Showing posts with label Verizon. Show all posts
Showing posts with label Verizon. Show all posts

Wednesday, December 7, 2011

Do Service Providers Earn Back Their Cost of Capital?

To the extent that all U.S. broadband networks rely on private capital to invest in new broadband facilities, the question of financial return for such investments is fundamental. After all, telcos, cable companies, satellite and wireless providers go to private markets for the funding to build their broadband networks, and those investors have lots of choices.

If the financial return, and the risk, of broadband facilities investment do not roughly match or exceed what is available from alternative investments, those investments will not be made, and it won't matter much how much people scream about what they can't get.

In that regard, it is fair to note that many investors no longer consider telecom an especially desirable investment. It is rare these days to find a venture capitalist willing to consider backing a new telecom equipment supplier, for example. To the extent that interest remains, it is centered on mobile and mobile applications.

And there are reasons for that investor caution. Any perusal of industry statistics or quarterly or annual financial reports, at least in developed markets, will show stress around the traditional revenue sources most communications or video suppliers rely on. 

Growth rates are down, subscriber trends are negative in many cases, profit margins are lower than has been the case historically, and there is more competition and a shift of value elsewhere in the Internet, broadband and wireless ecosystems. 

In fact, Bernstein analyst Craig Moffett argues that, over the last decade, the returns on invested capital in communications networks in U.S. markets have been anemic, at best. He argues that economic value creation has been, in aggregate, barely positive.

Wireline networks have the weakest returns on invested capital with a 1.5 percent gain over the last decade. Wireless networks had a meager return of 0.3 percent. Cable garnered a 2.5 percent return. Satellite networks had the best return on invested capital at 5.5 percent. Others, including AT&T, Comcast, Dish,Sprint and Verizon, have negative returns, Moffett argues.

You might argue that though low, those are positive numbers. True enough. But there are borrowing costs, and in many cases the cost of "good will" associated with acquisitions. Add those in and returns can go negative pretty quickly.

It probably goes without saying that potential end user shifts in the direction of over the top video entertainment do represent a threat to subscription video revenues now earned by telcos, cable and satellite companies.

A new study by Edelman suggests U.S. consumers are are disenchanted with their entertainment choices. Only about 17 percent of respondents think entertainment sources today provide “very good” or “excellent value.” That should send up a warning flag about the latent potential demand for different video and other entertainment options. 

Declining entertainment value obviously creates a gap that competing providers might be able to exploit. Unlike many other businesses, though, the video entertainment business is unusually controlled by content creators and distributors, rather than distributors. DirecTV, for example, recently had unusual success with its “Sunday Ticket” service delivering National Football League games, says Michael White, DirecTV Chairman, Chief Executive Officer and President.

Those sorts of issues mean there is potential for alternative distribution methods, so long as content providers are willing to cooperate. For fixed-line access providers, there are other issues, beyond a threat to existing video service revenues, though. Some would argue that fixed networks already have trouble earning a return on invested capital that justifies deploying that capital.

Whether or not a provider of goods and services can remain in business is not a consumer's problem, of course. But the apparent difficulty of making money in the fixed-line service provider business is a key concern for service providers, naturally. 

Beyond that, to the extent fixed access networks are seen as a key underpinning of economic growth, and a "national resource," there are key public policy issues. Specifically, if robust and high-speed broadband access is a "public good," inability to earn a return on invested capital is a broader problem. 




Saturday, November 26, 2011

What Next for T-Mobile USA?

AT&T easily will survive any failure of its bid to buy T-Mobile USA. T-Mobile USA, on the other hand, will continue to face strategic problems. A distant fourth in the U.S. mobile market, with no spectrum available to launch a fourth-generation network, T-Mobile USA either has to spend lots more money to try and catch up to AT&T and Verizon Wireless, or must exit the U.S. market. Few think its parent, Deutsche Telekom, has the appetite for investing.


That suggests T-Mobile USA will still be looking to sell, in the event of a failure of the AT&T bid to buy T-Mobile USA. One issue is the pool of potential buyers. But a significant strategic issue is the value of the asset in a mobile market where being "in the middle" is difficult.


AT&T and Verizon Wireless clearly lead the higher end of the market. Many other larger-regional providers lead the lower end of the market, especially the prepaid segment. That leaves firms such as Sprint and T-Mobile USA in an arguably exposed position, vulnerable to lower-cost providers on the lower end and pressure from the market leaders at the top. 


At a practical level, competing with the larger national contestants means heavy advertising and marketing costs. In some cases, the regional providers can be more targeted about such spending. And that's part of the rub. The providers of lower-cost prepaid services succeed in part by controlling their overhead costs, allowing them to offer lower prices. 


The contrast is perhaps not so stark as the positioning of a mass market retailer between Tiffany and Wal-Mart, or between Tiffany and Amazon.com, but it is the same general problem. 

T-Mobile USA has lost 850,000 contract customers in 2011. In the third quarter, sales fell 2.3 percent to $5.23 billion, though earnings rose 3.8 percent to $332 million. One wonders if earnings rose because T-Mobile USA essentially stopped investing as it would have, if it thought it was going to be an on-going business.

T-Mobile gained 826,000 prepaid customers in this year's first nine months of 2011. The problem is that profit margins for such customers are lower than margins for prepaid customers. Also, T-Mobile USA is the only service provide of the top four without the ability to sell the Apple iPhone. Deutsche Telekom's unsolved problem
Spectrum assets are another issue. T-Mobile USA’s CEO, Philipp Humm, made the point at a May 2011 hearing on the merger before the Senate Judiciary Committee. “As data usage continues to explode, spectrum is becoming a constraint to our business, with T-Mobile facing spectrum exhaust over the next couple of years in a number of significant markets,” Humm said. “Moreover, our spectrum holdings will not allow us to launch [Long Term Evolution]. ” No independent future?






Thursday, October 27, 2011

CTIA Backs Net Neutrality Rules

CTIA-the Wireless Association, a trade group that represents wireless carriers, filed a motion in federal court supporting the Federal Communications Commission's net neutrality regulations. CTIA backs net neutrality rules


Four public interest groups, including Free Press, have sued the FCC, arguing that the agency's net neutrality rules do not go far enough. 

The CTIA filing might strike some as odd, to the extent that the industry group is supporting mandatory "best effort only" broadband access. Sometimes, half a loaf is better than no loaf. The rules allow mobile service providers greater freedom to manage their networks, in principle also preserving the ability to create quality of service mechanisms. 


Even for service providers that operate both fixed and mobile networks, freedom for the strategic mobile business means it is an acceptable compromise to give up the ability to create quality of service mechanisms for fixed line broadband access. 


Of course, there already is a challenge to all of the rules, filed by Verizon Wireless, so fixed-line interests are not completely sacrificed as a result of CTIA support for the net neutrality rules. 


For some, net neutrality is about denying ISPs the legal right to create new revenue-generating products that create quality of service mechanisms, as this is said to create a "two tier" Internet. Sometimes people mistakenly believe it is about "content blocking." 


In the former case, if there are restraint of trade issues, they can be dealt with by the Federal Trade Commission. There is a legitimate concern that ISPs might favor their own services over rival services by applying QoS only to "owned" services, not to all services willing to pay for such QoS. But many would note that other remedies already exist for such situations. 


In the latter case, the FCC and all ISPs already have agreed that consumers have the right to access all lawful content. 


For others it is about both consumer choice and network management, in the former case the right of a consumer to buy services that optimize voice, video or gaming experiences, in the latter case the simple necessity of managing a shared resource. In either case, anti-competitive conduct can be restrained by either effective market competition or the FTC. 

Monday, October 24, 2011

Is "4G Plus DirecTV" a Viable Alternative to FiOS?


Verizon Wireless seems to be cooking up an out of market “video plus broadband” plan, working with DirecTV. During its recent quarterly earnings report, Fran Shammo, Verizon Communications EVP said that the company was working on such an effort.

“You're going to see that come in the fourth quarter with the what we now call the Cantenna, which is not a commercial name obviously, but it's the antenna that we actually trialed with DIRECTV, which was extremely successful,” said Shammo.

Some will legitimately wonder whether that approach might even wind up being used in some Verizon markets where FiOS has not already started to be deployed. LTE plus DirecTV

There are some significant Verizon markets including cities like Boston, Buffalo, N.Y, Baltimore and Alexandria, Va. where FiOS construction has not started.

The obvious new question is the rational approach Verizon should take to upgrading its fixed-line network. There isn’t much doubt about optical access media being more resistant to some weather-related impairments than copper networks, nor is there much doubt that new optical facilities cost less to maintain than older copper networks.

But the business question is how much incremental investment ought to be made in the fixed network,  if video and broadband services can be provided using the wireless network. One might rationally argue that the cost of maintaining the fourth generation wireless network is lower than the cost of maintaining the FiOS network.

Obviously, if that is true then the avoided capital investment in new optical facilities is significant as well. That isn’t to argue that fixed and wireless networks are in any way equivalent in terms of absolute bandwidth. But there is a financial question.

If the expected revenue and operating cost advantage of FiOS, compared to 4G, does not provide the optimal financial return, then a wireless solution might be the most-rational way to invest new capital.

The problem is that voice is a negligible contributor to incremental revenue on a FiOS network, while video, though an important contributor of revenue, is not such a great contributor to profits. That leaves broadband, and revenue upside is tough.

That is not to say fiber to home facilities are unimportant, merely to say that they might not be the best use of capital for a provider that also is investing heavily in mobile broadband.

In fact, there is an interesting bit of data in the latest report from Akamai on global Internet usage. The global average fixed-line connection speed was 2.6 Mbps, and the global average peak connection speed was 11.4 Mbps.

Looking at mobile broadband connections, average connection speeds on known mobile providers ranged from 5.3 Mbps down to 209 kbps, while “average” peak connection speeds ranged from 23.4 Mbps down to 1.2 Mbps.

The interesting observation is that wireless broadband has the higher peak speeds, about double that of fixed line connections, with a variable “average” speed that in some cases also is twice as high as fixed-line connections, though such sessions are highly variable. When mobile broadband is slow, it is an order of magnitude slower than fixed line connections. Global broadband speeds

Friday, October 21, 2011

Wireless Revenue Slowdown?

Both AT&T and Verizon's postpaid average revenue per user growth in the third quarter was slightly lower than consensus estimates.

These trends are prompting analysts to ask whether wireless service, traditionally the telecom industry's most dynamic sector, is headed for a slump. A delay in launching the iPhone 4S probably was a factor.

Nomura Securities analyst Mike McCormack says he is "concerned about the outlook for the economics of the wireless business." McCormack notes that Verizon's wireless service revenues grew 6.1 percent in the third quarter, compared to 6.6 percent in the second quarter.

"We remain concerned about consistent industry deceleration in total service revenue," he added.

Macquarie Capital analyst Kevin Smithen also speculates about whether "some adverse macroeconomic effects [are] beginning to creep through to the carriers."

Sunday, October 16, 2011

Content Ecosystems are Unstable: Watch Amazon

Most observers, looking at the matter of online or over the top video, and its potential impact on cable TV, telco and satellite video providers, will grasp the potential for disruption in the video business. Music and print content businesses already have been "disrupted." Could books be next?

Some will argue, with the rise of Amazon.com, and the demise of Borders, that the disruption already has happened. But some think additional far-reaching disruption is coming. After all, changes in distribution are one thing. But new patterns in product development and creation are perhaps more fundamental.

In Amazon's case, some would argue that the Amazon.com brand, back office, logistics operation and now Kindle devices allow Amazon to become a publisher, not just a distributor. To use the analogy, perhaps Apple iTunes becomes a music publisher; Google becomes a media company; Comcast becomes a studio; Verizon Wireless becomes a bank or TV network.

That should immediately strike you as a dangerous example of growing channel conflict, and you'd be right. Amazon has the distribution network and growing success in e-book publishing building blocks in place. Above all, the trade publishing houses seem to lack Amazon's ambition, some might say. Amazon might want to make money from the entire publishing chain, not just distribution.

Indeed, one reason content ecosystems are unstable is that as revenue and profit margins compress, expanding into an adjacency in any ecosystem starts to make more sense. There are potential conflicts, to be sure. But the lure of incrementally-important revenue and the ability to raise margins can be irresistible. 

Monday, May 9, 2011

Apple The World's Most-Valuable Brand

Apple is the world's most-valuable brand, Millward Brown's 2011 BrandZ study of the most-valuable global brands now shows. Apple ended a four-year run by Google at the top of the brand ranking.

Click image twice for a larger view.

Google now is the second most-valuable global brand, followed by IBM, McDonalds, Microsoft, Coca Cola and AT&T, the top-ranked telecom brand. Vodafone ranks 12th and Verizon 13th. All those telecom firms rank ahead of Amazon.

Wednesday, May 4, 2011

Verizon, HTC Mull Smart Phone Targeted at Women

Verizon and HTC have taken that into consideration and are testing a new smartphone that would target that female demographic. Right now, the code name for the phone is the Bliss and its said to hit Verizon before the end of this year.

The slate style Android device might feature a softer color hue, offer various preloaded calorie counting and shopping apps, a wireless dock, and even an LED charm notifier for easy access when the phone is in a pocket.

read more here

Thursday, April 21, 2011

FiOS Now 54% of Verizon Fixed-Line Revenue

Though wireless lead Verizon's quarterly highlights, as typically is the case, the company also reported continued progress with its FiOS business. In fact, FiOS revenues now are 54 percent of total fixed-line revenues. Some observers might well note that it has proven harder than anticipated to convince customers of the value of fiber to the home service.

Verizon recorded 6.3 percent year-over-year increase in wireless service revenues in the first quarter of 2011, with data revenues up 22.3 percent. Service revenues in the quarter totaled $14.3 billion. Data revenues were $5.5 billion, up $1 billion year over year, and represent 38.1 percent of all wireless service revenues. Total revenues were $16.9 billion, up 10 percent year over year.

Retail postpaid ARPU grew 2.2 percent over first-quarter 2010, to $53.52. Retail postpaid data ARPU increased to $20.51, up 17.3 percent year over year. Retail service ARPU also grew 2.2 percent, to $51.88.

Verizon added 1.8 million net new accounts, including 906,000 retail postpaid net customer addition. Retail postpaid churn was one percent.

Verizon also added 207,000 net FiOS Internet and 192,000 net FiOS TV additions, for a total of 4.3 million total FiOS Internet connections and 3.7 million total FiOS TV connections.

FiOS consumer retail revenues now represent approximately 54 percent of total Verizon consumer revenues. The company also saw a 12.8 percent increase in "strategic" enterprise revenues, which now represent approximately 46 percent of total global enterprise revenues.

FiOS Internet penetration (subscribers as a percentage of potential subscribers) was 33.1 percent by the end of the first quarter, with the product available for sale to 13 million premises. This compares with 29 percent penetration at the end of first-quarter 2010.

FiOS TV penetration was 29 percent by the end of first-quarter 2011, with the product available for sale to 12.6 million premises. This compares with 25.4 percent and 11.5 million, respectively, at the end of first-quarter 2010.

Broadband connections totaled 8.5 million at the end of first-quarter 2011, a three percent year-over-year increase. FiOS Internet connections more than offset a decrease in DSL-based broadband connections, leading to a net increase of 98,000 broadband connections from fourth-quarter 2010.

These are the most broadband net additions since the second quarter of 2009. Total voice connections, which measures FiOS Digital Voice connections in addition to traditional switched access lines, declined 8.2 percent to 25.5 million -- the smallest year-over-year decline since first-quarter 2008, the company said.

read more here

Monday, April 18, 2011

Verizon Simplifies DSL-Based Broadband Pricing, Eliminates Contracts

New Verizon broadband access customers now can buy copper-based service without a contract, and the packaging is a standard offer, not a promotion. The simplified new approach features just two double-play pricing tiers. Note that the offers require buying Verizon's voice service as well.

The first tier offers speeds between 500 kbps to 1 Mbps.  The second tier features the highest optimized speeds that customers qualify for. Those speeds will range between 1.1 Mbps and 15 Mbps, depending on distance from a DSL access multiplexer and the condition of the access wire.

Verizon’s "Enhanced High Speed Internet" bundle costs $59.99 per month.

The "basic HSI bundle" costs $34.99 per month. Verizon offers triple play offers with both access options. The DirecTV portion of the triple play does require a two-year contract, but comes with discounted service for the first year.

Consumers who order a bundle online will save $5 per month and receive a free wireless router.  Consumers who order stand-alone HSI service online can also save $5 per month, lowering the basic HSI offer to $14.99 per month with a qualifying voice package, Verizon says.

All bundles feature up to four gigabytes of online storage, nine email accounts per household, 10 megabytes of personal Web space to accommodate a blog or a web page.

Additionally, customers who order an Enhanced HSI bundle have access to Verizon Wi-Fi at no additional charge, allowing them to connect to Wi-Fi hot spots offering access in airports, hotels, bookstores, coffee shops and more.

read more here

Monday, April 11, 2011

Verizon Launches New Mobile Streaming Platform

Verizon is unveiling new "content-to-consumer" delivery capabilities, allowing content owners to distribute live and on-demand, personalized video content to users of smart phones and tablets. Verizon Digital Media Services automates manual workflow processes associated with formatting, managing and delivering digital media to virtually any device or platform on a large scale.

Verizon Digital Media Services will ultimately enable high-quality and reliable "unicast" (individualized video streams), though initially it is multicast content that the service will support.



http://www.prnewswire.com/news-releases/verizon-unveils-advanced-digital-media-management-and-distribution-platform-for-entertainment-industry-to-capitalize-on-new-content-to-consumer-experiences-119578669.html

Thursday, January 27, 2011

Verizon Launches Google Apps Bundle

Verizon is combining its leading broadband business services with a broad range of business applications from Google, featuring Gmail, Google Calendar, Google Docs and Google Sites.

This new offering, Google Apps for Verizon, is specifically designed to help smaller companies advertise by providing them with a domain name and domain name e-mail, and to boost their productivity by making cloud-based capabilities available to employees, whether in an office or on the go.


Google Apps for Verizon, which provides three free user accounts, is immediately available to businesses that subscribe to a bundle consisting of Verizon Internet service and either Verizon voice or TV service, or both.

The bundles with Google Apps are available in Washington, D.C., and parts of 12 states: California, Connecticut, Delaware, Florida, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Texas and Virginia. Google Apps for Verizon is also available as a stand-alone service to all businesses across the country for $3.99 per month per user.

Tuesday, January 18, 2011

Verizon Wireless iPhone Upgrades?

Thursday, January 6, 2011

Verizon CEO Touts 4G

It's fast. It might be pricey, not in terms of formal price ($50a  month for PC dongle service, with a 5 Gbyte cap, $80 for a 10-Gbyte cap), but if it encourages people to watch lots of video on their PCs, using the air cards, that they might not have in the past, it could get expensive.

Friday, December 24, 2010

Verizon FiOS TV Changes Coming?

Friday, October 15, 2010

More Granular Mobile Data Plans from Verizon Wireless

Verizon's new mobile broadband plans for the Apple iPad seem crafted for usage somewhere between smartphones and PCs.

Smartphone owners typically are expected to consume hundreds of kilobytes a month.

Users of mobile broadband for their notebooks or netbooks might consume a couple gigabytes a month.

Tablets that might be used heavily for content consumption could in some cases represent heavier demand that that, but not as much as many PCs on fixed connections. More granular pricing will be helpful, even though users might be expected to worry that they do not know enough right now to pick the best plan.

Carriers can help by providing better usage tools, communicating with customers and by being more flexible about allowing end users to shift plans when their usage behaviors change.

Users have gotten pretty comfortable with "buckets of usage," and mobile broadband buckets ultimately should be as acceptable as voice buckets have been.

Wednesday, September 15, 2010

Verizon Introduces "Computing as Service" for Smaller Businesses

Boosting bandwidth, adding more servers and turning up additional storage capacity to meet changing business needs quickly are among the many things small and medium-sized businesses now can do affordably with Verizon's new cloud computing offering, "Computing as a Service, SMB," that can be billed on a credit card.

Verizon's new offering is tailored to companies that have limited IT resources and do not want to own or manage their IT infrastructure. "CaaS SMB" is suited to smaller businesses such as retailers, manufacturers and professional services firms as well as independent departments within larger organizations, Verizon says. It also appeals to online businesses and application developers who want to code, test and stage in a reliable and scalable cloud environment.  All that's needed to get started is a credit card.

With Verizon CaaS SMB, customers can customize the server, storage and network resources required to manage a Web presence or enable company applications.  Unlike many other available cloud offerings, Verizon CaaS SMB offers built-in security including virtual private networks while allowing companies to add more security features.  CaaS SMB also lets companies retain previous computing configurations of their data and servers so data can be easily accessed in the future.

Thursday, September 2, 2010

Prepaid Market Cracks With Verizon Smartphone Offerings

Prepaid customers traditionally have had to live with a selection of devices that intentionally did not include the top devices sold in the postpaid market. But that has taken a huge change with Verizon's new willingness to sell even its leading devices on a prepaid basis.

At least at Verizon, the difference between prepaid and postpaid offerings is based more on payment options and subsidized or full price phones than anything else. That is a big change, indeed.

Verizon Wireless also has launched a new "3G Prepaid" data package that lets customers access unlimited data on select 3G smartphones and multimedia phones for $30 monthly access.

Multimedia phone customers also have the option of selecting a new $10 monthly data package for 25 MB per month ($.20/MB overage). These new prepaid data packages are available at Verizon Wireless stores already, and will be available online at www.verizonwireless.com beginning Sept. 28, 2010.

Supported smartphone devices include:

BlackBerry Curve 8330
BlackBerry Curve 8530
BlackBerry Storm 9530
BlackBerry Storm2 9550
BlackBerry Tour 9630
BlackBerry Bold 9650

Palm Pre Plus
Palm Pixi Plus

DROID by Motorola
Motorola DEVOUR
DROID X by Motorola
DROID 2 by Motorola
DROID Eris by HTC
DROID Incredible by HTC
LG Ally

3G Multimedia phones available include:

LG enV TOUCH
LG enV 3
LG Chocolate TOUCH
LG VX8360
Samsung Alias 2
Samsung Renown
Nokia Twist
Casio EXILIM

Thursday, August 26, 2010

Verizon on Network Neutrality Issues

Verizon executive Tom Tauke talks about the firm's views on network neutrality

Friday, August 13, 2010

"Nothing Bad Happens If Net Neutrality Fails"

There's a missing element in discussions about network neutrality, says Dan Frommer, Deputy Editor of Business Insider. "No one has convincingly and realistically explained what would happen that's so bad if ISPs were not forced to observe net neutrality, and if they were allowed to sell faster access to the highest bidders," Frommer says.

"The reality is that nothing really bad would happen," he maintains. Some think the internet access providers cannot be trusted. To be fair, everybody agrees with that, up to a point. The reason Adam Smith said we can rely on markets is that greedy, avaricious behavior by any actor is met in the market by offers from competitors who will offer a better deal. "Greed" is met by competition, and competition restrains greed.

Any ISP that behaves badly will quickly be met by a rival response from competitors eager to take that ISP's business and customers.

"If anything, things could get even more expensive for consumers if net neutrality is enforced," Frommer maintains. Why?

ISPs operate in competitive markets. They aren't perfectly competitive, only workably so, given the high barriers to entry.  If ISPs lose revenue opportunities because of net neutrality, they certainly will look elsewhere for new revenues, and raising effective prices is an obvious path to take.

There is an argument that if quality-assured tiers of service are allowed (something the Google-Verizon deal precludes), better-capitalized firms will be able to pay, and start-ups will not. That's mostly true.

But bandwidth costs are not the major cost item for new software upstarts. To the extent that "more bandwidth" fixes some latency issues, even real-time services can continue to use the best-effort Internet as bandwidths continue to climb.

The vast majority of Internet businesses won't pay for priority bandwidth, if it's ever available. And the ones who do will figure it into their costs of doing business, the same way they do with rent, staff and health insurance, for example.

Some will not agree. Market power is an issue in business. But competition is the natural restraint. Innovation will occur in the presence of, or despite, network neutrality rules. And the Google-Verizon agreement ensures that all application providers have exactly the same prospects in the Internet access part of the ecosystem.

If other ISPs adopt the same framework, fixed network access will remain a "best effort" service offering no advantages to any single application provider.

link

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