Monday, November 30, 2009

A Real "Google Phone" Coming?

A Google-branded smartphone running a version of Android not yet seen on other devices is coming, and it will feature a large screen, Gizmodo speculates. Since any such device presumably would be built directly to Google's specifications, it is possible the device would feature a more-tightly integrated hardware and software experience than is possible on "open" devices.

Oddly enough, such an approach would resemble nothing so much as the iPhone experience, which is just about the diametrical opposite of an open approach.

Huge Increases in Consumer Communications Value Since 1990, Data Shows

With the caveat that the product of a fraction always changes as either the nominator or denominator change, huge increases in consumer spending on communications and information technology since 1990 have been more than matched by broader increases in household income, holding the percentage of household spending on communications flat over the entire period.

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Since 1990, consumer spending on information and communications technology has grown from $197 billion to $545 billion, 5.1 percent of national disposable income in 1990, peaking at 5.9 percent in 2000, and falling to 5.4 percent in 2008.

Spending on communications services has tripled over the same period, from $77 billion to $243 billion, and at 2.3 percent of national disposable income, up from 1.8 percent in 1990 but below its peak of 2.5 percent in 2001.

Basically, the story is one of large increases in consumer value. Consumers are spending more on communications and infornation technology, but a steady percentage of disposable income.

Yet consumer value has grown exponentially in the intervening years. U.S. communications expenditures as a share of national disposable income has been flat since 1997, but users have added over 100 million broadband and video connections and over 100 million wireless connections, according to the Bureau of Economic Analysis.

Sunday, November 29, 2009

Content Delivery Networks and Network Neutrality: Net Is Not Neutral

Much discussion about network neutrality seems to assume that the issue is bit or application "blocking," and from one perspective that is correct. The existing Federal Communications Commission rules about a users' right to use all lawful applications already prohibit blocking of legal applications on wired networks. The issue is whether those rules, and the other "Internet Freedoms" principles also should be extended to the wireless domain.

In another sense, popular perceptions are misguided or worse. There is a separate issue, that of whether it ever is permissible, for any legal reason, to shape traffic, either to maintain network performance, provide an enhanced service to a user, or create a new level of service.

Some will maintain there are other ways of maintaining end user experience aside from traffic shaping. That is arguably correct, but might cost so much that the entire consumer access pricing regime has to change in ways people will find objectionable.

Some argue that any traffic shaping of legal bits should be banned, because such practices have undesirable business impact. "No bits should have any priority," that line of reasoning suggests.

One might simply note that about 60 percent of video bits--almost universally served up by media companies--already enjoys such "unequal treatment." Indeed, that is the purpose of a content delivery network: to expedite the delivery of some bits, compared to others, so that a better end user experience is possible.

In fact, about $1.4 billion was spent in 2008 precisely to deliver such expedited bits. The U.S. market currently generates an estimated 55.8 percent of the global CDN traffic, though international traffic is now increasing at a faster rate than its domestic counterpart, according to Research and Markets.

And though video delivery historically has been the CDN staple, new growth areas include whole site delivery, dynamic content, "live" video, high-definition video, mobile and smartphone applications, other non-PC devices and adaptive bit rate streaming, Research and Markets notes.

Of the 22.5 billion professional video views served during 2009, Akamai delivered 31.9 percent, Limelight Networks 12 percent and Level 3 11.2 percent, says Research and Markets.. Additional CDNs active in the market include CD Networks, Velocix, Liquid Compass, Abacast, Mirror Image, Edgecast Networks, Highwinds, BitGravity, Cotendo and Internap, the firm notes.

The point is that preferential delivery of bits already is an established part of the way the Internet works. Private network users, especially businesses, also commonly set up traffic priority systems for their internal communications and content, as well.

The ability of a consumer end user to choose to use such services and applications is one of the implications of the network neutrality debate that often is lost. To reiterate, preferential treatment of bits already is happening on a wide scale, and for very good reasons: to preserve end user experience. Perhaps we ought not to be in such a rush to foreclose practices and capabilities of obvious value.

Friday, November 27, 2009

Gartner Drops "Unified Communications" from 2010 "Top 10" List

Unified communications, which was on Gartner's "top 10" trends list for 2009, has been dropped from the 2010 list, which moves "cloud computing" to the top spot. 

People will disagree about what that means, but no trend remains "top of mind" forever. Nor is the ranking an indication that UC is unimportant, simply that it might not be among the most-important priorities for the coming year.

It might simply indicate that most enterprises have figured out what they want to do, for the moment. 

It might indicate that computing architecture, and issues related to computing architecture, which always are top concerns for enterprise IT staffs, once again have moved to the forefront, and that "voice" issues related to IP telephony are largely in an advanced stage of deployment. 

In fact, four of the top-six issues are directly related to remote computing capabilities. 

Tuesday, November 24, 2009

Users Say They Want ISPs Offering Both Wireless and Fixed Broadband

There are some heartening implications for service providers able to offer both mobile and fixed broadband access, and disturbing implications for providers who do not have such capabilities, in a new survey of 1,000 consumers conducted by the Yankee Group.

Specifically, more than 60 percent of survey respondents indicate a strong interest in mobile Internet, and 45 percent state that for their next broadband purchase they will choose an ISP that offers mobile service.

Do Usage Caps for Wireless and Mobile Broadband Make Sense?

Consumers say 60 percent of the wireless broadband decision is based on two factors: monthly recurring charge and existence or size of a usage cap. For that reason, "data caps" are a particularly unfriendly way to manage overall traffic, says Yankee Group analyst Philip Marshall. 

A better approach, from a service provider perspective, is to offer unlimited usage and then manage traffic usingreal-time, network intelligence-based solutions like deep packet inspection and policy enforcement, Marshall argues.

Some would argue that fair use policies that throttle maximum speeds when policies are violated is no picnic, either. But temporary limits on consumption, only at peak hours of usage, arguably is more consumer friendly than absolute caps with overage charges. 

To test consumer preferences, Yankee Group conducted a custom survey that included a "choice-based conjoint analysis," which allowed Yankee Group analysts to estimate the relative importance to consumers of key wireless broadband service attributes. The survey was taken by 1,000 mobile consumers who also use broadband access services. 

From the conjoint analysis, "we found that, on average, 59 percent of a wireless broadband purchase decision depends on two factors: service price, and the presence or absence of a 2 GByte per month usage cap," Marshall says. 

The results also indicate that 14.5 percent of a typical purchase decision is affected by service bandwidth, and that the implied average revenue per user lift when increasing bandwidth from 768 Kbps to 2 Mbps ranges between $5 and $10 per month.

The results also indicate, however, that there are diminishing returns for service plans that offer speeds above 3 Mbps, though speed increases might be useful for other reasons, such as competitive positioning. 

"Our price elasticity analysis implies that consumers are willing to pay $25 to $30 more per month for plans that offer unlimited usage, compared to plans that have a 2 GBytes a month usage cap," says Marshall.

"In a competitive operating environment, consumers will tend to migrate toward higher bandwidth services, all else being equal, but they are not necessarily willing to pay a significant premium for the added performance capability," says Marshall.

Our most recent survey results indicate that consumers require 2 Mbps to 3 Mbps bandwidth for their broadband service. This is likely to increase dramatically over the next two to three years, but the consumer survey suggests dramatically-higher bandwidth does not affect decisions as much as recurring price and existence of bandwidth caps. 

For example, when offered a choice between one package featuring a 2 GByte per month usage cap with 6 Mbps bandwidth, and another package with unlimited monthly usage but just 2 Mbps service speed, 63 percent of consumers opted for the 2 Mbps service with no cap.

Even when the choice is between an unlimited package offering only 768 Kbps bandwidth, compared to an alternative plan with 6 Mbps bandwidth and a 2 GByte per month usage cap, 57 percent preferred the 768 kbps package.

Service providers still must manage bandwidth demand though, with or without usage caps
Usage caps work to regulate demand, but users do not like them.

The other approach is not to impose the usage caps, but instead to use policy managment and deep packet inspection to manage traffic flows.

If such solutions are implemented in a non-discriminatory manner, so that all like services are treated equally, they can be implemented irrespective of network neutrality regimes currently under consideration, Marshall believes.

Small Business Commits to Social Media, Email, Search

About 75 percent of small businesses will increase their spending on email marketing in 2010, while nearly 70 percent will spend more on social media, according to VerticalResponse.

The findings might not suggest small businesses are spending wildly. In most cases the firms likely are testing new media. But the testing seems very widespread.

Almost all businesses with 500 or fewer employees will use email marketing next year, the company says. Only 3.8 percent of small business executives say they will not be using email marketing in 2010.

More than 70 percent also indicated they would not use TV or radio advertising.

Search advertising is used by about 72 percent of small businesses, but banner advertising is used by about 40 percent of small businesses, VerticalResponse says.

Facebook, Twitter and YouTube, as well as other social media sites, are used by about 78 percent of small businesses, the firm says.

Monday, November 23, 2009

Best Buy Sells Phone Power Nationwide

Best Buy now is distributing the "Phone Power" VoIP service nationwide. That's a pretty big boost for any retailer, and especially so for an independent VoIP provider aware that the market is consolidating and that scale is sorely needed.

Phone Power costs $19.95 per month with no contract, $16.95 with a one-year contract and $14.95 for a two-year contract. The service offers unlimited calling within the United States and Canada and 60 international minutes in 88 countries.

The Best Buy offering includes a two-line home adapter as well as a USB travel adapter. It sells for $79.95, and comes with a $79.95 instant service credit to be applied when the customer activates service on an eligible one or two year service plan.

It isn't clear yet whether Best Buy also will be actively selling Phone Power business packages, which come in both multi-line and single-line versions, offering unlimited inbound calling and 5,000 minutes of outbound calling with auto-attendant feature, and other popular business features, included on multi-line packages.

Apple And Android Dominate U.S. Smartphone Web Traffic

It is starting to look like just two smartphone platforms "matter" where it comes to use of the mobile Web: the Apple iPhone and the Android devices, a new analysis by AdMob suggests.

AdMob’s October, 2009 measurements show that the iPhone/iPod Touch and Android phones account for 75 percent of mobile Web traffic in the United States.

Apple devices continue to dominate, with 55 percent share, but Android users in October represented 20 percent of all activity, up from 17 percent in September, 2009.

The iPhone and iPod Touch grew their share from 48 percent to 55 percent share over the same period.

The Blackberry ’s mobile Web traffic share went down from 14 percent to 12 percent, and Palm’s webOS shrank from 10 percent to five percent.

On a global basis, the iPhone operating system now accounts for 50 percent of all mobile traffic, up from 43 percent the month before.

Android has an 11 percent global share, which makes it third globally after Nokia/Symbian’s 25 percent share.

Since Verizon launched the Droid about two weeks ago, Droids now make up 24 percent of all Android mobile Web traffic. The HTC Dream, which is the oldest Android device on the market, is the only Android device with more share, at 36 percent of Android traffic. Give it a few more weeks. The Droid is shaping up to be the most-popular Android device so far.

The data suggests that the BlackBerry, though a worthy enterprise device, continues to lag as a smartphone choice for users whose key applications lean to the Web.

Sunday, November 22, 2009

Why Isn't All Voice Free?

"When I wrote a story about various VoIP initiatives a decade ago, nearly every expert I spoke to spouted the same prediction: within 10 years, all phone calls will be free," says John Dvorak, PC magazine columnist. "The rationale behind the pronouncement was that the wires and systems used for phone calls will eventually be used to transfer data, just like everything else."

"You don't get charged for visiting a Web page, so why get charged for making a phone call, if both are essentially data?" he muses.

It's an old argument, but is akin to asking why a diamond, made of carbon, is worth more than a thimble's worth of oil, also made of carbon, or a tiny cube of apple.

The answer to the question of different incremental pricing or costs to use network features has little to do with the representation of symbols and everything to do with larger permissible business models mandated by government entities.

In a legal and regulatory sense, bits are never "just bits." Cable TV bits are regulated differently from voice bits that touch the "public phone network," while Internet bits are regulated differently from each of those other types of bits and from private network data.

Still, it is one thing to argue that use of communications or other bits may not impose an incremental cost to a user. That is not to say there are not specific costs associated with use of the bits. Google Voice might not charge an end user for completing a specific call. But there are actual costs, imposed by the regulatory regime. Google pays them, not the end user.

But that does not mean the call has no cost, only that the cost is indirectly paid.

As for why others, besides Skype, other instantt messaging-based call providers, have not moved more aggressively to offer various forms of "no incremental cost to offer" calling, financial interests are involved as they always are.

One might as well ask why no-incremental cost education, music, video, books or plane tickets are not available.

In 1977, for example, long distance calling represented about half of all U.S. telephone company revenue. By 2007, that was no longer true. Instead, wireless services had taken the place long distance once played in underpinning the whole business. That isn't to say long distance has dropped to insignificance. It remains important. It is to say that there must be some revenue model underpinning the business, and if it is not long distance or voice, it will be something else.

No, there is no mystery about why VoIP has not lead, over the last 10 years, to "universally-free" (no incremental cost to end user)  voice calls. Voice, though declining, remains a key underpinning of the carrier business model. Nor do government regulators permit "free to end user" calling between networks.

Google Voice might not charge a U.S. user for a U.S.-terminated call. But Google Voice is compensating the terminating networks for use of their networks. Google Voice envisions a different business model for domestic calling than "per minute" use of the network. Lack of end user charges does not mean "terminating minutes" do not carry costs.

That, in fact, is behind Google Voice's blocking of some numbers, in some high-cost exchanges. And those charges are radically higher. Some firms report that the high-cost termination charges are as much as 25 times higher than typical.

Saturday, November 21, 2009

Do We Need to Rethink What We Think We Know About Consumer Behavior?

Though 2010 widely is expected to provide a recovery from the depths of the recent recession, questions logically remain about how consumers will behave in a recovery most expect will be extended.

A new study by consumer research firm Decitica suggests lasting effects that could shape consumer spending on any number of communications services, applications and devices.

"The effects of the Great Recession on consumer behavior are so profound that many of the assumptions underpinning consumer segmentation are no longer valid," says Dr. Val Srinivas, Principal at Decitica.

Among the key findings: "Price has become the dominant consideration in the purchase of all kinds of products." For this reason, Decitica predicts "a long uphill struggle by marketers to shift the focus away from price."

The recession has caused a profound, deep-rooted change in consumers' spending habits in favor a more restrained approach, Decitica says. Many have accepted this radical change as the "new normal," and not just a cyclical phenomenon.

American consumers have proven researchers wrong in the past. The issue is whether this time might be different. See full post at

How Strong a Recovery; What Impact on Communications and Technology?

Since 70 percent of U.S. economic activity is generated by consumers, consumer behavior will be key to the arrival of a sustained period of growth. Conversely, anything that imperils consumer spending will weaken, choke off or abort any recovery.

In the past, this hasn't been an especially tough question to answer. Historically, recessions and recoveries roughly conformed to the principle of the bigger the bust, the bigger the boom, and vice versa. That, in turn, was underpinned by the underlying robust health of the U.S. economy.

Real growth in the four quarters following postwar recessions averaged 6.6 percent and 4.3 percent over the following five years.

Those figures are substantially above what economists seem to be calling for at the moment. The current recession has lasted a record seven quarters and has been marked by a near-record average gross domestic product decline of 1.8 percent per quarter.

All of that would, by historical standards, lead to a prediction of a powerful and sustained recovery. Yet forecasts of a two-percent recovery in growth are only one-fourth as strong as postwar experience suggests.

That suggests economists believe something has changed. We can argue about what the changes might be, and what is causing them. But this is not a political issue. As a simple matter of hope for America to get back to work, the anemic growth forecast is worrisome.

As someone who historically has tracked new technology and communications, as well as a citizen who wants the best for his country, it must be said: this does not bode well for our nation, our children or faster deployment of all sorts of interesting and useful tools people can use to enrich their lives and their work.

We might disagree from time to time about what should be done. That isn't the point. Clearly, something rather important is happening; something that defies historical precedent.

Perhaps the economists are wrong. They have been wrong in the past. I hope they are wrong about this. I continue to believe in the power of technology to make a huge difference in peoples' lives, and to fuel robust economic growth, which is, first and foremost, the way we are able to increase wealth and spread it around. I hope, for our nation's sake, that this continues to be true.

For that reason, I really hope the economists are dead wrong about the recovery rate. If not, we have some serious soul searching to do. Perhaps we have been dead wrong about some of our core beliefs.

"People Don't Like Ads" Yes and No

Surveys for decades have shown that "consumers don't like ads." But there's a big caveat. People always say they don't like ads when those ads are interruptions of some desired experience.

But sometimes ads are part of the desired experience. If you are an outdoors enthusiast, ads about gear you can use outdoors are very interesting. If you are a runner, ads about shoes, clothing, nutrition and events are very interesting.

If you are a surfer, ads about surfboards are very interesting.

So it comes as absolutely no surprise that 38 percent of respondents to a Parks Associates survey say they do not want to receive ads for any reaon. About 37 percent of respondents say they are neutral about ads and 25 percent are open to getting them.

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The study also confirms the notion that people will not mind getting ads when those messages are personally relevant, timely and valuable. To be sure, 18 percent of respondents say they don't mind seeing personally relevant ads, with 39 percent reporting they are indifferent and 43 percent not interested.

The problem with surveys, though, is that they sometimes cannot capture the complexity of consumer attitudes. Just about any survey will show that people dislike ads. But if asked whether they would rather pay money to gain access to desired content, for example, or get that same access for free, in exchange for the presence of ads, most people say they'll accept the ads.

Targeting and value make the difference. If the ads are relevant, they are unobjectionable, for the most part. If the user gets something in exchange for receipt of the ads, and the ads also are relevant, surveys show people are accepting, if not entirely happy all the time.

Twitter: "What's Happening," Not "What are You Doing?"

Twitter has made a refreshing, helpful and important change in the basic question our tweeting bird friend asks us.

"What are you doing?" had been the question. The new question is "What's Happening?" That makes more sense to me, corresponds to the way I use the service, and I suspect will deepen and extend the use of tweets as a broadcast, one-to-many information service.

"The fundamentally open model of Twitter created a new kind of information network and it has long outgrown the concept of personal status updates," says Twitter founder Biz Stone. "Twitter helps you share and discover what's happening now among all the things, people and events you care about."

What's interesting here is an important, if subtle shift from "you" to "the world around you." That isn't to say people will stop posting about where they are, random musing or what they are doing, as people.

It is to say that Twitter now is poised to become a more important "news" or "media" format, as it already has been becoming.  I like it.

Another Broadband Stimulus Delay

The National Telecommunications and Information Administration told the U.S. House and Senate Appropriations Committees it will start awarding grants in February 2010, another slip from the revised timetable of December 2009.

The first round of grants was supposed to be issued in June 2009. All during the year, telecom suppliers who are thought to benefit from the program have been asked about when the funding would show up in company activity. Now we know the answer: not until 2010 and probably 2011.

The delay presumably means grants or loans issued by the Rural Utilities Service might also slip into next year. Both programs have experienced delays, perhaps inevitably, given the huge increase in workload.

The NTIA and the Rural Utilities Service say they have received roughly 2,200 applications for the $4 billion worth of grants available for broadband projects in the United States that is available in the first round of funding.

The applications ask for total of about $28 billion in broadband projects, or seven times the total funds available.

The $4 billion in grants currently available to applicants is just the first part of the $7.2 billion that the government has allotted to fund broadband infrastructure investment over the next two years.

Of that money, $4.7 billion has been given to the NTIA to award grants for projects that will build out broadband infrastructure in un-served or under-served areas; to deliver broadband capabilities for public safety agencies; and to stimulate broadband demand through training and education.

The remaining $2.5 billion in broadband stimulus money has been allotted to the Department of Agriculture to make loans to companies building out broadband infrastructure in rural areas.

Barnes & Noble Runs Out of E-Book Readers, Demand Stronger than Forecast

Barnes & Noble says it has run out of available stock of the new Nook e-book reader. Customers who ordger now won't get it until the week of Jan. 4, 2010. "Preorders have exceeded our expectations," said Barnes & Noble spokeswoman Mary Ellen Keating. The company says its $259 e-book reader "continues to be the fastest-selling product at Barnes & Noble.

That has been true for Amazon's Kindle, as well, which is the leading e-book reader at the moment. Analysts have been ratcheting up their sales forecasts over the past two years as consumers exceed earlier forecasts.

Apple, meanwhile, is rumored to be preparing a tablet style device that could double as an e-book reader, and, rumor suggests, will be available early in 2010.

So there is lots of "action" in the e-book reader space, interesting for what it implies about the future economics and distribution formats to be used by the publishing and news industries, the sustainability of "single-purpose" mobile device markets over time, contrasted with "multi-purpose devices," and the associated impact on mobile service provider business models.

There doesn't seem to be much question that distribution of print content now is at the beginning of a change that music already has gone through, and that video also is undergoing. Book distributors and publishers have to be wondering whether this is all such a good thing for them.

From an end user standpoint, one of the interesting angles is whether the e-book reader remains a stand-alone, single-purpose device or whether it ultimately becomes a feature of a multi-purpose device. The answer obviously has huge ramifications for smartphone, netbook and e-book providers.

There is no single historical pattern here. TV displays, home audio systems, microwave ovens and landline phones generally have remained single-purpose devices. The iPod has been a single-purpose device, but the "touch" and now the iPhone might be changing that situation.

Smartphones are multi-purpose devices. Portable navigation devices traditionally have been single-purpose devices, but the Motorola Droid is challenging that notion.

Apple's rumored tablet would be an attempt to provider a multi-function device, and that probably is the form factor necessary for such a convergence. Though people have speculated on smartphones becoming e-book readers, the challenges of form factor (small enough to fit in purse or pocket, light enough to use as a phone, plus large enough screen size to read) seem rather implausible in a single device.

Besides Amazon and Barnes & Noble, other companies offering e-readers include Japan's Sony, Britain's Interead, and Dutch company IREX Technologies.

Forrester Research estimates that three million e-readers will be sold in the United States this year, up from a previous forecast of two million units.

Forrester said it expected 900,000 units to be sold in the upcoming holiday season alone and for e-reader sales to double to six million units in 2010, bringing cumulative sales to 10 million units.

Citi analyst Mark Mahaney thinks Amazon will sell 1.5 million Kindles in 2009, up from his previous estimate of one million. Mahaney thinks Amazon will sell 2.7 million Kindles in 2010.

“Book applications for smartphones have the potential to become a bridge to other devices such as tablet readers and netbooks,” said Mr. Weiner. “Apple, for example, could migrate the more than 500 book applications in the iTunes store to a tablet device and Google, which recently announced a browser-based e-reader, could offer applications for Android-based devices of various form factors,” he says.

Friday, November 20, 2009

Mobile Broadband Complementary to Fixed Broadband

Over the next three to five years, mobile broadband will be complementary to fixed broadband, rather than a substitute, says William Lehr, economist and research associate in the Computer Science and Artificial Intelligence Laboratory at Massachusetts Institute of Technology.

"I expect fixed and mobile broadband services to offer distinctly different sets of basic capabilities, and as a consequence, to remain distinct services that will not be perceived as close substitutes in most user and usage contexts for the foreseeable future," Lehr says.

There will be situations where it is reasonable to expect that mobile services will be perceived as substitutes, if imperfect substitutes, for fixed connections, and will therefore result in some cannibalization, he says.

Users who are more budget conscious (the young or others with limited incomes, for example) are more likely to choose one instead of both services, Lehr suggests.

Heavy users may prefer fixed broadband access, while light users (or those who live alone) may find the mobile alternative more appealing.

Also, users who place a high value on mobility are more likely to opt for mobile over fixed services. Conversely, those whose principal mode of usage is at a fixed location and who would have a high need for a large sized display, may strictly prefer fixed broadband services.

As mobile data rates increase, some users may find that for their usage profile, mobile is fast enough to meet their needs even for shared household use. That should especially be true now that MiFi devices can allow sharing of one mobile connection by as many as five devices.

On the other hand, even though mobile bandwidth is increasing, so is fixed bandwidth. So the relative value of mobile over fixed services is greater when the fixed service is less capable. In other words, a fast 4G wireless connection might be perceived as superior to a lower-speed digital subscriber line connection, compared to a fiber-to-home connection or DOCSIS 3.0 cable modem service.

What the situation might be in 10 years is likely unknowable, but it is reasonable enough to assume that if today's smartphones are simply tomorrow's phones, and if new devices continue to be developed, that mobile broadband always will be a distinctly complementary service. If you assume today's 276 million mobile phone users in the future will simply be smartphone users with broadband connections, you get the point.

In fact, it probably makes more sense to say that fixed services are not going to be substitutes for mobile broadband, than to argue that mobile will be a substitute for fixed access. Nearly every mobile device will require broadband, irrespective of what in-home or in-office devices require.

Whatever you think about mobile broadband, it is worth remembering that mobile broadband services were not available in the U.S. market until 2005. So we are at this point just five years into the product's lifecycle.

By the first quarter of 2008, 40 million or almost 16 percent of mobile subscribers were regularly accessing the Internet using mobile broadband services, according to Nielsen.

Analysts at Forrester Research use a lower figure of 34 million subscribers in 2008. That will have grown at a 52 percent rate in 2009 to 52 million, and mobile broadband will continue to exhibit double-digit growth through 2014, when 106 million users, or a full 39 percent of all wireless subscribers, will become regular mobile Internet users, Forrester now projects.

PC data cards represent about 34 percent of mobile broadband subscriptions, while smartphones rapidly have emerged as the key driver of new mobile broadband accounts.

Is Twitter Traffic Falling?

More than one recent study has suggested that Twitter traffic is declining, after leveling off in the summer of 2009. But is it really? The answer is complicated.

According to Nielsen, traffic to was down a dramatic 27.8 percent between September and October 2009, falling to 18.9 million unique visitors.

Research firm comScore also noted that unique visitors were down 8.1 percent in October, while Compete reported a 2.1 percent decline.

Some might suggest the traffic decline is caused by falling interest in Twitter, while others suggest the traffic simply is caused by Twitter third-party applications and mobile access.

Crowd Science, for example, in August studied traffic patterns and found 43 percent of Twitter users accessed the service through third-party applications, and 19 percent using text messaging.

Personally, I'd bet on the use of third party apps and mobility as the explanation. Nielsen says the third quarter of 2009 was the first quarter in which more than half of mobile Internet users were accessing the Web using a smartphone, and since social network updates are a huge driver of smartphone usage, it stands to reason that traffic sources are changing.

Are Recession Driven Product Substitutions Permanent?

Whatever else one might say about it, a recession is a prime opportunity for product substitution whose immediate benefit might only be seen to be “saving money,” but which then might create a satisfying habit that leads to a permanent shift in demand, not just a temporary change of provider or service level.

In the U.S. market, the issue is whether the millions of customers who have opted for prepaid mobility will keep those plans even after the recession has past. Virtually nobody thinks consumers who have cut the landline voice cord in favor of mobility are likely to reverse course.

The poster child for substitution of mobile broadband for fixed broadband, for example,  is Austria, where  almost all broadband net adds have over the last year or two been mobile connections, rather than fixed connections.

And though the market in Austria and in the United States appear to have different structural characteristics, the danger of product substitution is amply highlighted in the Austrian market, where aggressive mobile providers, high fixed broadband prices and relatively low value of entertainment video create a sort of perfect storm for mobile broadband substitution.

And though it is not certain, past recessions were linked with, though perhaps not directly contributors to, the rise of disruptive new players in media or communications ecosystems.

Google was born in 1998, in the midst of the Asian financial crisis, while Skype was born in 2003, after the dot-com implosion, for example.

Changes in industry structure and the emergence of disruptive new industry leaders will not be ascertainable for some time. But churn is going to be easier to track, as we normally get reasonable trend data from any number of public companies every three months. We largely will have to guess at how product substitution might be occurring.

Some forms of substitution are now so commonplace as to be expected: cable companies and mobile providers gaining voice customers while telcos shed them; telcos gaining video customers while cable companies shed them while online viewing grows.

Other likely product substitutions are less visible. It is not clear there is any appreciable substitution of mobile wireless broadband for fixed broadband. But logic suggests that will become a greater opportunity and danger in several years, when fourth-generation services are more widely available.

Parks Associates research, for example, finds 80 percent of broadband users in key European markets prefer traditional video viewing to online viewing. Depending on how you want to spin it, that is a glass half empty or half full.

“Broadband has transformed video viewing habits in Western Europe, where over 20 percent of broadband households have watched a film or TV program online in the past six months,” say researchers at Parks Associates.

Mobile broadband and mobile broadband modems and dongles (including embedded devices) are growing dramatically. In several major European markets, including Austria, Ireland and Sweden, as many as 15 percent to 30 percent of broadband subscriptions are now over cellular networks, up from nearly zero a year ago, the International Telecommunications Union says.

Think about that for just a moment. From zero, mobile broadband jumps to 15 to 30 percent of total broadband accounts, in a single year.

That represents some mix of additional access accounts supplemental to fixed broadband, and some substitution. But it is significant that the ITU report believes the growth shows “mobile broadband can substitute for light-usage DSL.”

So the logical question is whether mobile broadband is to fixed broadband as mobile voice was to fixed voice.

Analysys Mason notes that one of the key success factors for the rapid take-up of HSPA (3G) has been the introduction of flat-rate pricing with either unlimited usage or very large inclusive data bundles.

So at least in some markets, the recession could be leading some significant number of consumers to trade off their fixed broadband connections in favor of mobile broadband.

The longer-term issue is more important. Once they have learned to live that way, will they continue when the recession ends?

That is the big danger on a number of fronts. And it is a bigger change than simple churn, as important as that is.

If a business customer picks another provider for one or more services, the danger for the original provider is that this particular customer never returns.

If a customer switches from cable to telco or satellite for video, does the cable company ever get that customer back? And if a customer abandons all landline service, does a telco have much of a shot at getting that customer back later?

Those issues are real enough. More challenging though is a fundamental new behavior pattern that changes the size and value of an entire market segment, application or service, not simply the market share various contenders can claim.

Sure, there will be important but temporary effects during the recession. What bears closer scrutiny are permanent changes in end user demand. The recession will provide incentive to try new things. Once that happens, we might see the behavior persist even after the recession-induced driver has passed.

We won’t know precisely how important all that is for some time. What does seem clear is that lots of people are going to try new things, maybe just to save money at first. There is no way all that behavior is going to stop once the recession is a memory.

Thursday, November 19, 2009

If You Wanted to Build a National 100-Mbps Access Network, Could You?

The Federal Communications Commission says it will cost $350 billion to build a single, nationally available broadband access network operating at 100 Mbps and reaching virtually every American. The FCC also says it is studying whether telcos and cable companies should be forced to offer open access to third parties that want access to their networks.

Assuming one believes that both ubiquitous access and 100 Mbps speeds are a desirable thing, and virtually everyone might agree, in principle, that that is a worthy goal, the issue becomes "how to get there."

At some fundamental level, policymakers will have to decide whether they want maximum deployment and innovation in terms of new physical facilities, or mazimum third party access. 

Some will argue this is a false choice. That is possible. There is no way to predict with certainty what will happen if robust open access policies are instituted. 

That would be especially true if cable operators, for the first time in industry history, also were forced to open up their facilities for open access. 

Many will point to mandatory open access policies existing elsewhere in the world, and argue the same sorts of benefits can accrue in the U.S. setting. Some consumer advocates say open access is one reason why Internet service is cheaper and faster in those countries. it's a complicated question to answer, however. 

In most, if not all countries where robust open access rules apply to telcos, the competitive landscape is quite different from that of the United States. Few other countries have ubiquitous cable broadband and telco broadband. 

That might not seem, at first blush, to be much of an issue. It is, and the reason is as simple as pointing out that competitive markets are distinctly different from monopoly markets. Keep in mind that a single provider of very-high-speed access, operating on an open access model, still is a monopoly. There is one network and all comers can pay to use it. 

The issue is that such a provider, or providers, as would be the case in the United States, would not be able to operate as a monopoly, because there no longer is any such thing in the U.S. broadband communications business. 

In most communities, there already exist two fixed broadband access providers in the cable and telephone company. In addition, there are places where a third fixed operator exists, or one or more fixed wireless providers.

Then there are two national satellite broadband providers, Wildblue and HughesNet.

Beyond that, there are four mobile providers with existing or partially-built mobile broadband networks, as well as Clearwire, also in the process of building its own national broadband network.

So here's the problem. Where open access broadband networks are most successful, there is not a ubiquitous cable competitor fighting head to head for customers. Assume for the sake of argument that cable providers, nationally, have about 48 percent share of the fixed market, all telcos collectively have 38 percent, and other providers have the rest. 

Assume away all the issues of changing the business models of the whole industry so that one provider in each locality is charged with building a 100-Mbps access network, and is then free to provide service to all comers, at government-mandated rates.

Assume away the problem of the actual wholesale rate, which was part of the Telecommunications Act of 1996. That Act imposed just such an open access policy on major U.S. telcos.

To simplify what happened in the aftermath, telcos violently disagreed with the wholesale rates, while competitors argued just as vociferously that the mandated rates were too high. At the same time, investment in faster broadband facilities slowed dramatically, for one simple reason. Telcos saw no advantage to investing in expensive new facilities that provided a financial return unappealing to the entities who would have to lend the money.

All of that changed when new rules were written that exempted new fiber-based facilities from the open access requirements. Keep in mind that cable companies still do not have any open access requirements of any sort, and that any new broadband policies might well require them to provide wholesale access as well, and that they might also object to the mandatory wholesale rates. 

But ignore that for the moment. Here's the investment problem. Companies have to raise $350 billion in private capital to build the network. And when they develop their financial projections, they will have to note that the new revenue from building the $350 billion network is based on the incremental difference between what typical customers now pay for broadband access, and what they will pay for 100 Mbps access.

But there are other services on the network, you might point out. That's true. But here's the problem. The new network only replicates voice and video revenue already earned on the existing networks. No smart lender is going to okay huge sums based on replicating existing revenues. They will want to know what new and additional sources of revenue will exist. 

The providers can argue that where consumers now pay $40 a month for single-digit megabits per second of access, they will pay $100 to $200 a month for 100 Mbps access. Then the providers will have to model what percentage of customers will do so. When the number turns out to be quite small, the money will not be raised.

There just aren't all that many customers willing to pay $100 to $200 a month to get 100 Mbps when they can do nicely with 20 Mbps to 40 Mbps for lots less money. Ask people. They will tell you what they'll do.

You might argue that take rates will be very high if people can buy 100 Mbps for $40 a month. And that's correct. The problem is again that $350 billion cannot be raised if the new network has no ability to pay a return, in a reasonable amount of time, on the investment. And at anything like $40 a month, no lenders are going to cooperate. 

But matters actually are more complicated than that, as if that was not a show stopper. Recall that most people who want broadband access already buy it. Recall that cable providers, with their own networks, serve about 48 percent of the customers. 

Ask any cable executive you can find whether they would be willing to stop using their own network and just buy access from the telco. Go ahead. Ask anybody you can find. Let me know when you find anybody that says they will do so. 

But ignore that. Say the local telco is charged with building the 100-Mbps access network, and that somehow lenders are convinced that large numbers of people will buy the more-expensive 100 Mbps service. How many of its own customers, and customers of other providers, will switch to buying the 100-Mbps service? 

Be generous and say 20 percent of all broadband access customers can be convinced to buy the 100-Mbps service. That means about eight percent of the telco's own retail customers will do so. 

Say 20 percent of cable customers desert. That adds another 10 percent of U.S. broadband customers. Then assume 20 percent of all the other customers likewise make the move. That adds another three percent of current broadband customers.

What that all works out to is that about one in five homes or locations the new 100-Mbps network passes will buy the higher-priced access service. So the issue is whether an adequate financial payback can be built on serving one of five locations passed with a single new service.

You might argue there also is voice and video, but the problem is that the existing networks already provide those services. Additional revenue is not created just because the network changes.  

But assume an investment of $2700 per passing to build the network. Assume the 20 percent take rate and $60 a month incremental revenue per customer ($100 a month). 

Based on those assumptions, the network costs $13,500 per customer, since only one in five homes is a buyer. At an incremental $60 a month in revenue, breakeven (even at zero interest cost) is 225 months, or 18.75 years per customer.

Nobody will lend money for a breakeven of 18.75 years, and that is assuming zero interest on borrowed money.

An open-access 100-Mbps network might be a worthy public policy goal. But it is hard to see how money can be raised to build it. 

Wednesday, November 18, 2009

Google Phone: Will Second Time be the Charm?

Remember Zer01 Mobile, the mobile virtual network enabler, which says it "is the first mobile virtual enabler company to offer true mobile voice over IP services at a carrier level?" I don't mean "remember" as in, "they're gone," but only in the sense that you might not have heard quite so much about them since they switched business plans and became an MVNE rather than a retail provider.

At their original unveiling, some of us thought the most interesting angle about Zer01 was the way it went about providing voice services, at that time not a classic mobile virtual network operator,. but as something else. Up to this point, MVNOs essentially have bought capacity from some underlying carrier and then rebranded and resold those services under their own names.

Zer01 Mobile did something different. It leveraged intercarrier connection rights to essentially roam on other 3G GSM networks. It's the same sort of business arrangements mobile providers create when they want their own subscribers to use other networks where the home network does not actually have infrastructure.

By such mechanisms, Zer01 Mobile essentially was able to create a VoIP offering using the data connection only, with no need to buy wholesale voice minutes.

At the time Zer01 Mobile launched, at least some of us found the approach intriguing, though we were not then, and probably are not now, convinced the company would be first to really make a wild success of the approach.

So that's where a new Google-branded phone might just make sense. Nobody knows now whether Google is, or is not, readying its own branded phone. But one thing is clear: Google posseses the carrier interconnection rights it would need to create such an IP-only phone that relies completely on 3G bandwidth for all services.

So Google might not be frontally competing with any other service providers, or necessarily with any other mobile phone or smartphone providers, in the sense that it could bring to market a "data only" device that relies solely on the data connection to handle all voice functions.

There might be occasional quality issues, for the same reason there might occasionally be quality issues for any data services running on any mobile network that is at peak load. Over time those issues can be resolved.

Ability to prioritize voice packets clearly would help, but it is not clear whether that will be permissible, going forwad, because of possible network neutrality rules. If ever there was a good reason for prioritizing bits, maintaining the quality of voice conversations on an all-data network would be one of the best.

It's all conjecture at this point: the Google phone, the method of providing service and voice prioritization. But there is a possibility that something Zer01 Mobile cleverly devised might succeed in a very-big way if Google were to do anything similar.

Mobile Providers Will Sell 60% of Internet-connected Mobile Devices by 2013

Carriers are becoming a significant channel for all Internet-connected mobile devices, including netbooks and mobile PCs, says In-Stat.

By 2013, In-Stat anticipates that over 60 percent of all the Internet-connected mobile devices sold will be through carrier channels. In large part that is because smartphones increasingly are Internet-connected devices, and mobile retail outlets account for the lion's share of sales at the moment. What is new is the addition of netbooks to the lineup.

In-Stat projects that nearly 31 percent of notebooks will be sold through carriers in 2013. That would make mobile service providers a major channel for sales of netbooks, which might otherwise be purchased through a mass market retailer.

“In the U.S., carriers are charging up to $60 per month for a two year contract with the subsidized purchase of a netbook,” says Jim McGregor In-Stat analyst. “While the subsidy costs the carrier $50–$100, it generates $1,440 or more in service fees over the life of the contract.”

The total available market for Internet-connected devices is projected to grow at a 22.3 percent compound annual growth rate (CAGR) through 2013.

fring Now Available for Android

Tuesday, November 17, 2009

What Google Could Do with Gizmo5

Google has bought Gizmo5, an IP communications firm with a deep understanding of Session Initiation Protocol, which has been adopted globally by communications firms as the protocol for handling IP-based communications including voice, video and messaging.

That of course means Google could do lots of things. The "grabber" headline might be that Google now wants to "out-Skype" Skype by introducing a feature-rich calling service able to communicate with standard telephone devices, but also allow all sorts of rich and affordable features for IP-enabled devices on broadband networks.

According to that logic, Google might be readying a disruptive global calling service aimed either at Skype or at the global tier one telecom providers, either mobile or fixed.

But Google has other options as well. Those options might make as compelling headlines, but could make virtually any Google application more compelling.

In any of a number of scenarios, Google might be looking at anything but becoming a challenger to traditional telecom services, and maybe not even a direct challenger to Skype. The value of SIP is that it can "communications enable" virtually any Web application.

It could add voice communications, video or audio conferencing, messaging or other message and call handling features to any other Web-based application. As eBay once described the upside when buying Skype, voice communications could be added to any potential eBay transaction.

That didn't materialize, but the point is that SIP will be easy to integrate with Web applications and global IP communications in the way communications service providers are used to providing it.

In the perhaps more likely scenario, Google would work to embed rich communications into any number of its applications. In its mobile search efforts, Google would be able to create a location-based search experience that included one click calling, for example.

The same would be true for its mapping and turn-by-turn communications feature for Android mobile devices.

SIP could help Google embed live communcations links in Google Docs, or Wave, allowing real time communications to be a simple one-click feature of collaboration.

The point is that Google likely is not looking at anything so pedestrian as a "Skype killer." Embedded voice, messaging and video communications might be a very attractive feature for any advertiser using any Google application as an ad venue.

In any of these scenarios, Gizmo5 brings Google, and Google Voice, the ability to embed communications in nearly every application. It is the mass market equivalent of "communications enabled business processes" in the enterprise space.

Sure, Google might leverage the Skype style communications to enhance Google Voice. But it seems unlikely to me to stop there. As VoIP proponents always have argued, the real value lies not in free or cheap calling, but in changing the nature of the communications experience. In all likelihood, Google is thinking that way.

Surprising Smartphone Statistics?

I don't know about you, but I found this bit of data on smartphone use surprising.  According to Nielsen, when looking at smartphone use with a baseline of 100, smartphone users  disproportionately tend to be 18 to 34 years old. 

One wonders what happened to the BlackBerry users between the ages of 35 and 54, whom one might think are over-represented among the ranks of smartphone users. 

Granted, this is an index with 100 as baseline, so it is more an example of "over-indexing" among some segments, but the findings still surprised me.

That was especially surprising given the over-indexing of smartphone used at least in part for business purposes. 

While smartphone usage is shifting from purely business use to both personal and business use, owners are still more than two times as likely to own a smartphone for business usage only.  

The study also suggests smartphone owners continue to be predominantly male, are 65 percent more likely than the average mobile subscriber to be between the ages of 25 and 34, and nearly two times as likely to make more than $100,000 a year.

Mobile VoIP is Inevitable, Yankee Group Says

Flat-rate data pricing has made mobile VoIP applications inevitable, and over time, all U.S. carriers will end up allowing them, says Yankee Group analyst Carl Howe. That, in turn, is going to have profound impact on the mobile service provider business model, as voice now is the key revenue driver.

Some of the effects are easy to predict. International call traffic will migrate to VoIP. In the U.S. market, for example, domestic voice calling minutes are cheap, but international rates are fairly high.

On the other hand, mobile VoIP also will shift international traffic from the landline networks (including use of VoIP from fixed broadband connections) to the mobile network.

Less easily quantified is the boost mobile VoIP will give to purchase and use of specific handsets, and the emergence of specific mobile VoIP user segments. For example, devices with front-facing cameras potentially can become the foundation for mobile videoconferencing services and applications.

If you think of BlackBerries as "email" centric phones, and iPhones as "mobile Web" phones, while other devices are "social networking" or "navigation" oriented, you can see where the niches might be.

It is conceivable that "flat-rate data plan caps will tighten," says Howe. Mobile service providers might try to avoid a wholesale collapse of voice revenue by trying to manage network capacity through through more-stringent bandwidth caps.

The operative word in that sentence, however, is “trying,” says Howe. Data caps and over-cap pricing are likely to receive intense regulatory scrutiny to ensure that operators aren’t gouging customers in an attempt to replace lost voice revenues.

The other big unknown is whether service providers will be allowed to create optional "voice optimized" or "conferencing optimized" service plans for users that want priority handling of their own conferencing and voice bits, or "video optimized" plans for users who deem video apps to be key.

In a sign of things to come, Verizon Wireless and AT&T now allow use of mobile VoIP. Google's Android phones running on Verizon's network have VoIP applications available on them.

AT&T also now allows use of the Skype VoIP application on AT&T’s 3G network and iPhones. Vonage and iBasis, among others, also support mobile VoIP calling.

The VoIP trend actually only accelerates an on-going trend. U.S. mobile service provider monthly voice revenue per subscriber has declined from an average of $58 in 2000 to less than $35 in 2009. VoIP might accelerate that process, but is not singlehandedly causing it.

Data plan revenue is the obvious replacement revenue source. And with more application stores offering mobile VoIP clients, it will be hard to stop users from substituting VoIP for traditional calling. Of course, mobile providers have options.

They might not want to do so, but one way to prevent substantial migration to VoIP calling is simply to lower prices for tradtional calling, especially under conditions where voice is carried on one network, and data on a separate network. Part of the overall equation is the additional load mobile VoIP calling will place on 3G networks. In a sense, providing incentives for users to use the voice network for voice offloads traffis from the 3G networks.

Ease of use will emerge as a key issue as more mobile VoIP clients are made available. For many users, domestic calling is cheap enough that mobile VoIP will not provide much advantage, as compelling as international VoIP will be. Anything other than the normal process people now use to dial calls will create huge barriers to domestic VoIP usage.

Call quality also will be an issue. People are used to mobile voice call quality being less than landline. They are used to VoIP calls being equivalent to mobile call quality. But quality less than mobile will create barriers to usage.

On the other hand, use of high-quality codecs will be an incentive to use of mobile VoIP. Anybody who has used Skype high-definition codecs might have new incentives to use VoIP calling services that offer such experiences. Adoption barriers exist here, as both ends of a circuit must be equipped with high-performance codecs to maximize the experience.

The other unknown is the impact of devices able to support multitasking and integrate data services such as instant messaging and presence functions with voice sessions.

Carriers might want to ationalize data and voice pricing, says Howe. A $30 per month data plan capped at 5 GB a month allows your typical 24 Kbps codec VoIP user to talk for nearly 21,000 minutes. That makes the $60 AT&T charges for 900 voice minutes a month look pretty expensive, says Howe.

Operators should do the math on tariffs they charge and adjust rates so VoIP arbitrage becomes less attractive.

Service providers also should build their own mobile VoIP apps, optimized to work with 3G networks as well as Wi-Fi and 4G networks they also may own. That of course assumes such optimization will remain legal once the Federal Communications Commission finishes its rulemaking on network neutrality.

Does Social Media Advertising Work?

Some observers rightly will ask whether "free to use" social networks can survive forever without a clear revenue model of some sort. The general expectation is that viable revenue models can be created using some forms of advertising or marketing by brands hoping to reach their potential customers.

So far, the evidence is mixed, if promising. Reasonable observers will note that the way advertising or marketing messages are handled will be crucial. But lots of major retailers alread are betting that social marketing will pay off.

Telecommunications firms, Web media, retailers, financial and entertainment firms, automotive and health companies are among the companies already making use of advertising or other social network promotional opportunities.

Still, social media advertising and marketing remains a "work in progress." A new study by MomConnection provides evidence on that score. According to recent findings from, 60 percent of users report having used a social network in the past 24 hours, turning to online communities and social networks for advice, support and connection.

But the survey also suggests that they do not use social networks as a resource when it comes to product decision-making. In other words, social networks are used to share information about products users already have experience with, rather than to choose new products they have not used before.

Moms are four times more likely to turn to their personal offline network of friends and family than online social networks for product recommendations and buying advice.

The study found that social networks are not a channel where most moms are receptive to gathering product information, but rather is largely for entertainment and personal communication.

Still, the results suggest that social networks might be growing in influence. About 24 percent of respondents indicated that they have used Facebook for product information and buying advice, while five percent have used Myspace for product information, while three percent have used Twitter.  

The survey also found that the respondents interact with brands on a surprisingly high level, actively requesting information and resources from the companies whose products they use. Some 81 percent have visited a brand's Web site for more information while 65 percent have signed up to receive a newsletter from a brand.

Some 36 percent have posted a link or joined a fan group on Facebook. Also, it appears that users become important "influencers" once they have formed an opinion about products and services. About 94 percent of respondents report they give advice to other moms in at least one product category.

Are Android Users Different From iPhone Users? Does it Matter?

It is a bit early to determine how Android users might be different from other smartphone users, including iPhone customers. Some early studies suggest Android users are heavier Web application users than iPhone users are.

Others, such as a recent survey by comScore, suggest Android users are slightly less intensive users of mobile Web applications.

So far, the comScore study suggests, Android users are heavier users of video applications, capturing and uploading video significantly more than iPhone users do.

The behavioral pattern might be important if one assumes the Android has potential to create one or more new niches in the smartphone market.

Lots of attention now is focused on whether Android devices are "iPhone competitors." Some might argue it is more likely Androids will appeal to different types of users, for different reasons, as most BlackBerry users likely have different priorities than iPhone users.

How Junction Networks Deals with Traffic Pumping

Google Voice recently has drawn attention from the Federal Communications Commission for its practice of blocking calls to some high-cost telephone numbers used by free conference calling sites. And it appears Google Voice is not the only provider of affordable calling services that finds the high-cost numbers a problem.

Junction Networks, a provider of hosted business IP telephony, has taken another tack, announcing that it will begin charging a higher fee for outbound calls to those exchanges.

“Free conference calling and other ‘traffic pumping’ services exist because the current carrier compensation system allows rural carriers to pass extremely high fees on to other carriers, who often cannot come close to recovering the cost of calls,” says Rob Wolpov, president, Junction Networks. “As a result, we have been left with an overwhelming increase in fees for calls to a number of rural locations where these services operate.

“In order to maintain our low-cost business VoIP options and at the same time, allow our customers to call any number they choose, we have decided to charge the market rate for calls to the designated areas used by these services," Junction Networks now says.

Free conference calling services, adult chat lines and other “traffic pumping” services are often reached through the telephone exchanges of very small, rural operators. "In a legal but questionable arbitrage scheme, these calling services choose these rural exchanges precisely for their high termination charges -- the fees that sending carriers pay them to complete (terminate) the calls," says Wolpov.

Charging as much as 20 times the typical domestic termination rate, the rural telco then splits the profits with the service. While GoogleVoice has responded by blocking calls to those numbers, Junction Networks prefers the alternative: allowing customers to continue using these services at their discretion, but paying the actual cost of such calls.

Under the newe plan, Junction Networks customers can control the cost of any calls costing more than 2.9 cents per minute by simply completing an online extended dialing form.

Such traffic pumping schemes are expected to be addressed at some point. For the moment, blocking is seen as the lesser evil for some service providers who do not make a living from call termination, though cost-based pricing will make more sense for firms that do charge for calling services.

Google Voice arguably has a different problem. It provides Web-enabled calling features that sometimes require call delivery to such telephone numbers. Sometimes Google Voice provides the actual outbound call origination, rather than processing inbound calls to a user's own telephone numbers. When originating calls to the high-cost terminations, Google Voice has no direct revenue model at all.

Advertising is Changing from "Push" to "Pull"

Consumer packaged goods companies that typically have preferred mass media are making a significant move into social media messaging, says eMarketer. And where pushing ad messages to potential customers has been the dominant focus, social media allows retailers to engage in different ways.

“By looking at social media as a way to listen to consumers, respond to their needs and create ongoing dialogue—instead of as another way to advertise to them—CPG companies can reinvigorate their marketing and create new bonds with consumers,” says Debra Aho Williamson, eMarketer senior analyst.

That doesn't mean consumer retailers are abandoning traditional advertising by any means, she says. So far, social media advertising represents only a small fraction of the total dollars going to that channel, according to Nielsen AdRelevance.

And here's the difference: many mass market retailers consider social media to be "earned" media, historically the province of public relations, more than "paid" advertising. For that reason, more effort is going into blogger relations programs and promotional interactions that complement display advertising, for example.

Social media more frequently is seen as a way to “humanize their brand and create loyalty simply by being available when consumers have a problem, question or compliment,” says Williamson.

Telecommunications firms are leaders in the social media messaging space, as are Web media firms. About 20 percent of all social network site advertising over the last year (September 2008 to September 2009) has been spent by communications firms, while 19 percent was spent by Web media firms.

This is a significant shift. At some level, one might note that retailer spending is shifting from "advertising" to "public relations;" from "ads" to Web-based interactions on social sites. That means spending for Web operations overall is growing, most likely displacing spending that previously would have been devoted to tradtional display advertising.

The shfit from a "push" approach to a "pull" approach is tangible, if seminal.

Monday, November 16, 2009

New Ruckus Wireless Network: Just Like WiMAX, But Without the Cost

Ruckus Wireless has introduced a complete, end-to-end managed, wireless broadband access solution that provides a “build-as-you-grow” model for broadband access in developing market urban environments at a fraction of the cost of alternative approaches.

The Ruckus Wireless system is designed to operate using unlicensed spectrum, with carrier-class reliability, at initial capital investment that is as much as five timex cheaper than a WiMAX alternative, the company says. For full deployment, replicating WiMAX across a larger urban area, the Ruckus Wireless solution can be built for 30 times less capital than a comparable WiMAX network, the company says.

The business model for providing broadband access for billions of new users in developing markets requires matching investment with average revenue per user of a "a few dollars to five dollars a month," says Steven Glapa, Ruckus Wireless director.

The solution includes low cost customer terminals, access links, backhaul and network management able to handle equipment possibly provided by different suppliers, or even from a single provider, says Glapa.

The new element is the 802.11 backhaul system that auto-provisions and features a 30-degree beamwidth that allows trunking bandwidth of 60 Mbps at 12 km. The radios cost $2,000 a pair for backhaul and will reach 180 Mbps at 1 km.

A service provider can manage tens of thousands of access points in multiple cities from one network operating center.

Coverage of one square kilometer might cost $485,000 for base stations, antennas, backhaul gear, base stations and then capacity to the site, using a standard WiMAX platform

Using a WiMAX approach, a service provider would require $75,000 for base stations, of which the operator would need five, $6,000 for each antenna, of which six are required. Backhaul is $5,000, says Glapa.

In our case, an operator would spend $2000 for access point and the operator would need 41 access points to cover one square kilometer, he adds. Then there is an investment of $300 for backhaul per access point, amounting to $97,000 to cover a square kilometer.

Ruckus initially got its start using smart antenna technology to shuttle video signals around inside a subscriber's home, and now supplies about 100 service providers with such technology.

The point is that Ruckus Wireless was used to extreme cost pressures for end point technology, and simply has adapted all of its access, trunking and network management for such price-optimized environments. Along the way Ruckus also expanded into the enterprise segment for coverage of campus environments.

The addition of the trunking product obviously extends the range from office, home or campus to neighborhoods, while the auto-provisioning and auto-discovery features ease management chores.

Saturday, November 14, 2009

Smartphone Niches Emerging

Data from ChangeWave about smartphone preferences might suggest both the existence of clear smartphone segments as well as an evolution of those segments.

By definition, all smartphones handle voice and text. Beyond that, there seem to be distinct user niches.

One might characterize the Palm user as someone whose unique application is the "organizer."

One might characterize the BlackBerry user as oriented to email, and the iPhone owner as oriented to Web-delivered applications.

Looked at this way, the Changewave data might suggest that the value proposition for the email-focused remains steady, but that the value of "organizer" functions is receding, while mobile Web is growing. We also have seen the introduction recently of devices organized around social networking and navigation, so the number of smartphone niches addressed by particular devices seems to be growing.

The Palm Pre and Motorola Cliq are among new devices pitched at the social networking niche. Garmin's nuvifone is perhaps the best example of a navigation-focused smartphone. So the obvious big question is how the growing raft of Android-based smartphones will contribute to the proliferation of devices with a lead application mode.

How demand for the Droid will shape up is hard to say at the moment. Some fragmentary data suggests that Droid users access the Web even more than iPhone users do. But its turn-by-turn navigation features might also emerge as a key drawing point.

Friday, November 13, 2009

Mobile Ad Audience Grows, Number of Resisters Also Grows

Mobile ad spending is poised to grow 27 percent to $2.1 billion in 2010, according to the Mobile Marketing Association. The good news is the audience for mobile marketing is growing. The bad news is the audience is still relatively small and confined to a limited segment of the arket, say researchers at BIGresearch.

That means there is a high probability of turning off potential consumers. Consumers who like mobile marketing tend to be young men. They are mobile phone-centered and more likely to use social media.

People who don’t like mobile marketing tend to be slightly-older women who are not as centered around their mobile phones or users of social media. Receptive consumers have an average age of 39 while non-receptive consumers have an average age of 46.

About 23 percent of receptive consumers are regular users of MySpace, compared to 10 percent of non-users. About 13 percent of receptive consumers regularly use Twitter, while just 3.5 percent of non-receptive consumers say they regularly use Twitter.

Since June of 2008, the percentage of people who don’t like mobile marketing has ncreased, BIGresearch says. About 66.8 percent of 2,200 survey respondents say they don’t like text ads.

Some 60.2 percent don’t like voicemail ads. About 60 percent say they do not like video ads. By itself, those sorts of reactions are to be expected. How many of you would actually say you like receiving, hearing or viewing most ads?

Android People Heavier Web Users than iPhone People?

The Motorola Droid is the latest smartphone to be touted as a poential  “iPhone killer.” I'm not among those doing so, not for any lack of confidence in the Droid so much as a belief that the iPhone is not just a smartphone.

Like other Apple products before it, and like some other popular consumer products, the iPhone already has carved out an "experience" and "emotional bond" that cannot be broken by a substitute product.

Still, the Droid seems to be the sort of product that will advance the use and adoption of Web content to a connected device, especially for users whose Web experiences are heavily Google-mediated.

Significantly, Nielsen data from the third quarter of 2009 already suggests Android users are heavy mobile Web users, maybe even more so than iPhone users, who, up to this point, have been the heaviets mobile Web users.

But there is still plenty of room in the market for devices that are optimized around a lead application. The iPhone might have been the best example to date of a device really optimized around Web access as BlackBerry has been optimized around mobile email and other devices are plumbing the "turn by turn navigation" app, for example.

In the fourth quarter of 2009, perhaps 40 percent of all new devices sold will be smartphones of one sort or another. By 2011, smartphones will represent the majority of phones in use, Nielsen forecasts.

"Projecting Nielsen data out through 2010, we see smartphones crossing 50 percent of the market by the middle of 2011, roughly equal to 150 million users," says Jerry Rocha, Nielsen Online Division senior director.

Sabi the War Hero Dog

Okay, I love labradors....labradors that defy death, get lost for 14 months and then get to go home is even better.

Verizon Grows Annual Revenue 5x More Than Average

Verizon's revenue growth over the last year tops, by a substantial margin, revenue growth for nearly all other service providers among the 30 largest in the world.

Annual revenue growth of about 1.6 percent is the average, says TeleGeography.

Verizon grew revenue by 10 percent. Vodafone, China Mobile and Deutsche Telekom were the other stand-outs.

Thursday, November 12, 2009

Despite Shocking Unemployment, Consumer Demand for Communications Holds Up

There's a sobering statistic in the latest research from Centris about consumer spending on communications and video service consumption: 27 percent of households reporting at least one member who lost their job in the last six months.

Most of the other findings seem consistent with other surveys taken over the last two years, though. The issue now is whether recession-induced behaviors will change as we exit the recession.

About eight percent of U.S. households said they were likely to cancel their Pay TV service in the third quarter of 2009, unchanged from the second quarter of 2009. Keep in mind that a typical churn rate for video services is about two percent a month, so those findings are relatively consistent with typical disconnect plans, and most churners simply sign up with alternate providers.

Some 18 percent of households said they were likely to cancel their home phone service and replace it with a currently-used cell phone. That is an underlying trend that might have accelerated during the recession, but was in place already.

Fully 75 percent of respondents said they would not likely downgrade their Internet access service. Virtually all other studies show high resistance to cutting back, or cutting off, Internet access services.

Nearly half of all households have contacted their current TV service providers shopping for discounts and lower-priced packages, though.

If past patterns show themselves, consumers should start spending more on enhanced services of all sorts, including premium video entertainment and mobile services, as the economic recovery takes hold. The wild card are services such as wired voice, which have been under pressure for other reasons unrelated directly to the recession.

Video Now Driving Bigger Access Bandwidth Packages, says

How much Internet-delivered video is being consumed by users of sites such as or According to data, traffic has grown 210 percent over the last year.

"If continued this growth trajectory for another year, we could see it break into’s top 50, surpassing unique visitor traffic to sites like the and," says Matt McGlinn, writer.

From September 2008 to September 2009,’s volume of unique visitors viewing movies and other content online increased 163 percent, says

The good news for Internet service providers is that these trends will keep driving end users to buy access packages featuring higher amounts of bandwidth, says McGlinn.

Will Click-to-Connect applications Replace IVR?

Yes, says Sorell Slaymaker, Unified IT Systems VP. The reason is that most consumers initiate their contact to a business using the web and then switch to some other channel only if the web does not solve whatever need, issue or problem needs to be solved.

Compared to using a phone for initial contact, "web with click to call" can store information, so it does not have to be rekeyed. The equivalent of cookies is not available when initiating a session using phone methods, he argues.

The other advantage is the ability to push content while talking, he says. Visual communication is richer and quicker than audio communication, and putting the two together optimizes the efficiency and effectiveness of communication.

Does "Open Access" Lead to More or Less Consumption of Broadband?

Samuel Clemens famously quipped that there are "dies, damned lies and statistics." Something like that seems to be at the heart of conflicting analyses of the impact of widespread open access requirements on consumer buying of broadband access services.

The Berkman Center for Internet & Society suggests robust open access regulation increases consumer buying of broadband while analysts at the Phoenix Center says the opposite is true.

The interpretation matters. Good public policy requires decisions that are based on facts, as difficult as it may be to determine precisely what the "facts" are. The wrong "fact base" will lead to policies that could harm the intended public policy goal.

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...