing as well, again confirming a broader trend seen in the consuemr segment of the VoIP business overall. Basically, significant numbers of people who are persuaded VoIP makes sense for them right now have become customers.
After adding 662,000 new subscribers in the third quarter, Comcast’s total net new voice additions dropped to 604,000 in the fourth quarter. None of this is unexpected.
Those of you who have had to live with EDGE access speeds (just like most iPhone users) will be happy. Up to this point, EDGE access has felt remarkably like "dial up" access. And how many of you can imagine doing important work, or trying to get any of the normal sorts of information you look for in a day, over a dial-up connection?
People don't use the mobile Web much because it's too painful, even if there were interesting applications.
Hoping to head off mandatory pricing and regulation Vodafone, Deutsche Telekom and KPN also have announced cuts in their data roaming prices.
As many in the computing and Web worlds are starting to discover, governments and regulators have much to say about which services and companies can succeed in the communications business, and even affect the amount of profits any contestant can make.
Any mandatory EU intervention to cut the price of sending text messages or using the Internet while traveling outside one's home country would be limited to the wholesale level. In other words, the EU would regulate the prices carriers can charge other carriers for roaming access, but leave service providers free to set their own retail prices.
Wednesday, February 13, 2008
Open Access will develop and maintain the access network infrastructure and manage activation and other processes.
The move is the latest example of ways different service providers in different countries are adapting to differing regulatory regimes and competitive "facts on the ground."
While there have been discussions of structural separation in the U.S. market, there never has been any political will to change the regulatory regime strongly in that direction, though aggressive wholesale discounts were the rule, for a period after 1996, and began heading the other way after about 2004.
Markets where functional separation has been adopted tend to be characterized by weak ability on the part of cable operators to provide meaningful competition in voice and high-speed Internet access services.
That isn't the case in the U.S. market, where regulators basically have decided that a competitive duopoly where cable and telco incumbents battle it out will lead to the greatest consumer gains, in the shortest amount of time. As a practical matter regulators probably got this one right.
Given the current state of capital markets over the past four or five years, it is virtually impossible to raise enough money to build a third, widespread broadband terrestrial network. Aggressive wholesale requirements meanwhile were all the excuse the large telcos needed to drag their feet on rapid broadband upgrades.
It is no coincidence that Project Lightspeed and Verizon FiOS really cranked up after it was clear the aggressive wholesale requirements would not stand.
That said, nothing in the telecom world ever is completely stable. What the government gives, the government takes away. At some point, the rules will begin to change again. As always in the U.S. market, the issue is whether the problem is too much freedom or not enough.
That's a big "if," but history suggests lower churn is possible, if not easy. The reason is that, over time, customers learn the value of a new type of service or application, and gradually come to have a better understanding of why it is they actually need and use a service. There always is lots of churn at first.
The U.S. cable industry struggled precisely with churn at the same levels Vonage grapples with, in the late 1980s and 1990s. Today's churn levels are far below that, but not much below two percent a month. And there's a reason even for that level of churn.
People move. That's called "uncontrollable" churn because there isn't a heck of a lot most providers (except those with a huge footprint) can do about people moving. Wireless providers used to have three percent a month churn as well. These days, most save Sprint Nextel are down just a hair under two percent a month.
They don't necessarily have the "customer is moving" problem so much with the advent of continental U.S. calling buckets that mean local calls cost the same as long distance. A new dwelling in a new area doesn't necessarily mean any change in calling rates and charges, so there is less "uncontrollable" churn.
Still, even the largest of the wireless carriers have just a bit under two percent a month churn. So far, in the consumer markets, that's about as good as it gets.
In the commercial markets, guess what the monthly churn rate is for many smaller independent service providers? Three percent.
That's not great, but the point is that it is hardly unusual, especially for new services, smaller providers and any service tethered to a location. The good news for Vonage is that, like a mobile provider, its service is not tied to a physical location. Over time, and should it survive, it can expect, with diligence and the passage of time, to get its churn down to about two percent a month.
The issue is simply to stay in business long enough for the learning effects to kick in.
halfway point faster than most other information and communication technologies.
It took 18 years for the personal computer to be used by 50 percent of Americans at home and 18 years for color TV to reach half of homes.
Mobile phone penetration took 15 years to reach the "half of homes" point. It took 14 years for the video cassette recorder, and 10 and one half years for the compact disc player to reach the same level of penetration.
It has taken about 10 years for broadband to reach 50 percent of homes. We can argue about the price of broadband, the definition of broadband, the quality or terms of service under which broadband can be purchased.
But it continues to surprise me that some observers still think there is some sort of crisis or problem here. Over the last year bandwidths have been leaping, not just incrementally increasing. There's more third generation wireless access, more WiMAX, more Wi-Fi. With a new SpaceWay satellite in orbit, there's much more satellite broadband capacity coming online as well.
And the last time I checked, some 98 percent of U.S. homes had access to at least one wireline broadband provider, and depending on where the location is, one or two satellite providers. Again, depending on location, users have access to one to three broadband mobile networks as well.
Few countries save Japan have prices-per-megabit lower than U.S. consumers do. By all means let us solve problems. But it doesn't do much good to keep trying to "solve" problems that already are in the process of being fixed.
And by any historical standard broadband access is a product being adopted by U.S. consumers at a faster rate than other highly-popular innovations have. In fact, one would be hard pressed to name another popular innovation that has penetrated the market so quickly.
“The significance to me of what has happened in the EU is that it indicates to us that the cost structure of delivering these calls is much, much lower than the retail prices,” Sinclair says. “The operators know exactly what the costs of services are,
but they are not prepared, without regulatory oversight, encouragement,
or if necessary, intervention, to do something about it."
"At the moment, as far as I can see, the only thing that would fix this is regulatory action," she says.
Service providers take notice: a re-regulatory wind is blowing around the world, though it isn't as windy everywhere. Telstra seems to be in a different situation than EU carriers. U.S. carriers have enjoyed a decade of less intense regulation. But there's one thing you can be sure of: it the telecom business, no set of rules, and no climate, lasts forever. The next swing will be back the other way.
In its efforts to control marketing cost, Vonage has been targeting geographic regions where it has a greater chance of signing up customers with high need to call international destinations. For the most part that means urban areas with large immigrant populations.
So although Vonage's marketing up to this point has been able replacing other landline services, the new value pitch is more nearly the "cheaper long distance" segment whose buyers might otherwise be looking at calling cards, dial-around or other ways of calling globally for less money.
The move highlights a perhaps under-appreciated aspect of the voice communications business. Though most executives think "voice is a commodity," and are right in most respects, an argument can be made that voice is not actually a "commodity" in a classic set, but rather a set of "commodities," or perhaps not a classic commodity at all.
Sugar, salt and flour generally are classic commodities. But sugar is not a substitute for salt or flour. In that sense, mobile communications is not generally a substitute for landline voice, a business phone system, PC-to-PC communications or texting, though in some ways each of these modes is partially a substitute for each of the others.
Even email, surely something most people would say is a commodity, is not completely so. Mobile email is a different product than Gmail, or else everybody would be using mobile email. The point is that the mode of consumption, the cost of consumption, the places and time where consumption occurs, as well as the essential required features for successful use, are not so substitutable as to make all of them fully interchangeable commodities.
And the point of that observation is that industry proponents sometimes do not work hard enough at understanding the real differences that make each of these modes and use cases "different products." Which is to say, no commonly interchangeable commodities.
The point at hand is Vonage's new marketing pitch. True, for some users Vonage is a substitute for legacy wired voice service. For others, it is a substitute for long distance calling, calling cards, callback service or dial-around.
To say voice is a scale or volume business, a low-margin business or even a "bulk" business is one thing. To say it is a "commodity" business might be more correct within a single segment or use case. It is wildly incorrect across the full range of use cases that "voice" now represents.
Some might point out that short message service (text messaging) is a distinct business. Others will say it is part of the mobile voice business. Some might say it sometimes is part of the mobile business, and sometimes a "PC-initiated" and "mobile terminated" business.
If such opinions can exist, it is confirmation of the "non-commodity" (in the sense of non-interchangeability) nature of the business.
That isn't to say differentiate is easy. It is hard. But to argue it cannot be done, because voice is a commodity, is off the mark. That isn't to say it is easy to differentiate without obtaining scale. Providers might rationally choose not to differentiate. But that is different from arguing "they cannot."
Sometimes the insight that leads to an assault on a new market is to discover the new market hidden in the weeds of an older and established market. Incumbents in the mobile phone market have dismissed the Apple iPhone simply because the volumes of devices shipped by the leading players is so overwhelming.
Though it is less often said, the same sort of dismissal could be aimed at Android, the open-source operating system under development by Google and 30 or so other partners.
And it's hard to argue with that perspective. Unless you dig in the weeds and reimagine a market. If one looks at smart phone (perhaps more aptly described as mobile PC or mobile Web device)penetration, it is still quite low.
Looking just at smart phones, which have low penetration, the market volume to be shared by all players is still quite small, so the market share doesn't have nearly the same meaning it would in a large volume market.
"Smart phones" or "mobile Web" devices or "conference in a pocket phones" or "email in a pocket" phones remain a developing market, not a saturated market. So new players still have a shot of ultimately achieving significant influence and share, no matter how small their efforts might appear if the market is defined as "mobile phones."
Hughes de la Vergne, Gartner analyst, estimates that even powerful Symbian has just two to three percent share of the U.S. smart phone operating system market, for example.
But that's just the U.S. market. The numbers certainly look daunting just about everywhere else.
Tuesday, February 12, 2008
"The research clearly indicates a great opportunity for service providers to target SMEs," says Alf deCardenas, Nortel general manager.
The research conducted by Ronin Corporation involved surveys of some 900 SME and enterprise decision makers across the United States, France and the United Kingdom.
Among other findings, the research found that SMEs are more likely to go to service providers than resellers for voice hardware and Internet services. The ability to make phone calls over WiFi and cellular networks using a dual-mode phone is the service SMBs are most likely to consider for implementation, followed by Web services like click-to-connect and converged desktop applications that allow them to easily control calls from any cellular phone using a laptop application.
RIM says no messages were lost during the incident, which caused intermittent delivery delays. No explanation for the outage has been given.
Outages of this sort are the reason many of us are giving more thought to backup and redundancy strategies. On a recent business trip, for the first time in my life, I accidentally left my laptop at home, and was going to be gone for 14 days. True, I had the BlackBerry and another mobile as well.
But in my line of work access to the Web is arguably more important than either of those two sorts of devices, as important as they are. Because of Google Documents & Spreadsheets and Google Broswer Sync, I was able to keep working using public terminals and loaned machines, with access to Microsoft Office.
I also learned to live without access to Outlook for a bit. The BlackBerry helped, of course. The lasting change so far is that I have kept using Google Documents more than I have in the past. That's why sampling is so important. Behavior can change.
One more sign: Netflix is going to stop carrying titles in the HD DVD format.
Netflix has stocked both Blu Ray and HD DVD titles since 2006. But all HD DVD discs will be cut from their inventory by the end of the year. Netflix also has stopped adding new HD DVD titles to its inventory.
Blockbuster last summer had made a similar decision.
The format victory is a surprisingly rare event for Sony, which developed and has pushed for Blu-ray. In prior format wars it has lost, fairly consistently. It backed Betamax, but lost to VHS.
So go ahead and buy a Blu-ray HD DVR. It's the winner.
About 35 percent of Belgian households no longer possess a fixed line telephone and another 28 percent are prepared to give theirs up if there is a good alternative, some researchers have found.
Monday, February 11, 2008
The measure was cleverly worded, saying it would lower the telephone tax rate from 10 percent to nine percent, but extend it to "a wider range of telephone-like technology and allows the city to tax the routing of voice, audio, video, data or other communication information transmitted through fiber-optic coaxial cables, power lines, broadband, DSL or wireless systems.”
The city has been taxing local access services since 1967. Further legal challenges are likely.
"Change," in this case, might not be anything like the notion of "transformation." The reason is that adoption still is driven by traditional buying decision triggers, such as equipment end-of-life, lack of capacity, business partnerships, and internal IT initiatives, In-Stat says.
The issue is whether adoption of unified communications necessarily entails "transformation" or whether it merely leads to "change," albeit changes that lead to more efficiency.
And some survey findings suggest there is less transformation going on than one would think, though efficiency arguably is higher. Less than 33 percent of businesses using IP communications currently use unified collaboration and unified messaging applications, In-Stat says.
As its name implies, the N96 is the successor to the N95, Nokia's former high-end device. The dual slider device comes with 16 gigabytes of internal storage, plus a microSD slot, something the N95 8GB lacks. Like the N95, the N96 retains the
5-megapixel autofocus camera with Carl Zeiss Tessar lens.
But "flash" support is improved by the use of two LEDs to provide lighting. There is an integrated DVB-H mobile TV tuner. As audio support on the N95 was robust, we would expect the same from the N96.
On such a device one would expect Wi-Fi support and global positioning satellite capabilities, and both are included. The N96 is supposed to launch in Europe in the third quarter this year.
The acquisition further reinforces the importance Microsoft attaches to the mobile computing space.
Nokia touts the venture as the first global mobile ad network of top tier publishers. There is no doubt a story here: First, that advertising is becoming part of the revenue model for the mobile business. Second, that handset providers are carving out new space for themselves in the value chain. Third, that mobile handset manufacturers and service providers now are in the media business.
Google isn't going to have this market to itself.
Namely, two free hours a day of Wi-Fi access at Starbucks. Additional hours will cost $3.99 for additional two-hour chunks of time.
Under the earlier plan with T-Mobile, Starbucks customers needed a paid subscription to access the in-store Wi-Fi service.
Users also will have a choice of monthly subscriptions costing $19.99 that will enable access to other AT&T hot-spot locations in addition to Starbucks.
At&t broadband customers will be able to surf at the more than 7,000 Starbucks locations in the U.S. for free, as well. The new Wi-Fi partnership is expected to be introduced gradually at Starbucks locations this spring.
So seating is going to be harder to get, and access more congested. It's still a great deal.
The Xperia X1, which it says is the first new brand to come from within Sony Ericsson, is the first device to use Windows Mobile 6.
The X1 handset is designed around media player applications and Web browsing and features a full QWERTY keyboard.
If one then decides to deliver all on-demand programming, one needs a switching infrastrucure, and then must make some assumptions about simultaneous peak viewing. Will a typical user, at the peak viewing hour, want to watch one feed, two feeds or three, keeping in mind that one of the feeds might be recorded for later viewing while a second is actively watched.
The Internet access portion of the planning exercise is more murky, but still hinges on video behavior. If business logic allows it, users might be able to stream video, even HDTV video, over IP connections. Whether this bandwidth is of the "public Internet" type or the "walled garden" type is less important, in some sense.
Assuming there is a revenue model, how much bandwidth must a service provider be able to provide? Whatever end users may think, a service provider will deliver bandwidth in amounts that allow it to make money, and no more.
So asking how much bandwidth users may want is probably less important than how much they are willing to pay to get that level of bandwidth. And so far, few users seem to have shown a willingness to spend hundreds of dollars to get symmetrical bandwidth, whether that is a T1 connection or a 50 Mbps symmetrical service from SureWest Communications.
To use the old but useful analogy, all of us might enjoy driving a Lexus. But not all of us do. We solve our transportation problems, but not always with a Lexus. In principle bandwidth ultimately will represent that sort of choice as well. Just about anybody can buy a T1 connection today. But not all businesses do so, and few consumers do so.
Granted, the bulk of consumer bandwidth requirements still will remain of the asymmetrical sort (barring a massive switch to peer-to-peer), so symmetrical bandwidth might not be the best analogy.
Still, the question remains: how much bandwidth will consumers pay for? "Need" is it that sense a subsidiary question. There's no question typical consumers are showing a clear preference for paying more for higher bandwidth.
The issue is the elasticity of that demand as service providers start to move into the "scores of megabits" range, and then contemplate bandwidths an order of magnitude higher than that (100 Mbps or more).
If one looks simply at the price-per-megabit, users have shown a wide willingness to pay $50 to $100 a month for unrestricted use of 200 Mbps to 500 Mbps of linear video (with implicit quality of service assurances).
They likewise have shown high willingness to pay $50 a month for a few megabits to several megavits per second of interactive Internet access bandwidth in the downstream direction, with no quality of service assurances.
Assume that most also have been willing to pay $50 a month or so for a wireline voice connection and you are looking at $150 to $200 worth of monthly revenue for services offering several hundred megabits-per-second of downstream bandwidth, plus services on top, using a highly asymmetrical network.
That does not leave lots of headroom for networks that deliver more symmetrical bandwidth (scores of megabits per second in the upstream and hundreds of megabits per second for linear and on-demand video plus 100 Mbps for interactive applications).
In the consumer markets, the rule of thumb has been that $10 a month of incremental spending is a big deal. Still, shown a value proposition high enough, even $50 a month in incremental spending now has become fairly commonplace.
So the issue might be more "how much will consumers pay?" rather than "how much bandwidth will they need?", as important as that question remains.
There always are trade-offs engineers can make: bandwidth versus processing, processing versus storage, non-real-time versus real time, bandwidth versus image quality and so forth.
Ultimately, consumers are going to drive access bandwidth with their wallets.
So the issue is whether Sprint will "go nuclear," unleashing some sort of market-disrupting attack it expects its competitors will not want to match. Its a risky gambit, to be sure. AT&T completely changed the basic way mobile voice minutes of use are packaged when it launched "Digital One Rate."
But the tactic has not had long-term differentiating value because all the other major carriers simply shifted their packaging to match. So Sprint has to find a proposition that is startling and compelling to end users, but not appetizing for the more dominant providers to mimic quickly.
If the attempt is to "drive sales through the roof," nothing short of a disruptive move will work. Some suggest "unlimited calling" is one such tactic. Some smaller wireless providers such as Leap Wireless have prospered by offering unlimited local mobile calling. In so doing Leap and others have carved out a definable niche in the "wireline replacement," value calling and ethnic market segments.
There is some thinking that unlimited calling on at least a continental basis might be the same sort of market-shaking move, eliminating the "what is the right bucket size?" decision every consumer has to make, and transforming what is still a service sold on the basis of "scarcity" into a service whose premise is "abundance."
In some sense, Sprint CEO Dan Hesse actually has to hope that such an assault really would drive call volumes through the roof. Because if Sprint can do so, and its relatively generous spectrum will support the additional traffic, some other key competitors--especially Verizon and at&t--might not be able to quickly turn up additional bandwidth to match the offer.
And that's the other part of the equation. The offer must shake up user perceptions of value compared to price, as did Digital One Rate. But the offer must challenge Sprint's competitors enough that they will not immediately respond.
And at some level this is a nuclear strategy in an operational sense: if Sprint moves to provoke a non-linear increase in voice usage, can it handle the load? More important, can Sprint's competitors handle increases of the same magnitude if they decide to respond to the offer.
Likewise, there is the financial angle. If competitors match Sprint's offer, what is the level of damage they sustain in average revenue per minute of use, or average revenue per user? How does Sprint price and package so a direct competitive response is too painful to contemplate?
If Verizon and at&t can't match the offer without losing more than they gain, they won't match the offer. And if they won't, Sprint gains the distinctive positioning it seeks.
"Going nuclear" is going to be dangerous. But the only thing more dangerous at this point is thinking Sprint somehow can "creep" its way to success. The issue is where "unlimited calling" is, in itself, destabilizing enough to achieve what Sprint wants.
My sense is that it would not. Leap Wireless already offers a plan that is for most users a "national unlimited calling" plan, for about $50 a month. But there are other angles.
Unlimited texting or Web access might be more attractive. If Sprint really wants to disrupt the market, it can do something about texting plans.
"We do business in an increasingly mobile environment," says Marie Wold, OnRelay president. "Fifty to 70 percent of enterprise voice minutes are already mobile."
Her conclusion? "Landline office phones are simply a waste." In fact, her argument is in some ways similar to the argument proponents of hosted services and cloud computing take: that the public and private IP networks now are robust enough and easy enough to use that remote provisioning makes more sense.
In this case, using mobile networks in place of in-building wiring is seen as a better way to provide desktop phone equipment, at the same time avoiding the expense of new IP phones and upgrades to corporate networks to handle voice.
"An enterprise deployment of 10,000 IP extensions includes a large hidden cost of LAN switches, routers, cabling and power supplies required to support the IP voice traffic," says Wold. "Of the staggering $15.8 million total cost of the IP telephony deployment, 80 percent is related to the desk phones and corresponding LAN upgrades."
Wold argues that most, if not all, employees can manage their office communications equally well or better with just their mobiles.
Which brings up an interesting question: to what extent are fixed-mobile convergence" projects less about "converging" and more about "diverging." In other words, though FMC can be pitched as a "convergence" of wireless and wireline networks, by allowing wireline access to substitute for mobile network access, in practice such "convergence" really leads to wireless substitution.
One can argue that the lower calling costs possible when a mobile handset is able to send and receive messages using a wireline-attached base station of some sort truly is a form of convergence. One might argue it is another form of substitution. The attempt is to stimulate use of mobile minutes from indoor locations, provide better quality when doing so, and decrease network-related operating and capital costs. All of those objectives are praiseworthy, but are not actually "convergence" moves. They are about mobile substitution.
Even when a "fixed line only" operator begins deploying mobile handsets to compete with mobile service providers, that s less a case of "convergence" and more a case of trying to grab some mobile market share while ensuring a continued viable role for the terrestrial broadband network.
"Fixed mobile convergence" has been touted as a way to create new services that unify experiences between wireline and wireless domains. But it seems more likely that divergence is the more likely result, so long as the focus is on calling prices and access networks.
Matters arguably are different in an enterprise scenario, where the seamless availability of applications on desk and mobile handsets, rather than calling cost or end point choices, would seem to be the driver. But as OnRelay argues, one has to integrate desk phones and mobiles only if one insists on using both types of devices on a wide scale. If one goes with a wireless tail, there isn't much need for "convergence."
FMC might be one of those significant detours the global telecom industry takes now and then, in a well-intentioned effort to create next-generation services. At some level, it makes sense to unify services across end user devices. But that makes most sense when assumes the existence of multiple classes of highly-deployed end points.
Over the longer term, it probably will happen that FMC winds up being less important as a way of "integrating desk phones and mobiles," and more important as it refers to making Web-based and server-based applications available on mobile devices. In the future, it might be more important to unify application access on all sorts of mobile and fixed "Web capable" devices than to unify mobile and fixed voice appliances.
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