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.

Android: It's the Business Models

The most important thing about Android, the open mobile operating system and platform sponsored by Google, is arguably not the technology or the implications for handset cost: it's the development of business models.

One might think: "well, this is open source, so we will look for business models that are like the existing models for open source." But that's probably not going to be the case. Today's revenue model for open source is payment for enhancements, support and training.

To some extent, the business model is implicit rather than explicit. If I am a hardware or software applications provider, I simply use Asterisk because it is a lower-cost way of implementing something that an end user actually buys, even it the thing being bought essentially is a "legacy" requirement.

Voice mail, phone system or messaging platform are examples. In those cases, the operating system is an input to a business model, but not the model, which is the same one that existed before the open source tool was available.

Translated into a mobile market, it looks different. Open source will not do much, in and of itself, to lower the cost of a handset. So open source doesn't necessarily mean "cheap or free handset."

One can assume handset makers using Android will stabilize their versions so there is little need for third party end user support. That is a bug, not a feature, in the mobile end user world.

And since the whole idea is "easy to use," there shouldn't be much of a market created for training people how to use, develop, maintain and upgrade their operating systems. End users don't want to do that.

Assuming Android devices are used on existing networks (the 700-MHz C band network remains a bit of a wild card), the pricing models for data access are relatively affordable already, so it isn't clear whether there is immediate impact on data plan pricing either.

So consider Android a better way to help create a mobile Web business. The mobile phone business is built on recurring payment of access fees for voice, text and data access. The mobile Web just assumes access.

So the revenue model must begin where the Web itself begins. And that means advertising, to the extent that features and content have to be monetized directly. Of course, there's also content and applications given away for free in hopes that the attention will lead to support for some other business model, be that public relations, consulting, marketing, software or what have you. In that case a content provider doesn't necessarily require a revenue model.

But that's not what service providers, device manufacturers and application providers are looking at. The issue is revenue. And from where I sit, that means a media model.

The media model includes "for fee" and "for free" services and content, with greater or lesser degrees of advertising support. That means "aggregating eyeballs" and "aggregating highly-detailed information about the owners of those eyeballs" and "tracking the behavior of those people." That makes the advertising model quite valuable.

In the mobile arena, valuable as in "can I entice you to visit Starbucks right now; it is around the corner?" Valuable as in "are you hungry and a lover of good Thai food? You are half a block away."

Some will speculate about whether an entirely ad-supported model is conceivable. Well, it's conceivable, but not likely. Broadband access isn't free. But that isn't the point. If the value is high enough, a reasonable fee is not a barrier to usage.

Android is more likely to have an impact in making the mobile Web, and applications built on the mobile Web, far easier to use and vastly richer in functionality.

That's a hugely important and economically significant activity. But I don't think Android is about "free phone calls" or "free Web access" or "free phones," as many either think or hope for. Rich applications will be reward enough for users, who are quite capable of figuring out a value-for-money proposition. Android is about the promise of a mobile Web so useful we won't mind paying access fees to use it.

The one exception is that some users will appreciate "sometimes" being able to use Wi-Fi hot spots to access applications. This is a subset of users who choose not to pay a recurring fee for fully-mobile access, and want to rely on Wi-Fi for all of their connectivity.

Then there are users who occasionally will be happy to have Wi-Fi access for signal strength reasons, even if they are comfortable with a fully-mobile broadband connection.

Still, it seems likely that the early pull of Android applications is going to be location-based. "Where am I? How do I get there? Where can I find it? I didn't know that was on sale. So that's where you are."

Ad-supported phone calls, devices or access might have some role to play, sometimes. But I doubt that's the big impact.

Which Future for Telcos?

What name would you choose to describe "who you are" if you were an executive at any leading incumbent telecom company? Sure, you might come up with "converged communications and entertainment provider" or something like that, but the term is unsatisfying and probably will confuse most mass market customers in any case. BT already is trying the "information and communications" company tagline. The problem with such efforts as it isn't so clear how the tags differentiate "telcos" from large system integrators, large software houses offering hosted services, cable companies and possibly others.

"Experience provider" is a buzzword some toss around, but it lacks much descriptive power, beyond suggesting an approach to creating services and features. "Application provider" likewise hints at something important, but again is rather too broad to be useful.

But no matter how the nomenclature efforts finally resolve themselves, it seems clear enough that something important is changing. Even if the unique, irreplaceable assets any "telco" owns are the actual pipes and software used to create communications capabilities over those pipes, that will not be a key part of the future identity.

One way or the other, "applications" are going to figure into the description in some key way. Which is odd, in a way. To a very large degree, telcos have always been "application" providers, in the sense that voice is an application running on a network optimized to provide it.

The big change now is the sheer range of applications providers create or deliver.

The big conundrum is that the irreplaceable and unique assets "telcos" possess, aside from their regulatory prowess, is the pipes and associated software that makes those pipes useful. And yet it seems inevitable that "telcos" want to be known as something else more directly associated with "apps."

If you can configure this out, please, make sure all the rest of us know. Maybe somebody can capture the multiple values in one easy to remember phrase.

Unlocked German iPhone: 999 Euros

Deutsche Telekom, after being sued by Vodafone over availability of unlocked iPhones, will offer the device for 999 euros ($1,483) without requiring a two-year exclusive contract with its T-Mobile unit.

T-Mobile changed the rules after Vodafone won a court injunction that bans T-Mobile from selling the iPhone with contracts or the "SIM lock" that prevents the phone from working on another network.

Apple and Orange have the same issues in France.

DT Channels BT: Will Others Follow?

Telcos have not in the past had much success as providers of enterprise system integration and management services. That may be changing as the business of system itnegration begins to look a lot more like advanced communications. BT has been forceful about transitioning in this way. Now Deutsche Telekom (DT) may make a bid to buy IT services giant EDS (EDS).

Telcos and mobile services providers are increasingly becoming IT providers, either directly or as integrators or aggregators of IT functions that they then deliver to their customers. Similarly, large software providers are moving towards "software as a service." And what is communications but "software as a service."

BT was ahead of the curve on this trend.

Mobile IS Broadband by 2011

Mobile broadband will be the dominant broadband platform worldwide in 2011, according to Informa Telecoms & Media. There will be more than one billion broadband subscribers worldwide in 2011, with the majority using mobile rather than fixed networks.

Mobile broadband will be a "more than" $400 billion service revenues business in 2012, as a result. Of course, getting there will mean climbing a wall of end user resistance to mobile broadband pricing, research by Parks and Associates suggests. That might be especially true if mobile broadband winds up being a replacement for narrowband mobile access, rather than fixed mobile access.

HSDPA (High-Speed Downlink Packet Access) will be the leading mobile broadband technology by then in terms of number of subscribers, followed by EV-DO (Evolution Data Optimized and mobile WiMAX.

"Mobile broadband will represent close to half of total mobile service revenues in 2012," says Mike Roberts, Informa analyst.

Carrier Fiber Plans Accelerating?

Ofcom, the U.K. communications regulator, hasn't come to terms with BT about ways to speed up fiber to customer investments in the U.K. market. Up to this point BT has objected to earlier proposals that would have applied relatively robust wholesale requirements to new optical access plant. Perhaps there is new hope for some compromise that reassures investors, speeds up fiber deployment and yet offers some hope of a return.

Around the world, fiber to customer deployments seem poised to accelerate, but both competitive providers such as Illiad in France and Verizon in the United States have been punished by the financial community for daring to proceed with such deployments, which are costly, no doubt. U.S. cable companies have the same problem. Every time there is a hint that capital spending plans might intensify, equity values get hit. Comcast appears to be under that cloud as well at the moment.

Irrespective of the competitive elements of such decisions--obviously the providers making the investments want to keep the rewards, if they can be had--these networks can only be built by private capital. And private capital keeps making clear concern about the payback, whether those investments are made by cable companies, incumbent telcos or competitive providers.

At this point it is a simple fact that the investment framework has to reassure the capital markets. Yes, competition is desirable. But that has to be balanced against capital markets that actually loathe competition. Let's hope Ofcom and BT can thread this needle.

Global Voice Traffic Keeps Growing

Despite all the new ways people can talk to each other, and all the other ways people can communicate using text, global voice traffic keeps growing at a steady rate, according to TeleGeography.

DT Gets iPhone?

T-Mobile appears to be the exclusive carrier for the iPhone in Germany next week. Apple reportedly has a revenue sharing deal similar to that with at&t, in which Apple collects a portion of the monthly subscription fees. Pricing will reportedly be set at 399 Euros ($554) for an 8GB model. It isn't clear whether 3G support is forthcoming.

Ad-Supported Calling?

There can be no doubt about the direction of advertising. So if the trend is so clear, it is inevitable that ad-supported calling will get closer attention. Jajah has been trying this in Germany and Austria, for example. Jajah has partnerships with three large media companies, including Bild, Germany’s largest newspaper; ProSiebenSat1, which owns two major German TV stations, and NewsAT, an Austrian station. The partners will spend seven million euros to advertise Jajah’s Internet phone service.

They will point users to their own Web pages, which will have a co-branded Jajah service from which people can make calls. Essentially, the media companies will subsidize voice to build traffic on their sites. Deutsche Telekom, Germany’s large phone company, is part owner of Bild. So, in a sense, DT is kicking the tires to see what's there.

Jajah will keep 50 percent of any advertising revenue that it sells on the pages it shows people while they make calls. It will sell a banner and a skyscraper on each page.

Separately, Globe7 offers a softphone-based approach integrated with video streaming. The play seems to be that the content downloading creates an ad potential. Ad viewing then earns calling credits. The angle here is possibly more interesting than the old "listen to a short ad and then I will connect your call" approach. PC-based or Web-activated sites can show ads on a home page, without disrupting a call.