Tuesday, March 31, 2009

Ribbit Announces KillerApp Winners

Ribbit has announced the winners of its "KillerApps" challenge, a contest for developers of new applications using the Ribbit voice platform.

Lucid Viewer won the "Media, Advertising, Entertainment" category for its authoring tool that allows developers to create immersive experiences. The tool allows users to call up stores directly from a Flash interface, such as a three-dimensional view of a street in Rome, Italy. Lucid Viewer also won the Grand Prize in Ribbit's KillerApps contest.

Sugared Frog won the "Business" category, with an app that integrates SugarCRM's open source solution with Ribbit voice apps. Sugared Frog allows users to organize their voicemail, and dictate notes and memos right from their mobile phones.

Save A Life won the "Social Networking and Communication" prize by creating an Adobe AIR app that allows you to quickly reach a group of friends or community members by phone. Currently, the application focuses on blood donations, though the program could be used for other donation campaigns or emergency services as well.

CYHAA won the "Breakthrough" category. CYHAA, which stands for Control Your Home, Anytime, Anywhere allows users to control their smart home devices with their voice right from their phones.

Verizon and AT&T: No, Thank You, to Stimulus Funds

Verizon Communications Inc. and AT&T might very well pass on applying for any of the "broadband stimulus" programs, at least in part because of "strings" attached to the money.
Neither company is well placed to apply for the Rural Utilities Service portion of the funds targeted at rural areas, and access provisions might be unpalatable for the National Telecommunications & Information Administration grants. 


More Wireless Broadband Substitution Coming?

It is no idle speculation to consider that more users will look at wireless broadband substitution as downlink speeds rise into the 50 to 60 Mbps range in the near future. And Verizon might be thinking along those lines itself, though mobile providers without wired assets to cannibalize have been more aggressive, so far.

There is speculation Verizon will introduce such a router at CTIA this week.

Zer01 Plays the "Interconnecting Carrier" Angle

Some observers might wonder how the new mobile service created by Zer01 is different from existing applications that provide VoIP calling over a mobile handset. Recently, Skype for Apple iPhones has gotten lots of attention, for example.

“I do not really see any comparison to the Zer01 value add here,” says Mark Richards, Pervasip CIO. Pervasip provides the underlying network, billing and customer care for the Zer01 effort.

The Skype calling feature uses a Wi-Fi connection, not the AT&T data network, and can require per-minute calling charges, where Zer01 uses an IP wide area network and a GSM wireless network for access.

And Richards argues there is a difference between an downloaded application running on top of a mobile operating system, and a native application. “To run VoIP over GSM is stodgy,” Richards says. “It is not simple.”

One problem is that the downloaded app is always contending for processor resources. To run a VoIP path on top of the OS, rather than natively on the phone, compression and decompression is required, and that uses processor resources.

Calling gateways is more complex, so there is some kind of inconvenience, he argues. “I have not yet seen a seamless desktop process that really changes habits,” says Richards.

United Technologies Group has developed a mobile application that seamlessly sits on the cell phone and takes over a phone’s dial pad by replacing it with its own, Richards notes.

The other great confusion is over the business model. To date, many firms that do not own their own mobile networks have operated as mobile virtual network operators, leasing wireless capacity and services on a wholesale basis, and then selling at retail.

Those of you familiar with the “unbundled network element-provisioned” (UNE-P) model will see the similarity. An MVNO or UNE-P reseller essentially is engaging in price arbitrage.

The difference here is that Pervasip is a licensed carrier. It has the legal right of interconnection with other carriers. So Zer01 essentially and simply interconnects with GSM mobile providers around the world. It is not a reseller of their services.

Private Interests, Public Purposes

For every public purpose, there is a corresponding private interest.


Monday, March 30, 2009

VoIP Revenue Will Grow 20% in 2009, IBISWorld Says

Telecommunications and internet related services are now so ingrained in the daily lives of businesses and consumers that they will hold up relatively well compared to other areas of the economy, say analysts at IBISWorld.

"One shining light will be VoIP, which competes on price against more established service providers," the firm says. "Consumer substitution from wired telecommunications to VoIP will accelerate but a weaker economy and lack of available finance will result in many smaller VoIP providers exiting the industry."

VOIP revenue is expected to grow 20.1 percent in 2009.

Wireless Providers to Collaborate on Marketing "Best Practices"

The Mobile Marketing Association says the four largest U.S. wireless service providers--Verizon Wireless, AT&T, Sprint, and T-Mobile USA-- have agreed to coordinate their mobile marketing guidelines with the MMA’s "best practices" guidelines. This industry-first agreement is intened to produce a dramatic reduction in the costs of launching mobile marketing campaigns, faster time to market for campaigns and improved consumer satisfaction by improving the consistency and efficiency of mobile marketing campaigns across the four major U.S. wireless service providers.

In addition to the four largest U.S. wireless service providers, major aggregators, brands and content owners includingVeriSign, Neustar, Limbo, and Thumbplay are supporting the process.

The agreement is expected to enhance efficiencies in running short code programs, accelerate the time to market for mobile campaigns, ensure monitoring programs and audit results are more consistent and reduce operational costs across the mobile marketing ecosystem.

Cox Communications Plans CDMA, LTE Networks

Cox Cummunications is moving ahead with its plans to build an in-region moble broadband network using CDMA, the same platform used by Verizon Wireless and Sprint Nextel. Cox is said to be thinking more along the lines of Long Term Evolution for its fourth-generation network.

Huawei Technologies Co. says it has been selected to provide its end-to-end CDMA solutions and services to Cox Communications. Cox, the third-largest cable provider in the United States, will launch its new 3G wireless network utilizing Huawei’s LTE-ready SingleRAN solution and industry-leading 3900 Series base stations, Huawei says.

Cox might rely on its partnership with Clearwire or Sprint for out-of-region roaming. As Sprint's national network uses CDMA, it makes sense to rely on the Sprint network rather than WiMAX for out of region coverage.

Sunday, March 29, 2009

Addressing "Sustainability" of NTIA Broadband Stimulus Projects

The problem many applicants must face in crafting projects under the National Telecommunications & Information Administration portion of the American Recovery & Reinvestment Act ("stimulus bill") are the conflicting objectives.

The "broadband stimulus" portion of the ARRA is supposed to create jobs. Broadband is almost a secondary objective. The projects are supposed to have "measurable" goals. But economists aren't sure whether new broadband facilities actually create--or destroy--jobs.

All funds awarded under the NTIA program must be spent in two years, so are temporary, but the ARRA ideally expects "sustainability" of the projects once federal funding ends.

Nobody yet knows what "under-served" means, so many projects might actually be proposed in areas where there are two wired services providers as well as two satellite providers, plus three mobile broadband providers. Lots of people are "under-served" not because of lack of access to facilities but for some other reason: lack of interest, lack of knowledge, equipment or money.

Most people think the Rural Utilities Service portion of the program will address rural areas. But an argument can be made for rural programs under the NTIA rules that actually have a route to "sustainability" and "job creation" on a permanent basis.

That route is funding rural call center operations. NTIA funds can be used to create facilities, either "at home" or perhaps at new call center facilities, with monies used to train rural residents.

The sustainability of the jobs and connectivity once the NTIA funding runs out are provided by the call center operations. Since NTIA projects have a stated preference for education and job creation, proposals should be submitted by community colleges and state job training agencies, in conjunction with service providers that can provide the connectivity and equipment.

The objective would be to deliver a turnkey "call center" capability ready to be used by any firm requiring such capabilities.  It's a thought.

Saturday, March 28, 2009

Long Tail Yes, But Perhaps Not What You Were Expecting

In recent years much has been made of the implications of the "long tail" theorem, the notion that digital technology, digital goods and the Internet make possible a vast shift of commerce from the few large firms in any category to many hundreds to thousands of other firms.

Search market share indicates that the basic underlying theorem, the Pareto Principle, commonly understood as the "80/20" rule, does indeed operate.

But not in the ways some might predict. There is a search long tail, with four providers at the head of the curve, and then several score other smaller providers forming the tail.

Unfortunately, it does not appear that market share is much different from what might predict for physical goods. In search, as elsewhere in life, 20 percent of providers have 80 percent of the market share. In this case, a few percent of providers have 99 percent share.

Friday, March 27, 2009

TV Still Dominates "Three Screen" Viewing

TV Continues to represent 99 percent of viewing on all screens, according to the Council for Research Excellence. Contrary to some recent popular media coverage suggesting that more Americans are rediscovering "free TV" using the Internet, computer video tends to be quite small with an average time of just two minutes (a little more than 0.5 percent) a day.

Despite the proliferation of computers, video-capable mobile phones and similar devices, TV in the home still commands the greatest amount of viewing, even among those ages 18 to 24, the Council says. This appears to refute a common belief that Internet video and mobile phone video exposure among that group (as well as the 25 to 34 cohort) were significant in 2008.

Consumers in the 45 to 54 age group average the most daily screen time (just over 9.5 hours). The study also found the average for all other age groups to be "strikingly similar" at roughly 8.5 hours

Even in major metropolitan areas where commute times can be long and drive-time radio remains popular, computer use has replaced radio as the second most frequent media activity. Radio is now the third most popular media format while and print media ranks fourth.

Live TV led all video usage by a large margin, followed by DVDs, with DVRs third.


Social Networking Overtakes Email

Internet activity patterns are changing, according to Nielsen Online. In the past, email has been the "killer app" for Internet users. More recently, search replaced email.

These days, email has been eclipsed by search and social networking.

Two thirds of the world’s Internet population visit a social network or blogging site and the sector now accounts for almost 10 percent of all Internet activity time. "Member communities" have overtaken personal email to become the world’s fourth most popular online acivity after search, portals and PC software applications, Nielsen says.

The total amount spent online globally increased by 18 percent between December 2007 and December 2008. In the same period, however, the amount of time spent on member community sites rose by 63 percent to 45 billion minutes,  and on Facebook by a massive 566 percent, says Nielsen, growing from 3.1 billion minutes to 20.5 billion minutes.

"The staggering increase in the amount of time people are spending on these sites is changing the way people spend their time online and has ramifications for how people behave, share and interact within their normal daily lives," says Nielsen.

Consumer engagement within social networks has the potential to change the way consumers are targeted, not just through the digital medium, but through all forms of traditional media, Nielsen adds.

According to Nielsen Online, more people in the United States, Australia, Brazil, France, Germany, Italy, Spain, Switzerland and the United Kingdom are using social networks and blogs than email. Where 85.9 percent of respondents say they use search, 65.1 percent say they use email.

In addition, time spent on social networks and blogging sites is growing at over three times the rate of overall Internet growth.

Thursday, March 26, 2009

Expect Upwards of $29 Billion in Fraud, Waste from Energy Dept. "Stimulus" Spending

When was the last time an infrastructure project--any infrastructure project--really was better because spending was rushed?

Based on rates of fraud already encountered by the Department of Energy, one might expect a 17.5 percent rate of fraud and waste, at minimum, for funds disbursed as part of the "stimulus" spending authorized by the American Recovery and Reinvestment Act.

According to Energy Department Inspector General Gregory Friedman, the $165 billion in stimulus cash to be distributed by the Department so dwarfs the annual Department budget of $27 billion that the resources of the agency for getting the money spent while avoiding fraud and abuse will be sorely tested.

In the last four fiscal years the Department of Energy investigations into misspent federal funds have resulted in about 150 criminal convictions, and fines and recoveries of more than $190 million. This represents a little over 17.5 percent of budget money, and suggests the Energy Department can expect more than $29 billion in waste and fraud just within its slice of the stimulus pie.

Friedman's memo acknowledges that low income home weatherization is the program most at risk for fraud, so if you intend to be working on projects of that nature, expect a lot of extra paperwork and figure your bid overhead accordingly.


Less Churn is Sorta Good, Sorta Bad

At home entertainment is up, while almost anything outside the home is down, a survey sponsored by the Cable & Telecommunications Association for Marketing suggests.

Industry executives--both telco and cable--have been saying that with housing starts down and housing activity down, so are home moves.

Ironically, that has made it harder to attract new customers, as moving automatically creates a "change event" that opens the door for new providers.

The CTAM survey also suggests there is less appetite for trying new providers. So all those customers who aren't moving, also are less likely to churn. Lower churn is good. But some amount of churn also represents a sales opportunity.

Service providers in the small and medium business space note a roughly similar trend: people are less inclined to take on some amount of additional risk by switching current providers.

Another Take on "Cocooning"

One reason video entertainment services fare relatively well in a recession is that the perceived value of in-home entertainment increases.


Global VoIP Growth Slows

Global growth in local VoIP minutes seems to have slowed down a little, say researchers at iLocus. There was a sequential growth of seven percent in local VoIP traffic from the third quarter of 2008 to the fourth quarter of 2008, apparently caused by a decline in the rate of VoIP subscriber growth.

International long distanceVoIP minutes, on the other hand, experienced negative growth quarter over quarter. "This is perhaps due to the overall decline in international long distance traffic in the fourth quarter of 2008, iLocus says. The negative growth also could be due to slight bit of consolidation in the service provider segment, as well. National long distance minutes saw a healthy growth rate owing to the growing use of IP networks by wireless carriers to transport NLD traffic, iLocus says.

In the fourth quarter users consumed 107. 2 billion local minutes, 298.1 billion national long distance minutes and 22.5 billion international long distance minutes.

Wednesday, March 25, 2009

Don't Assume A Return to Normal

There's a reason for voice, data and video entertainment providers to be obsessive about how their consumers are behaving during the current recession. Presenting a customer with a chance to switch, to change behavior, is dangerous because the changes, once integrated into daily life, can become permanent.

"Don't assume a return to normal," John Quelch, Professor of Business Administration at Harvard Business School, warns. "The longer and deeper the recession, the more likely consumers will adjust their attitudes and behaviors permanently."

"Their coping mechanisms may become ingrained and define a new normal." More than that, the competitive landscape likely will have changed as well. One would expect to see mergers, acquisitions, company failures and launches that mean the post-recession market looks different than the pre-recession market.

That means buyers might be looking at all product offers with new eyes.


FCC Asks for Advice on "Broadband Stimulus" Rules

The Federal Communications Commission is asking for comment on how to distribute broadband funding under the American Recovery and Reinvestment Act of 2009, commonly known as the "broadband stimulus" program.

The FCC has already established a separate docket for parties wishing to comment generally on a rural broadband strategy (GN Docket No. 09-29). The FCC now is seeking comment as part of its consultative role with the National Telecommunications and Information Administration (“NTIA”) and the Department of Agriculture’s Rural Utilities Service (“RUS”), the agencies that actually are charged with disbursing the funds.

The FCC specifically is seeking comment on five core terms and concepts:

The definition of "unserved area;"

The definition of "underserved area;"

The definition of "broadband;"

The non-discrimination obligations that will be contractual conditions of the Broadband Fund Opportunities Program ("BTOP") grants; and

The network interconnection obligation that will be contractual conditions of BTOP grants.

Comments are limited to these five specified items and are due on April 13, 2009 and should be submitted in GN Docket No. 09-40.

The comment period extends to April 13, 2009. That implies that no final rules can be issued by NTIA or RUS until May, since NTIA and RUS staffers will require time to read and digest the new input.

That in turn means the first third of the funds, which by statute must be released before the end of June, will require submission and awards over a roughly two-month period, at best, by agencies which never before have had to process, much less award, so much money in such a short time frame.

For better or worse, that suggests projects in the first round will be weighted to providers with enough "track record" that NTIA and RUS can reduce the risk of making awards to applicants that are not well placed to execute, that may squander the money or that may prove otherwise embarassing when later oversight reveals what actually happened, or didn't happen, with the awarded funds.

And though most observers probably think the funds are supposed to lead to deployment of new facilities, the statute is part of a "stimulus" package that is supposed to create jobs in the near term. That could lead to a situation where projects actually do not create facilities or make better use of facilities but rather mostly can be pitched as projects that create jobs related to those facilities and use of facilities. "Training" or "education," in other words, might play a bigger role than some think.

That isn't necessarily a bad thing if one assumes that a great deal of non-use is related to people not understanding what they can do with broadband and the Internet, or non-use by people who think they understand what they can do, but don't feel too comfortable using computers and software.

Permanent Changes After Recession?

It isn't yet clear how changes in consumer use of communications and entertainment might change on a more-permanent basis once the recession is over. So far, there has been little tangible evidence of significant behavioral change.

About the only measurable change I've been able to find is an increase--by about one percent--of mobile users on prepaid, rather than postpaid, wireless plans.

There might be more-permanent changes in the business market, though, such as wider adoption of open source software.


Tuesday, March 24, 2009

Mobile Media Gains U.K. Ground

Some 81 percent of U.K. mobile media users access mobile media once a week with strong at-home, public transport and around town consumption, says Orange.

As you might expect, mobile is viewed as the most innovative and personal media channel compared to all other traditional and digital channels, Orange says.

Mobile media usage patterns differ greatly depending on a consumer's location, with the strongest usage of mobile media being in the home, where 67 percent of participants who used their mobile for email did so in their home and 56 percent used a mobile at home for mobile Internet browsing.

The average age for mobile media users is 36, and 81 percent of respondents said they use mobile media more than once a week, with 46 percent using it daily.

Men generally use mobile media more, although women are much more likely to use picture messaging.

The mobile internet pages viewed most often are search engines, email, news, music and film although, interestingly, a high proportion (55 percent) of people browse the mobile Internet with no specific agenda.

Mobile media users are very much open to mobile marketing, Orange maintains, with 70 percent of participants attracted by interactive marketing formats, with the most-popular forms of mobile marketing being click-through advertisements and voucher redemption codes.

Recession Barely Touches Cable Modem Subscribership

Only two percent of cable modem households report that they are "somewhat" or "very likely" to cancel their cable modem service in the next six months, a new study sponsored by the Cable & Telecommunications Association for Marketing suggests. Nearly 95 percent of cable modem households surveyed report that they plan to retain their cable modem service, despite current economic conditions.

Cable TV service likewise is showing similar strength despite the economic downturn, the study suggests. In fact, cable households have become more loyal to their TV service over the past three months, the study suggests. About 81 percent of respondents who have cable TV service or digital cable TV service report that they are "not at all likely" to cancel their cable TV service, compared to November 2008, when 71 percent of respondents indicated a similar certainty about keeping cable TV. In November 2008 just 77 percent of respondents with digital cable TV said they were so certain.they would keep digital cable.

One might draw several conclusions from the survey results. First, one might say that broadband Internet access now is a foundation service for users who buy it. Second, one might conclude that the traditional resilience of core communications and entertainment services has not changed in the current recession, the first where there has been mass adoption of wireless and broadband Internet access services.

Overall, lifestyles and buying habits are changing, though, the study also finds. Consumers report being likely to spend more time at home watching TV (35 percent) and less time doing activities outside the home. That "cocooning" suggests one reason why broadband and television might be so resistant to economizing moves.

More than half of U.S. households currently report doing less shopping (53 percent), eating out less (52 percent), going on fewer vacations (51 percent) and attending fewer concerts and theatre performances (50 percent) because of economic conditions.

Content is Not Always King, But "Sunday Ticket" is Close

But sometimes it makes a huge difference.

As part of a new four-year, $4 billion deal struck between DirecTV and the National Football League, DirecTV "Sunday Ticket" subscribers will now also have the option of getting any game streamed to their laptops.

It is the first time the NFL has licensed the online rights to its games. DirecTV says streaming will begin “no later than 2012."

The NFL, though, also won the right to create a new channel called “Red Zone Channel," to be launched in the next couple of years, that shows real-time highlights of NFL games that will be distributed on multiple media, including cable, satellite, online and mobile.

DirecTV executives have been adamant about retaining their exclusive deal for out-of-market games, believing (correctly) that in this particular case, exclusivity allows it to lure subscribers away from cable and other satellite TV companies.

Sports programming continually is cited by cable operators as a primary reason for continual rate hikes. The new NFL deal is more of the same, on that score.

Still, DirecTV does have a point. The only reason this particular subscriber would choose DirecTV over FiOS (someday soon that will be an option) is "Sunday Ticket."

So content might not be king. Some of us would argue, looking just at the amount of money consumers and businesses already spend, the communications is king. Still, content, if not king, can in some cases swing a subscriber choice from one provider to another.


Monday, March 23, 2009

Why "Net Neutraliity" is a Bad Idea

If no Internet service provider can give preference to any streams or protocols, it is not possible to create a service a user actually does want: the ability to give preference to voice streams when on a Skype call or conference, when watching a webcast or a movie.

It is understandable that some advocates worry about ISPs giving preference to their own streams over others. News: they already do. It's called "cable TV." The issue is whether an end user can prioritize certain protocols at certain times, to optimize their own experience.

Strict net neutrality, which allows no prioritization, or minimal traffic shaping to maintain overall user experience when a very small number of users are straining a network, also will prohibit any other "user friendly" forms of prioritization.


Seattle Weighing Own FTTH Build?

The city of Seattle seems t be pondering building and perhaps even operating its own fiber to the home network. Planners think such a network, offering speeds of perhaps 25 Mbps, might ultimately get 24 percent market share.

That certainly is within the realm of possibility, though lots of executives with experience in the overbuilder business, where a network competes against both a telco and a cable company, might point out that the business case is tough without the ability to offer both voice and video services.

A full FTTH network with on-going revenues from access alone might be very difficult.


Mobile Access Less Strategic, Vodafone, Telefonica Signal

Telefónica and Vodafone have confirmed wide-ranging plans to share mobile network assets--starting with tower sites--across Europe.

As part of the collaboration, Telefónica and Vodafone also are actively exploring opportunities to cooperate in related areas such as the provision of transmission services, which would extend sharing to radio capacity as well. The companies will share mobile network assets in four European markets where both have operations - Germany, Spain, Ireland and the UK - while discussions are ongoing to extend the agreement to a fifth market, the Czech Republic.

The joint building of new sites and or consolidation of existing 2G and 3G tower sites, with one site housing the equipment of both companies where previously two would have been used, is expected to lead to a significant reduction in the total number of towers in operation.

The move also suggests a perception of where value lies. Towers are deemed not to be strategic, though required, and radio resources, though likewise required, might not offer much end-user value either. That tends not to be as true for more-expensive wired infrastructure, where most executives with the ability to do so tend to prefer exclusive use of their own facilities, essentially forcing would-be competitors to undertake their own expensive construction projects.

The proof point here is what has happened in markets where robust wired network wholesale access has been enforced. In such markets, incumbents tend to lose huge chunks of market share while end user prices fall dramatically. As good as that is for consumers, it is problematic for service providers.

For that reason, regulators are being much more cautious about extending current rules for copper access to new optical access, taking care to ensure that investment opportunities are attractive enough to fund such networks.


How Much More Can be Wrung from DSL?

Ericsson engineers have demonstrated in the lab a way to bond together six unshielded copper wire pairs to push 500 Mbps about 500 meters. The technique is promising for the same reason all such technology developments are: they suggest it is possible to wring yet more performance out of a widely-deployed infrastructure that has some real-world performance limitations.

That doesn't mean the lab performance easily can be ported to a real-world environment. For starters, lab tests are not encumbered by all the messy real-world complications. Real-world access plant faces hazards such as squirrels, moisture ingress, corrosion and electromagnetic interference from other services that might be running inside the same cable bundle.

The other practical limitation is that most consumer locations might not have six available spare pairs to use. On the other hand, as fewer people use landlines, there theoretically are more unused pairs to tap. It's a messy process, though, and likely would require installing new drop cables and resplicing the drops to the distribution wiring. That sort of heavy craft work isn't so interesting for any service provider that might contemplate trying to introduce such a service.

On the other hand, in some urban markets in countries with dense housing, copper drops might be short enough that something could be practical, perhaps not delivering 500 Mbps, but still providing enough bandwidth to be quite interesting.

As often is the case, spot deployment seems more promising. Mobile tower backhaul, for example, could benefit, as the upside from deploying a relatively short length of new cable, when a suitable fiber node is available, could be quite helpful. Some enterprise locations also could benefit, much as these locations now do for "Ethernet-over-copper" technologies.

In the consumer market, at least in the United States, where loop lengths generally are longer than in Europe, bonding two pairs is much more practical. As always is the case when trying to market a service to the consumer market, varigated real-world physical constraints are important. Two pairs is typical. In some cases four pairs might be fairly standard. But four pairs might not generally be available everywhere in a region or city.

No question, any developments that increase DSL bandwidth are helpful. How helpful really "depends" on a variety of messy details.

Sunday, March 22, 2009

Big Gains Seen for SIP Trunking, Ethernet

Nemertes Research says 53 percent of respondents to a recent survey are evaluating, deploying or planning to deploy SIP trunking to reduce access costs and take advantage of new services for in-bound and out-bound call routing.

In addition, 62 percent are using, or planning to use, Ethernet as a WAN connectivity technology to reduce bandwidth costs, with 85 percent planning to increase Ethernet usage.

Cox Aims SIP Trunking at 20-99 Employee Segment

Cox Business will be rolling out SIP trunking later this year, aiming at the 20 to 99 employee organization, after introducing its hosted IP PBX service.


Saturday, March 21, 2009

Broadband Stimulus: Too Much Optimism About What Can Be Done

Hype is running far ahead of what can be done even when all of the broadband stimulus funds are awarded and projects deployed. Broadband access is a hugely capital-intensive process, especially for the last couple of percent of locations that are so remote, in areas so thinly settled, that nearly all the cost must be recovered from such a small number of potential customers.

Physics and demography, not lack of will, are the key problems. In an urban area, some forms of broadband can be deployed for less than $2,000 a location, and often for as little as $1,000 a location.

In remote areas, serving one location can cost $10,000 to $50,000. You can build your own spreadsheet to figure out how long it would take to break even on that sort of investment, when the customer is expected to pay $40 to $50 a month. Don't forget the cost of interest on borrowed money, operating costs, maintenance and repairs, as well as the need, at some point, to replace the entire infrastructure because of age.

There likely will be some incremental benefits. But the "problem" of access in rural areas, or the quite-different problem of "under-used" broadband, will not be solved. Not by a long shot.


Small Businesses Increase Web Spending, Shift Ad Spending

The smallest U.S. businesses have average annual sales of $212,000 and spend just $5,671 per year on advertising, typically in the yellow pages or on direct mail ads or on coupons, say analysts at Borrell Associates. But where small businesses used to spend four percent of their budgets online three years ago, they now are investing 11 percent of their advertising that way.

And there's a shift of thinking occurring as well. SMB executives are blurring the lines between what’s advertising and what’s not. They consider whatever they spend on their own Web sites to be “advertising,” though in actuality that spending is a technology, design and telecommunications expense, Borrell Associates notes.

When marketing professionals were asked in which media they intended to spend more money this year, two thirds of them said “my own Web site.”

SMBs are less receptive to buying banner ads (now accounting for 54 percent of their online spending, but declining) in favor of search-engine advertising, online directory listings, and streaming video. And they are diverting money toward something that feels to them like advertising, but in reality is technology-supported marketing: Web site design, search engine optimization and customer databases, Borrell Associates says.

Effective Broadband Stimulus? Give it to Libraries

As this article from the New York Times suggests, libraries are where people go to use resources they do not want to, or cannot pay for. If you have been to your local library recently, and if your local library has PCs and Internet access, you see the same pattern: people who cannot afford broadband at home, or who do not own PCs, use the public libraries.

It would be hard to name any single institution, anywhere more ideally suited to provide high-speed broadband access to people who cannot afford PCs or recurring service charges.

It would be nearly criminal if libraries are not key beneficiaries of "broadband stimulus" funding.


Friday, March 20, 2009

Commissioner Adelstein to Head RUS

Jonathan Adelstein, a two-term commissioner of the Federal Communications Commission, has been nominated by the White House to head the Agriculture Department's Rural Utilities Service, the agency that will be disbursing $2.5 billion in grants, loans or loan guarantees to further rural broadband deployment.

Keeping $7 billion in "Broadband Stimulus" in Perspective

AT&T is going to invest $17 billion to $18 billion in 2009. Verizon will invest somewhere between $16 billion and $17 billion. The U.S. cable industry spent about $14 billion in 2008. It is reasonable to expect cable companies to spend less than that in 2009. Add possibly $11 billion by all other U.S. telcos other than At&T and Verizon, for a total of about $59 billion in capital investment in 2009.

The point is that cable companies, AT&T and Verizon alone will spend about $48 billion in 2009, compared to perhaps $3.6 billion in combined National Telecommunications and Information Administration and Agriculture Department Rural Utilities Service "broadband stimulus" funds in 2009.

Just keep that in mind when gauging how much can be done, even adding $7 billion in "broadband stimulus" funds over two years. There are lots of needs. But something on the order of $3.5 billion a year for two years is not going to produce as much change as you might think.

The reason some potential broadband customers in America do not now have access to wired facilities is simply that it is so costly to build those facilities.

How Long to Disburse "Broadband Stimulus" $, Really?

The Congressional Budget Office’s original assessment of the House version of what ultimately became the The American Recovery and Reinvestment Act of 2009 was that it would take as long as seven years for the National Telecommunications and Information Administration to disburse $2.825 billion. 

NTIA currently distributes $17 million, so CBO obviously extrapolated from the workload in making its assessment. Of course, NTIA now has the taks of allocating nearly $5 billion. The statute, nevertheless, requires spending of all that amount by the end of 2010. You can make your own assessment of how thoughtful the disbursement process will be. 

Thursday, March 19, 2009

Optimum Lightpath to Turn Up First Business Hosted VoIP Customer April 1

Optimum Lightpath is going live with hosted IP telephony services on April 1, a source says. Optimum will not sell to customers with fewer than 35 seats to support, as sister company CableVision Systems will be handling business customers up to about that range. The company is taking a really smart approach to pricing and packaging.

It has worked out agreements with one or more value-added resellers in its market to provide local area network assessments and remediation, installation and other support services. But those agreements are structured in a way that Optimum Lightpath can price its services on a really-simple per-seat-per month price, including any necessary LAN remediation. The whole idea is to simply pricing so that a 50-seat, 75-seat, 125-seat or perhaps 300 seats, for example, service can be sold at one uniform price, anywhere, anytime, without having to custom source assessment and remediation services every single time a new customer is to be added.

Think about that entails: VAR partners essentially have to agree, in advance, to a flat-fee payment for assessment or remediation services. In some cases, the partner will reap huge margin, because a given customer network is rock solid for voice. In other cases, the partner might actually lose money on a given job, because lots of work must be done to ready the LAN for voice services (essentially, creating a new voice virtual LAN). The idea is that, over a year's time, margins are healthy enough for a VAR to undertake the work on a flat-fee basis.

The hope that Optimum Lightpath is going to have robust sales obviously is enough of a carrot to entice one or more VAR partners to take the deal. For Optimum Lightpath, the advantages are equally great. It creates a simple and uniform per-set pricing model that is repeatable. It eliminates the extra charges that otherwise might be necessary if LAN assessments and remediation, installation and configuration, customer premises qualification and selection are "extra."

One would think Optimum Lightpath is going to do quite well with this sort of approach. Though some other providers also price per-seat, per-month, those prices do not typically include the virtual guarantee that customers "don't have worry about whether your LAN is ready now," how to source installation and configuration services, or the chores of figuring out which phones actually work with the hosted service.

Though supporting a service all the way to the desktop would not have been Lightpath's first choice, it seems to have realized that its "go to market" strategy must include lots of service elements and support that go beyond the router, if a hosted, business IP telephony service is to address key buyer concerns about simplicity and clarity of total costs. This is a big deal.

No Signs of Video Substitution, Says Viacom

Viacom CEO Phillippe Dauman gets paid "by the subscriber" by distributors who carry Viacom programming, and he says his company is not seeing lower subscription rates, even if some observers think consumers are not, or might, abandon their cable or multi-channel video subscriptions in favor of online alternatives

"We're not seeing it," he says. "We know what the subscriber base is out there, because we receive affiliate fees based on subscribers. And the subscriber base is growing."

Just What We don"t Need: More Broadband Talk, Less Action

The broadband stimulus program, most of you would assume, is designed to get more people more broadband, not to study whether some potential users need broadband, or where those people are. Indeed, part of the broadband stimulus funding already is earmarked for mapping exercises. But that isn't going to prevent some applicants from "studying" rather than building.

The ConnectMe Authority, a Maine state agency, is planning to apply for federal economic stimulus money to pay for a study of the state's high-speed Internet network, AP reports.

Of all the things the need to be done, one would think yet another study is about the last thing we need. How about actually providing more broadband? http://tech.yahoo.com/news/ap/20090319/ap_on_hi_te/me_broadband_assessment

Wednesday, March 18, 2009

Broadband Stimulus: Who is "Unserved," and Why?

The National Telecommunications and Information Administration and Agriculture Department's Rural Utilities Service have gotten around to accepting public testimony about what an "unserved" or "underserved" community is.

That public input on this subject, which began in Las Vegas on March 17, continues today in Flagstaff, Ariz., and will continue on March 19 in Washington, D.C., already offers us a chance to make a few observations.

Though most of the meeting testimony was non-quantifiable, it is clear that there are "unserved" areas in the sense of places where the cost of wired networks is extraordinary, and many places where service might exist, but is "underserved" in the sense of not receiving speeds that now are increasingly common in urbanized areas with significant competition.

The moderator of the Las Vegas meeting thanked the presenters for illustrating that unmet demand exists. Anybody who has been in the communications business long enough, and especially those familiar with the broad expanse of the intermountain West and Great Plains, knows exactly what an "unserved" or "underserved" area looks like, and why those areas either are unserved or underserved by wired facilities. It's a bit like pornography: people tend to know, without a precise definition, what it is.

Almost as predictably, some observers are wagging their fingers about mean old greedy telephone companies that don't want to provide service. Typically, people who make those charges don't live in any parts of the non-urban intermountain West, the expanses of the Great Plains, up and down the Yukon River or the Alaska panhandle, for example.

People often assume that customer demand is unmet because service providers don't want to provide service. Nothing could be further from the truth. Most small, rural communications providers, some of which are cooperatives, suffer from a lack of customers. Of the 1,000 or so small, independent telcos or cooperatives in the United States, half to 70 percent (or more, in some cases) of total revenue comes from other telecom companies in the form of "access charges" (allowing customers to receive long distance calls) or from support mechanisms such as the Universal Service Fund.

That means half to 70 percent of revenues do not come directly from customers, in part because there are so few customers, and in part because those customers do not pay anything like a rate that would provide an actual financial return on providing service. Put another way, the most-important revenue sources are other telecom providers and taxpayer subsidies provided precisely because, in the absense of those subsidies, wired network service simply is not feasible.

At the same time, terrestrial wireless and satellite alternatives do exist, and may in many cases represent rational ways to deliver services fast, at reasonable cost. Nobody disagrees that rural users should have services comparable to those provided to urban customers, at equivalent rates. The problem is that the cost of providing such services, using wired facilities, in rural areas, is disproportionately, punishingly high. "Average" costs don't make sense where it comes to actual access facilities.

Wired providers have a key role to play, but will lose money for every new "unserved" customer they add. Asking them to do that without subsidies ensures they will not act. At the same time, mobile, satellite and other technologies now offer alternate ways to provide voice and bandwidth services very fast or relatively fast, with less investment. Only satellite actually is positioned to offer service on a continuing basis with any actual hope of making an actual profit, at prices equivalent with those paid by urban or suburban users. Terrestrial wireless might or might not offer a return, depending on "density," where there might be an average of half a person per square mile.

Access is a real issue. Ability to provide access without some sort of subsidy is questionable in many cases. All the more reason to be rational about getting investment to people who need it, in a rational way. In some cases, that will mean ensuring a wired networked alternative. In other cases wireless might make more sense. In lots of cases, only satellite makes genuine sense.

Hopefully rational investments is what we will get.

Tuesday, March 17, 2009

Turnkey Wireless "Broadband Stimulus" Package

Berkeley Varitronics Systems, Inc., EDX Wireless, DoceoTech, and EGS Technologies have developed a turnkey package to help the rural broadband build-out that is part of the American Recovery and Reinvestment Act of 2009 (ARRA) economic stimulus package providing broadband access to the rural and underserved areas throughout the United States.

The collective, integrated package allows for a streamlined procurement of wireless propagation test equipment, RF planning tools, geodata tools, and tailored technical training for several broadband technologies. These include WiFi, WiMAX and LTE.

It is not immediately clear whether the package is RUS-certified.

Broadband Stimulus: "Access" is Only 1 of 3 Problems

The "broadband stimulus" programs established by Congress in the American Recovery and Reinvestment Act, making $7.2 billion available to improve broadband service in rural, un-served and underserved areas, actually must address three different sets of problems, says the National Cable & Telecommunications Association.

The NCTA notes that "unserved areas" represent about nine to 10 million households, typically in rural areas. NCTA refers to areas without "wired" access, as satellite broadband is available in those areas, though in some cases not technically accessible because of obstructions (mountains are the biggest issue, though foliage and trees or other structures in the line of site can be an issue in some cases). NCTA thinks projects extending broadband access to these households should be given highest priority.

"Underserved populations" represent a different problem. About 35 million households already have access to wired and satellite broadband, but do not currently use the services. The problem there is not "access," but "affordability" or "perceived value." Many of these potential users simply do not use PCs or the Internet, even if affordability is not the key problem. Simply building more access networks will not solve these problems. Instead, "demand stimulation" is the problem to be addressed in the "underserved" bucket of potential users.

Demand-side stimulus is what is needed here, and that might include training, equipment subsidies or usage subsidies.

Separately, there are households in underserved areas which have broadband access, but not at speeds generally available throughout the rest of the country. In these areas, the government should proceed with caution, NCTA says.

The need for subsidy in these underserved areas is not as great as in unserved areas or for underserved populations, and subsidizing infrastructure in these areas runs the risk of subverting the commercial deployment already taking place, NCTA argues.

Subsidies to these underserved areas should therefore be carefully structured so as not to favor one technology over another, one provider over another, the public sector over the private sector, or otherwise upset marketplace dynamics, NCTA argues.

NCTA notes that more than 92 percent of U.S. households actually have wired broadband access available to them. Satellite providers would argue that the eight percent without wired access are precisely the segment best served by satellite services.

About 18 states are least represented by wired access facilities, where households unable to buy a wired broadband service are less than 94 percent of all homes.

Among unserved geographic areas, subsidies therefore should be targeted first to areas in which service would not otherwise be provided and that could support the ongoing costs of providing broadband service if government funded the costs of the underlying infrastructure, NCTA argues. These are areas where infrastructure cost prevents commercial payback, but where an on-going business case can be made, if infrastructure deployment is not an issue.

New mapping of broadband facilities will be finished only after the funds have been disbursed, so "mapping" does not help either NTIA or RUS make its awards.

Merely providing broadband access does not necessarily mean that customers will subscribe to it, NCTA and other policy advocates note. The larger problem is that many consumers fail to subscribe to broadband service even when it is available. That's a "demand" problem, not a "supply" problem. "Researchers studying broadband access have concluded that 'lack of interest' in broadband is the main reason that people do not purchase the service.

Indeed, about onequarter of adult Americans do not use the Internet at all; these individuals are disproportionately lower-income and older than average Internet users, NCTA notes.

Grants should be used to provide targeted subsidies to make broadband services more affordable, NCTA suggests.

Access isn't the only problem the "broadband stimulus" investments must tackle.

Broadband Stimulus: Commercial Entities "Need Not Apply"

Some observers say large telcos are "dragging their feet" about applying for "broadband stimulus" funds. That's not the best way to describe it. By RUS rules, large telcos are ineligible to apply.

By NTIA rules, which are targeted to non-profit organizations, most commercial entities likewise are ineligible to apply, at least not as "prime" contractors, unless they get a waiver that says the proposed projects are in the public interest. That might or might not be difficult.

Putting aside other concerns about strings attached to funds received under either the RUS or NTIA programs, the language of the statute, while not forbidding grants to commercial applications, requires a waiver.

Ultimately, commercial entities may find they do best by partnering with a submitting organization that is a government, medical, educational or other non-profit entity.

The single statutory exception is for Small Business Administration firms that already have qualified for "minority set aside" treatment.

Even if service provider concerns about wider business model impact are addressed by the final rules, which remain fluid, the fact remains: NTIA rules heavily favor prime contractors that are non-profits. It remains likewise unclear the degree to which these rules also will apply to RUS funds.

Broadband Stimulus: Questions, Questions and More Questions

Thousands to tens of thousands of applications are expected for the National Telecommunications and Information Administration $4.7 billion in new broadband project funds, and the Agriculture Department’s Rural Electrification Service $2.5 billion in grants and loans to promote broadband services for “rural broadband.”

One obvious problem, among many, many others is that thousands to perhaps tens to scores of thousands of applications now will hit agencies ill-equipped to process them. RUS has a staff of 130, about 24 working on the broadband stimulus program. Observers say they aren't even sure the NTIA has even 130 people, total. That has some proponents arguing for state-level review, whether or not states actually are delegated authority to make the awards. Others say that is an unnecessary hurdle.

Consider the enormity of the challenge: the statute requires that applicants receive funds received under one program, not both. That requires some way of identifying which projects are funded under each program. But nobody wants a complicated, burdensome, expensive application process. But the RUS program objectives are distinct from those of the NTIA program.

Mark Cooper, director of research at the Consumer Federation of America, argues that maximum coverage and sustainable projects are important. And though many observers probably are thinking about extending access, Cooper thinks investments in backhaul and mobile infrastructure are desirable. “Two that come to mind are mobile computing and Internet back bone to unserved areas."

“I would suggest a rough justice approach: the funds should be divided equally between physical infrastructure and human and social capital, and within the human and social capital area, it should be divided equally between the adoption, training, institutional network and stimulation aspects of the statute,” Cooper said

Mark DeFalco, Appalachian Regional Commission Telecommunications Initiative Manager, thinks it will be tough to create a unified application process, though. “We see each agency having a separate process for processing the loans and grant applications,” DeFalco says. “RUS has an existing process in place, and we expect the new stimulus dollars will flow through that process.”

“NTIA will need to develop their process and quite honestly, with the time limits on this, it is a daunting task to get that process in place and get the money out the door,” he noted. “But both processes should use the same definitions of broadband, un-served and under-served and we would like to see rules specifying minimum speed requirements for rural areas,” DeFalco said.

And though Ramsay favors state level screening, Owens disagrees. “If it comes to the point of the states actually making the determination on who's getting the funding, that may pose a problem for our members,” Owens said.

Cooper suggested there might be danger if the state level became a second level at which grant politics had to be faced. Arnold tended to agree. “Helping NTIA and RUS facilitate this and make it quicker, that's better, but I'm with Mark: if it becomes an impediment, it could be a real problem for us,” said Arnold.

“I honestly believe the only way this is going to get done” is to have the states rank the proposals, with NTIA making the final decisions, said Ramsay.

DeFalco says “the states are probably in the best position to know what rural areas need the coverage in the first round, so we would be strongly advocating the state role in this process.”

But Cooper argues that replacing consultants in Washington, D.C. with consultants at the state level does not represent a lot of progress. In fact, Cooper suggests that if states are to have a strong role, NTIA and RUS “have to come up with some very, very specific criteria, so that it's not really a lot of discretion to the governor or a public utility commission.”

“If they are truly just evaluating against a set of criteria, those criteria are going to have to be really, really carefully defined or else you get into what is essentially a lobbying bailout for PUCs,” says Cooper.

Ramsay predicts that larger states are where most of the proposals will be focused. “I would be surprised” if California did not get thousands if not hundreds of thousands of proposals. “People will go where the money is,” Ramsay says. “With the smaller states, with smaller populations, there will be correspondingly fewer projects.”

Arnold and DeFalco predict there will be thousands or proposals. Owens predicts that there are 1,000 or so rural companies that are interested and likely to submit applications.

“Assuming there would be thousands if not tens of thousands of applications, I have encouraged the entities I work with to make them statewide or regional applications, says Cooper.

DeFalco says what is not wanted is maximum coverage at minimum speeds. “We want to have good coverage in all rural areas.”

“We cannot afford to take these rural areas and give them adequate coverage today which is not going to be adequate for tomorrow,” he says. “If we do that, then we are going to be back in this same situation in a couple of years where they have broadband and they have low-speed DSL service and what they need is something far more robust, while the urban areas have FiOS in place or u-Verse or fast cable and these rural areas are left behind with a slow speed service.”

“We lack internet backbone in rural America, and no matter where the network eventually goes, we are going to need that backbone,” says Cooper.

Arnold suggests that at least in the first of three funding rounds, emphasis should be on infrastructure. “Let's stick with shovels in the ground; get this stuff deployed,” Arnold says.

Harmonizing the NTIA and RUS programs is going to be challenging. RUS loans go to rural telephone companies and private sector providers where NTIA guidelines are set for grants to public or non-profit entities, says DeFalco. “They can't be identical because quite frankly, they are reaching different audiences to a certain degree and they have different programs than the statutes.”

In any case, the application itself, and the sorting process, must, by statute, ensure that projects getting funds from one program do not receive funds from the other, implying some unified way of tracking applications and disbursements. Owens argues the simplest procedure is simply to modify the existing RUS application form, and use it as the vehicle for applying for either NTIA and RUS grants or loans.

Some issues are quite practical: what information does the application form require? How are applications tracked? Who does the tracking? How is the consultation process structured?

Others are practical but directly linked to fulfilling legislative intent. The definitions used for “un-served,” “underserved” and “broadband” are examples. Likewise, what rules govern regional projects that cross political boundaries, include rural and non-rural areas or that might require “prime” contractors to be entities of a certain type according to NTIA or RUS rules.

Cooper argues there is no single technology that best serves all areas and users. “We need to find a minimum standard that really meets needs, that delivers services that are going to be durable, and we need to do that allowing the technologies to compete on their costs,” he said.

Among the other unsettled issues is how disbursements in the first of three funding rounds might differ from second and third rounds, if at all. If the award philosophy is consistent, then applicants will have a better idea of what NTIA and RUS are looking for in the later rounds.

DeFalco pointed out that in the most difficult areas, grants are the only practical solution, as there never will be a payback from any commercial deployment.

Cooper argued loans and grants be linked in some way to the intended retail price of the service offered. “I am very concerned about loans and grants going out and then having people price their services to the market or commercially.”

Another issue is the requirement for a 20-percent project match. There is a waiver clause, and NTIA and RUS will have to figure out what conditions are sufficient to qualify an applicant for a waiver. Even where the match requirement is applied, it is not yet decided whether in-kind matches are permitted, or whether the match must be in cash.

One way or the other, fully rational or not, well-considered or not, there is little time. The statute requires that the first funds be awarded no later than June 2009. It is mid-March and we still are in the "comment" phase. And make no mistake, there will be huge battles over the rules, as there always are when large sums are to be awarded.

Monday, March 16, 2009

Will Private Companies Be Able to Bid for Broadband Stimulus Funds?

Lots of people seem to very interested in the $7.2 billion in "broadband stimulus" funds the NTIA and RUS will be awarding. But there are some very big caveats. With one little exception, only non-profits are, by statute, allowed to apply. And there is some possibility that unless an entity already has in the past gotten a grant from RUS, it might not be well positioned to apply under the RUS rules, either.

And though RUS and NTIA are holding lots of hearings, there remains more uncertainty than clarity.

At a March 16 National Telecommunications and Information Administration hearing, presenters said about what you would expect them to say about bidding rules for the upcoming round of NTIA and U.S. Department of Agriculture Rural Utilities Service "broadband stimulus" grants, loans and loan guarantees.

A service provider representative suggested service providers should be able to apply. "NTIA should extend eligibility to any existing entity that holds an FCC license, state certificate of public convenience and necessity, cable franchise or similar

government authorization or who is otherwise providing broadband service under applicable federal and state law," said Curt Stamp, president of the Independent Telephone and Telecommunications Alliance.

"No additional or individual review of any such entity should be required"Curt Stamp, president of the Independent Telephone and Telecommunications Alliance.

A representative of the Communications Workers of America urged that service provider entities be given "priority" so long as projects proposed by such entities have endorsements from non-profit entities specifically named in the legislation.

"Priority should be given to entities that add substantial infrastructure and focus on unserved areas," said Debbie Goldman, Communications workers of America telecommunications policy director. "An applicant should be required to demonstrate that it has the financial, technical, managerial, and operational qualifications to complete the project in timely manner, and then it has the capacity to continue operating after stimulus funding is no longer available."

"Past performance shall be a strong consideration to determine the applicant's qualifications," Goldman argued.

The New America Foundation representative argued that telcos and cable companies should not be given special priority, but rather "the types of eligible private entities we must support must go far beyond usual suspects," said Sasha Meinrath, New America Foundation Open Technology Initiative research director. That's what one would expect from an entity in favor of open access.

Betty Ann Kane, chairwoman of hte District of Columbia Public Service Commission, emphasized the need to consult with state and political subdivisions including state public utility commissions, state broadband authorities and state service administrative agencies. "Private firms or sole proprietorships or individuals should be considered eligible when those entities act in partnership with any of those state entities."

Grant Seiffert, Telecommunications Industry Association president, argued that focusing on eligibility is the wrong focus. "NTIA should not focus on what type of entity an applicant is but rather on, one, to the value the proposed project to the American people and two, the applicant's ability to use the funds to achieve the project's objective."

Seiffert said he does not "believe that this program can be successful and meet the goals set by Congress and the administration without private parties being involved."

What Next for Salesforce.com, other SaaS Providers?

Salesforce.com has been the poster child for how voice and communications capabilities can be integrated with enterprise applications.

But Salesforce.com now is a decade old. Pretty obviously, the focus on applications that can benefit from voice has to shift elsewhere.

And analysts at Forrester Research say enterprise interest in SaaS might be slowing. That could suggest that organizations are having a harder time figuring out where SaaS really delivers measurable benefits.

Web conferencing might be the only application for which there is broad-based recognition of the value of voice and communications tightly integrated with an existing business app (presentations and meetings).

Cisco Enters Blade Server Business, Ecosystem

Cisco has introduced a new data center architecture that moves it directly into the blade server and computing architecture business. That inevitably means Cisco now competes in some new areas with the likes of Hewlett-Packard and IBM.

Cisco says it has designed an entirely new class of computing system incorporating the new Cisco UCS B-Series blades based on the Intel Nehalem processor families. The Cisco Unified Computing System also essentially consolidates what today are three separate networks: local area networks (LANs), storage area networks (SANs) and high performance computing networks, into a single fabric.

By supporting "virtualization," allowing multiple apps to run on a single server, Cisco's move also suggests some further changes. Though up to this point most important business applications have been run on dedicated hardware, in the future apps might typically run on standard hardware.

For those of you with some decades of experience in the communications business, that might suggest an evolution of most parts of the business towards "software" rather than dedicated machines. Where once a Class 5 switch was a discrete machine, in the future the equivalent applications might run much as other enterprise apps do: on standard hardware platforms, using Ethernet as the transmission layer.

That might lead to rather widespread repositioning. Many companies commonly thought of as "hardware" providers might come to be better known as enterprise or carrier "software" firms, with less direct bundling of the hardware on which the applications execute. At that point, an enterprise class data center becomes a carrier switching center. You can then envision new ways for contestants to build the foundation for a communications business.

That doesn't mean the existing financial, legal and regulatory issues go away. Those key elements of the business context must be addressed. But core communications features might shift to a more software-focused mode, without the requirement for dedicated hardware. This probably is a longish sort of transition. But the direction increasingly is clear.

To the extent that the Cisco architecture incorporates a number of discrete networking protocols such as Storage Area Networking and LANs, the ecosystem further might create some new entry points for wide area network providers into the enterprise computing and LAN business as well.

That trend likewise will take some time to develop. In principle, though, it should in the future be easier to integrate "data center" and "central office" apps in a more unified way. Big stuff.

Sunday, March 15, 2009

Think You Qualify for Broadband Stimulus Funds?

Lots of companies and organizations believe they might be eligible to apply for funds to support broadband access services. Some of them are right. But the rules might be far-more restrictive in practice than most believe. 

NTIA funds clearly favor non-profit and governmental agencies. RUS funds clearly favor firms that have received rural electrification funds in the past. So most actual firms that supply broadband access services will not be able to apply directly.  Perhaps they can do so if they are participants in bids submitted by government or non-project agencies. 

But it appears lots of firms will spend significant time, and some money, to learn that they don't actually have much of a chance to submit bids that meet the program guidelines very well. 

Section 6001 of the American Recovery and Reinvestment Act of 2009 requires the National Telecommunications and Information Administration (NTIA) to establish the Broadband Technology Opportunities Program, responsible for disbursing some $7 billion or so for broadband projects of various sorts. The Act further establishes authority for the Rural Utilities Service (RUS) to make grants and loans for the deployment and construction of broadband systems. 

NTIA will be disbursing about $4.7 billion while RUS will award some $2.5 billion. Applicants have been told they may apply for awards under both programs, but will receive awards from only one, should their proposals be accepted. But there is a dramatic difference between the two sets of programs. 

Despite the exhortations to craft applications that apply under either set of program rules--rules that remain maddeningly vague--the NTIA and RUS programs are quite different in intent. 

RUS is supposed to award grants, make loans and offer loan guarantees for broadband infrastructure in any area of the United States where at least 75 percent of the area to be served by a project is a rural area without sufficient access to high speed "broadband service to facilitate rural economic development." The emphasis for RUS funds clearly leans toward infrastructure deployment.

The NTIA program, in contrast, clearly is aimed at "new programs," not infrastructure, with a clear "non-profit" organization focus. In fact it remains unclear whether "for profit" entities will be allowed to submit applications, except for  "economically or socially disadvantaged small businesses as defined in section 8(a) of the Small Business Act."

NTIA has to give some preference to projects supported by local authorities, especially state agencies. But it also has to give preference to public safety applications; health care providers, clinics, and facilities; schools and libraries; colleges, universities, or other higher education and research institutions; job training and job-creating facilities and community support organizations. 

NTIA also is bound by statute to give preference to projects that increase broadband access to low-income, unemployed, aged, and other disadvantaged or "vulnerable" populations.

But NTIA also is directed to favor projects that provide educational or employment opportunities using broadband access/deployment/infrastructure; that stimulate demand for broadband and economic growth; and that are submitted by nonprofit organizations (for-profit firms can partner with such entities).

Projects must show that they would not be undertaken but for the grant. But such projects also should show how they increase affordability of, or subscribership to, broadband to the greatest populations.

Projects that offer high broadband speeds also will be favored, as well as projects that enhance healthcare, or serve education or children. The one area where commercial interests are allowed to bid, by statute, are "economically or socially disadvantaged small businesses as defined in section 8(a) of the Small Business Act."

Projects that feature the greatest "open access" to users might also be favored. 

That's an awful messy set of priorities, with an awful lot of constituencies to satisfy, with no immediate indication how a commercial service provider might apply, except as a partner of a non-proift. 

The RUS program rules give priority for awarding funds in ways "that will deliver end users a choice of more than one service
provider." So far, there is no language that clarifies what that means, but it might mean higher priority for projects that have a substantial "wholesale access" component. 

The RUS program also favors projects submitted by "borrowers or former borrowers under title II of the Rural Electrification Act of 1936 and for project applications that include such borrowers or former borrowers." In practice, that means the inside track is held by firms now receiving, or who have received in the past, funds. 

Much remains to be decided, so perhaps the finalized rules will open the doors a bit for most companies that actually sell broadband access to customers. Right now, that isn't the case.

Despite Video, Text Still Rules, So does Voice

There are some interesting parallels between "voice" and "text," and the relationships can illustrated by the difference between "telephony" and "IP communications," or "text" and "video."

Voice usage continues to increase, even as more text, blogging, video and conferencing occurs as well. But voice is not necessarily "telephony." Voice is used in many different ways, even as buying of traditional consumer voice lines continues to decline in favor of mobile or VoIP alternatives.

Likewise, lost of news, commentary and entertainment now is moving away from legacy print and towards online formats. But text seems to have grown in importance as legacy "print" channels have struggled. Again, what we see is a pattern similar to that of "voice" usage. More usage, but using new formats, media and channels.

But user behavior is quite complex. As Steve Rubel points out in this post, text remains key for Web-based and mobile communications, even as Web video has emerged as the next wave of Web media.

One can look at video growth, telephony "decline", and make the wrong forecast: that people mostly will communicate using video. Likewise, one can look at the demise of newspapers or magzines and assume people are not reading. They're reading, but it is tweets, blog posts, news feeds and Web pages. Text simply is used in different ways.

As Rubel notes, though, an argument can be made that text still "rules."

Saturday, March 14, 2009

Thinking the Unthinkable: Telcos Have Done Better than Publishers

Over the course of some years I have on occasion used the airline analogy to look at structural issues faced by telecom service providers. Both are capital-intensive industries with huge economies of scale, multiple customer segments, important regulatory backdrop, and similar market entry and incumbent response patterns.

At other times I have used the analogy of how Internet Protocol is changing the telecom business to describe what is happening in the print media business, arguing that the underlying business impact is similar in both industries.

Neither the print nor the airline industries have performed as well as the telecom industry in coping with dramatic change.

Clay Shirkey's article is a provocative but largely accurate assessment of why print publishers--newspapers in this case--have failed to adapt as rapidly as telecom providers have.

Friday, March 13, 2009

More than 77 percent of wireless subscribers in the U.S. subscribe to or purchase text-message capability, says Nielsen Mobile. And uers now send and receive more text messages than they do voice calls.

In the United States, about 200 million of the 259 million wireless subscriber lines subscribe to or purchase text-message capability. Of these, 138 million--53 percent of all mobile subscribers--use text-messaging on a regular basis.

Nielsen recently reported that in the second quarter of 2008, mobile subscribers sent or received an average of 357 text-messages per month, compared with 204 phone calls. And while the average number of text-messages sent or received has increased 351 percent (from 79 text-messages sent or received last year), phone traffic have not become less popular.

In fact, phone useage has been constant, suggesting that text messaging adds to, rather than replaces, voice communications.

U.S. and U.K. Users Represent Half of Mobile Web Browsing

About 29 percent of global mobile Web browsing traffic now happens in the United States, with about 20.3 percent happening in the United Kingdom. Between them, the United States and United Kingdom now represent about half of global mobile Web browsing, says bango.

That might come as a surprise to many. What might be a bigger surprise is the number of people who now land on Web sites using a mobile. That could be an issue: sites not optimized for mobile access might not execute some expected functions at all, others poorly.

But most businesses do not have mobile-optimized websites.“Many people simply have no idea that they have visitors from mobile devices accessing their PC-optimized website, says Anil Malhotra, Bango SVP."These mobile visitors are simply invisible to them.”

The statistics also show that while some countries such as India and Indonesia have a good appetite for browsing on their mobiles, it doesn’t always convert into purchases. In fact, only five countries in the Top-10 browsing chart are also in the Top-10 payments chart. Those countries are the United States, United Kingdom, Portugal, South Africa and Spain.

“When it comes to payments though, the US is accelerating faster than any other country and now accounts for 57 percent of payments worldwide,” says Malhotra.

No matter how high the browsing rate, it is only converted into a high purchase rate where people have a good disposable income and can pay for content on their phone bills, bango says. In regions such as India, South Africa, Indonesia and Egypt the driver for mobile browsing is a lack of fixed-line broadband and PCs for accessing the Internet which means that the mobile device is the only way people can get onto the Internet.

Thursday, March 12, 2009

Google Voice to Launch Within Days

Nearly two years after acquiring GrandCentral, Google is preparing to relaunch the service with lots of new features. GrandCentral has been in private beta for the last two years and over the next few days Google will be prompting existing beta users to upgrade to Google Voice before rolling out the service to new users in a few weeks.

GrandCentral was a Web-activated IP voice service that uses a single "public" number that points to other numbers and devices, providing a range of visual voice mail and Web message retrieval and call management features.

Google Voice will add the ability to make free calls to U.S. telephone numbers and cheap calls to other numbers, make conference calls, and send, receive, store, and search SMS messages and create transcripts of voice mails.

From my perspective, one of the best new features is the ability to deliver the Google Voice number, even when placing a call from some other real device. The reason for that is that Google Voice features are applied to inbound calls using the virtual number.

If anybody calls using the actual device's "delivered" number (caller ID), the features aren't available. So it now will be easier to deliver the Google Voice caller ID on outbound calls, which virtually assures that return calls will arrive in a way that allows call management features to work.

Also, voice mail now will more nearly resemble email, and users can create transcripts of calls, a useful feature for many call settings.

Hopefully, Google will make address book importation easier as well. That, and the inability to simply deliver the GrandCentral virtual phone number, have been my two biggest problems using the service.

Wednesday, March 11, 2009

Comcast Passes Qwest as Phone Provider

Comcast Corp, the largest U.S. cable television company, says it now has become the third-largest provider of primary home phone service in the United States, overtaking telephone company Qwest Communications International.

Comcast, which started offering phone services in the spring of 2005, said it now has 6.47 million subscribers.

RCN Metro Has "Nice Problems"

Here's a problem any service provider sales staff would like to have: trying to figure out why sales are running ahead of projections for four months in a row. But that's precisely the issue Phil Alvarez, RCN Metro Optical Networks president, says he has been "grappling" with over the last four months.

"Gven our sales across all markets, we were trying to figure out why we are doing so well," says Alvarez. "You

question yourself." When RCN Metro dug into the numbers, it found very strong activity in wireless, a result of wireless providers really shoring up their backbones to support wireless broadband services. Need for more route diversity and the ability to provision very quickly also were factors.

You might think any provider with exposure to the financial services industry might face some exposure. Sure, there's some churn, says Alvarez. But "our services address trading requirements, data center connectivity and connections to customers and trading partners," Alvarez says.

So they still are buying. The financial services industry is used to periodic downturns, Alvarez says. They know business will pick up again so they have to keep moving. Their core business plans require capacity investments.

That said, RCN has seen some minimal recession impact. Some customers say they might substitute new providers for some services, on some routes, in some areas, in part because, on some selected routes, and for some services, a great deal of very-aggressive pricing is going on, in areas such as transit services. What is more obvious is pricing pressure on high-traffic routes, though. In other areas, on a highly route dependent basis, prices are relatively firm, or firming.

Generally, on routes where there is pricing pressure, it is Ethernet capacity pricing that is most exposed, not SONET capacity, which Maura Mahoney, RCN VP, says is quite strong.

That isn't to say the recession is haivng no impact at all. It is reasonable to assume that, industrywide, customers are asking for, and might be getting, more capacity for any given level of payment, especially when contracts are renegotiated early, locked in for more years or when upgrades from 100 Mbps to 1 Gbps, or 1 Gbps to 10 Gbps services occur.

That does not seem to be the case for10-Gbps and wavelength purchases, though, says Alvarez.

To be sure, lower prices wouldn't be much unusual in the capacity business, which is used to virtually annual decreases in price-per-megabit-per-second pricing.

In some cases, customers are asking for shorter contract intervals. Where customers might have been buying contracts of five to seven years' length, they are in some cases making three-year commitments. Historically, longer commitments have been associated with a belief that prices would be climbing, shorter commitements with a belief that prices will be falling. That might not be the primary driver at the moment, but could be playing a factor.

Crowded routes are being hammered by low price competitors, though, and Alvarez believes that is not sustainable.

Still, Alvarez says he has been "surprised" at the levels of demand.

A nice problem to have, these days.

Tuesday, March 10, 2009

AT&T to Add 3,?000 Jobs, Reduce CapEx $2-$3 Billion

AT&T plans to invest $17 billion to $18 billion in 2009, in line with its 2007 capital expenditures of $17.7 billion, though not as much as the almost $20 billion it spent in 2008.

About two thirds of AT&T's 2009 investment will go to its wireless and wired broadband networks The company also says it will add almost 3,000 jobs in 2009, primarily to support mobility, broadband and video services.

AT&T also expects to reduce jobs in other areas, primarily wireline. Some of the investment is in more than 2,100 new cell sites across the country, as well as an expansion of 3G service to 20 new markets in 2009. .

AT&T also says it will invest in its IP/MPLS backbone networks, U-verse, more DSL coverage.

NTIA Broadband Stimulus Meeting: Little Meat on Bones

The National Telecommunications and Information Agency held a public meeting on how the broadband stimulus programs will work, and attendees emerged with little more concrete detail than they entered with, with a couple of suggestive bits of guidance.

Bernadette McGuire-Rivera, NTIA associate administrator, suggested the agency will try to allot its $4.7 billion for broadband programs in three rounds of grants, with the first round coming between April and June. The NTIA is required to allocate all the money by September 2010.

The Rural Utilities Service, with about $2.5 billion to allocate, also likely have three rounds of grants and possibly loans, with a funding notice coming out within 60 to 90 days, said David Villano, USDA assistant administrator for telecommunications programs.

Moody's Issues "Most Likely to Default" List

Here's a list no company wants to be on: a new Moody's list of 283 companies which it believes are the most likely to default on their debt within 12 months. Moody's estimates about 45 percent of "Bottom Rung" companies will default on debt in the next year.Among the firms of interest to communications industry watchers:

Blockbuster,  CavTel, Charter Communications, Clearwire, Cleveland Unlimited, Global Crossing, Grande Communications, Intelsat, Integra Telecom, Level 3 Communications, Palm, Primus Telecommunications and Securus Technologies.

The Bottom Rung list, which Moody's will update monthly, represents roughly the riskiest 15 percent of all companies the agency tracks.  Seeking Alpha calls it the "leper list." Others call it the "death list." Others might call it a potential list of "dead pool" companies.  

Whatever one calls it, it is not a list one wants to be on. Some of them have been in dangerous straits for years, though, without crashing. One hopes Moody's is wrong. 

Monday, March 9, 2009

Broadband, Video, Mobile: What Will 1Q 2009 Show?

U.S. consumer spending on subscription TV, broadband, and mobile services will be "about the same" for most consumers, but about 15 percent say they intend to cut back in 2009, says In-Stat. The first test will come as first quarter 2009 results are released.

Should consumers do what In-Stat analysts think they might, these three service segments could see nearly a $5 billion decrease during the next 12 months.

The In-Stat might yet prove to be correct. But the latest round of earnings reports do not yet show evidence of the trend. comcast revenue was up 9.2 percent in the fourth quarter of 2008, the latest quarter for which returns are available. Time Warner Cable revenue was up 6.7 percent.

In February 2009 average spending at Verizon and Sprint increased by three percent and one percent respectively. T-Mobile and AT&T saw declines of slightly more than one percent each.

Still, since October, both Verizon and AT&T have seen relatively stable revenues, according to the Geezeo. Main Street Spending Index. Customer spending increased four percent at Verizon while AT&T customers are spending one percent more in the October 2008 to February 2009 period.

Sprint and T-Mobile, have seen a dip since October 2008. T-Mobile’s customer spending dropped by 9.36 percent and Sprint’s customer spending dipped 13.36 percent.

"It important to note, however, that all four of these firms have seen positive spending figures from this time last year, in both overall and year on year statistics," Geezeo says.

In its fourth quarter of 2008, Verizon grew year-over-year revenue over 12 percent in wireless, nearly 37 percent in broadband and video and over eight percent for the key strategic services offered by Verizon Business. In addition, ARPU grew 1.4 percent in wireless and over 14 percent in consumer. In the fourth quarter, Verizon grew revenue 4.6 percent.

At AT&T, fourth quarter revenue grew 2.2 percent sequentially and 3.4 percent year over year.

So it is likely that cutbacks, should they materialize, will have the effect of shifting revenue from some providers to others. It also is possible that aggregate industry revenue in each of the segments--wireless, broadband and multi-channel TV--actually will increase, though just about everybody believes that underlying secular declines in wired voice will continue, and might intensify.

In-Stat suggests that the biggest decrease in spending on mobile, broadband and subscription TV services, though, will come from households with income below $35,000, a finding most would find logical. The offset is that revenue and average revenue per user still seem to be growing, at least based on fourth-quarter results. Of course, the first quarter 2009 results will be instructive.

The Downside of Multi-Purpose IP Networks

By now, virtually all observers agree that direct revenue generated by fixed networks will shift to supplying broadband access, while some o...