AT&T to Add an Android?

Earlier in 2009, Motorola indicated that it plans to release as many as 20 handsets in 2010 running Google's Android platform.

It appears AT&T will be launching at least one Android device in 2010, said by some observers to be called the "Backflip" or "Enzo,"

The device is rumored to run "MOTO BLUR," software that syncs Facebook, MySpace and Twitter updates with no log-ins and no apps to open.

Perhaps you would expect this, but at least some rumors suggest the AT&T Android device will not come preloaded with any Google apps except for Maps. Some people won't like that, but the point is that users can buy Androids that do feature Google apps, either on other Android devices sold by AT&T, or Android devices sold by other carriers. And there will be the Nexus One as well.

The whole idea of "open" neworks and devices is that diversity will happen. Some people might not like AT&T "dictating" what software load is on the device when purchased. Others might simply say that it is an option. If any user doesn't like it, don't buy it. That's the whole idea of the benefits openness brings. Users get choice.

The "Opus One" is said to be Motorola's first iDEN-based Android phone. That means it will work on Sprint Nextel's iDEN network and offer features such as walkie-talkie calling. According to the Boy Genius, it will run Android 1.5 with iDEN service enhancement.

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.

T-Mobile USA Moves to 7.2 Mbps, Plans 21 Mbps

There are times when being late to market is actually a benefit. The latest entrants in any technology-based market have access to the latest technology, and can build their business plans around that fact. There are other times when it's a bit difficult to characterize a particular competitor's position.

That is where T-Mobile USA now sits, for example. T-Mobile USA was the last of the top-four U.S. mobile providers to build a 3G network, and it has uncertain plans for 4G. But the company is on track to have faster versions of 3G up and running before some of its major competitors.

The company had no 3G customers in the second quarter 2008, though it had acquired 3G spectrum. But the 3G network now covers 240 cities and passes 170 million people, with plans to extend coverage to 200 million people by the end of 2009, at which point nearly all major urban areas will be covered.

So here's where the "last shall be first" principle applies.T-Mobile is using the faster 7.2 HSPA air interface, running at 7.2 Mbps downstream, on all its 3G nodes by the end of 2009.

At least one of T-Mobile's primary competitors is upgrading less-capacious 3.6 HSPA networks to 7.2 HSPA, but will not have that conversion completed until the end of 2011.

Likewise, T-Mobile plans to upgrade even the 7.2 HSPA network to HSPA+, a 21 Mbps network. The company says it will start rolling out HSPA+ in 2010. T-Mobile says the upgrade will be a relatively low-cost and relatively easy upgrade.

Of course, the reason T-Mobile's position is complex is that it has not yet announced a specific method for deploying a 4G network, which will require additional spectrum.

Both AT&T and Verizon are building their 4G networks for substantial coverage by 2010, while AT&T will have substantial coverage in 2011. Sprint is banking on the Clearwire network for 4G.

Still, competition in the mobile broadband market might not primarily be about "feeds and speeds." Coverage, pricing, application stores and device exclusivity arguably are more important.

Nor is it yet entirely clear that 4G will offer an entirely new consumer marketing proposition, beyond "faster." European 3G networks languished for years with sluggish uptake because the compelling new services requiring a 3G network were not in place.

In the U.S. market, it has been the mobile Web that has driven an upsurge of 3G uptake. But that adoption was based in part on applications and capabilitiesm, in part on use of particular devices, which require use of the 3G network.

The question for 4G networks is what new value or application will drive uptake.

Perhaps no new discrete driver will be required. Maybe "more" will be sufficient. But as Verizon has so far discovered with its FiOS fiber to the home feature, consumers still need a reason to buy fiber access as compared to hybrid fiber-copper access.

Providers can be last or first. Either way, the applications and device capabilities will remain the drivers of adoption.

Mobile is Not "Too Big to Fail"

Some people set up straw men that are easy to knock down, such as the big, rich telcos and mobile providers. Reality is more complex. They still are big, but they also are businesses facing cannibalization of their core revenue stream, voice, and will have to replace most of that revenue with something else.

We as a nation have made this sort of mistake before, trying to bring more competition to the landline voice business precisely as that business was entering a serious period of decline. Mobile providers now are in the same predicament. No matter how big they are, their base business is going to go away, for the the most part, meaning every single cent of revenue they now earn will have to be replaced.

If you think the telecom business is in great shape you don't work in the business. Granted U.S. wireless data revenues grew five percent quarter over quarter in the third quarter of 2009 and 27 percent year over year, to reach $11.3 billion by the end of the third quarter of 2009, according to analyst Chetan Sharma.

But overall service provider average revenue per user decreased by 14 cents during the third quarter. Average voice ARPU declined by 57 cents per user while the average data ARPU grew by 43 cents.

The point is simply that the communications business already is in the midst of a necessary transition from its traditional revenue models to new models, none of which are assured. It is going to take a great deal of very-hard work to pull this off and while consumer displeasure with such providers is understandable at times, they are not "too big to fail."

Most of that gain in data revenue was realized by Verizon and AT&T, which between them accounted for 80 percent of the increase in data revenues in the third quarter. AT&T and Verizon also now account for 68 percent of the market data services revenues and 61.5 percent of the subscriber base, Sharma says.

AT&T experienced the most growth with a six-percent increase quarter over quarter,  followed by Verizon and Sprint with five percent revenue growth each.

Overall mobile service provider revenue grew about two percent year over year. On an annualized basis, data represents about 28 percent of total mobile service provider revenues.

Analyst Chetan Sharma estimates that by end of 2009, U.S. mobile data traffic is likely to exceed 400 petabytes, up 193 percent from 2008.

Smartphones also now represent 25 percent of U.S. devices in service, says Sharma, while mobile penetration stands at about 91 percent.

The average number of text messages used in the U.S. market now averages almost 568 messages per subscriber per month.

Elections Matter: Competitive Carriers Challenge Telco Wholesale Pricing

In the U.S. communications business, some things don't change, and among those unchanging realities is that competitive local exchange carriers believe they should have widespread rights to use access facilities owned by the former Regional Bell Operating Companies (Qwest, Verizon and AT&T), paying wholesale prices with healthy discounts.

The former RBOCs just as vociferously argue that such access should be available, but not on a mandated basis, and only at market-based rates. Those fights were particularly fierce earlier in the decade, but have been relatively muted over the past several years. But nothing is ever completely settled in the communications business.

Eight competitive communications providers and Comptel have asked the Federal Communications Commission to adopt rules that would lead to lower prices for broadband access and transport. The petition for "expedited rulemaking" will not, as its name suggests, result in anything actually happening very soon.

The request must, by law, be circulated for response, and those responses will be vigorous. The request also comes at a time when larger issues, especially the shape of a new national broadband policy, are being weighed as well.

Comptel, 360networks, Broadview Networks, Cbeyond, Covad Communications, NuVox, PAETEC, Sprint Nextel and tw telecom have asked the FCC to create new procedures that would require the former Bell Operating Companies to offer wholesale access at "going-forward rates," plus a "profit margin or markup" of about 22 percent.

The concept is arcane for anybody who is not a communications policy expert or communications attorney, but essentially boils down to a competitor belief that prices are too high, and that the changed political complexion of the FCC will allow changes more in line with CLEC thinking both on mandatory wholesale and robust discounts on wholesale facilities used by competitors.

The perhaps unstated hope is that the forthcoming national broadband plan might address terms and conditions for mandatory wholesale access to optical broadband facilities owned by the former RBOCs, something competitive providers would dearly like to win, and which existing rules do not support.

Still, the petitioners do not expect immediate action, as the request has to be circulated for public comment, and will, as usual, face heated opposition from Qwest, AT&T and Verizon.

Still, it has to be noted that elections have consequences. The new petition might not have been deemed to have a chance of upside in the previous presidential administration.

AT&T, Verizon Will Gain Video Share in 2010

AT&T and Verizon are slowly gaining share in the U.S. multi-channel video market, while satellite providers DirecTV and Dish Network are holding their own, with Comcast and Time Warner Cable under a bit of pressure, but possibly facing more erosion over the next year, new surveys by ChangeWave Research suggest.

A key factor is simply that AT&T and Verizon now are able to market video services to millions more customers every year as they build out their new networks. Given a choice, some customers will exercise that choice, and switch from a current provider to one of the telco-provided services.

To the extent that customer satisfaction has a direct effect on churn behavior, Verizon, AT&T and DirecTV also stand to benefit, as their customer satisfaction ratings are at least three times higher than those of Comcast and Time Warner Cable, according to a recent Changewave Research survey of nearly 3,000 end users.

Still, market share changes relatively slowly in the video entertainment market. When asked whether they planned to switch TV providers in the next six months, about 12 percent reported they’ll be switching.

That works out to about two percent of the customer base a month, a figure quite consistent with what video operators have seen in recent years. But users rarely behave precisely as they say they will. One might expect churn to wind up being less than two percent a month, but more than one percent a month.

Also, service providers recently have found churn levels lighter than usual, in part because of slower housing starts, in part because of “save” offers made when customers call to disconnect, in part because bundles save customers money.

But prices seem to have very-high importance. According to the Changewave survey, price is the reason half of the “switchers” plan to make a change. Only about 10 percent indicated they would switch to get a bundle.

If price drives half the changes, rather than some other service attribute, many users who plan to defect will wind up staying because of a “save” offer that addresses the price objection.

Market share changes over the last year show just how stubbornly service providers are fighting to prevent churn in a saturated market that mostly is a zero-sum game.

For the U.S. market as a whole, cable TV operators retain dominant market share of 65 percent while satellite providers have 25 percent market share. Telcos now have 11 percent market share.

Comcast, with 23 percent share, slipped about one percentage point over the last year.
Time Warner Cable, with 11 percent share, gained one market share point over the same period.

DirecTV, with 13 percent market share, was unchanged over the year. Dish Network, with nine percent share, lost one share point over the last year.

Verizon’s FiOS has five percent share of the national market, while AT&T U-verse has three percent of the national market.

About 54 percent of the Changewave respondents who say they intend to switch providers say they will choose a fiber-optic service, an eight-point increase in three months.

Verizon FiOS TV remains the top provider that switchers plan to move to in the next six months. But AT&T’s U-verse service has jumped seven percentage points since Changewave’s March survey and is currently showing the most momentum among providers.

By way of comparison, just four percent of switchers saying they’ll sign up with Comcast and one percent say they’ll buy from Time Warner Cable.

Changewave researchers think cable and satellite providers will, for these reasons, face headwinds as the telcos gear up.

Fiber TV providers boast a big lead when it comes to customer satisfaction levels. Some 38 percent of subscribers say they are “very satisfied.”  About 27 percent of satellite subscribers say they are “very satisfied.”

About 13 percent of cable subscribers say they are very satisfied. So satellite subscribers are twice as satisfied as cable customers while fiber TV customers are three times as satisfied as cable customers.

The difference is even more evident at the individual company level, where Verizon has the most satisfied customers. About 47 percent of Verizon FiOS TV customers say they are very satisfied, while 39 percent of AT&T’s customers say they are very satisfied.

Some 34 percent of DirecTV customers say they are very satisfied. Just 11 percent of Comcast and Time Warner Cable customers say they are very satisfied.

"Surprising" AT&T Stance on Net Neutrality?

Some people might be shocked to learn that AT&T complies with existing Federal Communications Commission rules. Some people might be shocked to learn that AT&T actually already agrees that "best effort" Internet services ought to treat every packet the same as every other.

“We use the principle of ‘us on us,’” says AT&T  CTO John Donovan. “If we take an external developer and ourselves, we should not be advantaged in how long it takes or how much expertise is required."

"I don’t think it needs to be that complicated," he says. Does any application run by any third party work as well on the network as an AT&T-provided application?

"Outside applications need to be on an equal footing with our own applications," Donovan says.

But that's part of the problem with net neutrality. It is very hard to define and covers a range of business discrimination issues, network management and performance practices as well as potential future services that consumers might very well want to buy, that provide value precisely because they allow users to specify which of their applications take priority when the network is congested.

As a working definition, net neutrality is the idea that ISPs cannot "discriminate" between packets based on the owner or sender of packets, or on the type of lawful application, or block lawful packets.

The latter principle already applies to fixed broadband access connections, and the new change might be the extension of such rules to wireless providers. What is "new" in the current net neutrality debate is that concept that no packet can be afforded expedited handling, compared to another.

At some level, this is common sense. One wouldn't want video packets or voice packets sold by a third party to be disadvantaged, compared to video packets sold by the Internet access provider, for example.

But that isn't the issue in the current round of discussions and the possible FCC rulemaking. The issue is more an issue of  whether "affirmative" packet handling, as opposed to "negative" packet handling, will be lawful in the future.

"Negative" packet handling is sort of a "thou shalt not" approach: application providers should have a reasonable expectation that their best-effort Internet traffic will be handled the same way as any other application provider's traffic is treated. So ISPs "shalt not" provide any quality-of-experience advantage for their own application bits, as compared to any other bits delivered over the network.

All that sounds fair and reasonable, and in fact ISPs (after a few notable cases of interference), have concluded it is not worth the public outrage to block or delay any packets to heavy users, even when networks are congested, for the purpose of maintaining overall user experience for all the other users.

But there are several issues here. Good public policy would forbid business discrimination, a situation where any ISP could attempt to favor its own applications over those provided by its competitors. Back in the "old days," an example might have been a refusal by one telephone company to deliver calls from a rival.

But the network neutrality debate is far more complicated than that. There is a broad area where network management policies designed to maintain performance might be construed as business discrimination, even when the purpose is simply to protect 95 percent of users from heavy demand created by five percent of users.

Under heavy load, real-time applications such as video and voice suffer the most. So either end users might want, or ISPs might prefer, to give priority to those sorts of applications, at peak load, and slow down packets less sensitive to delay.

The problem with crudely-crafted net neutrality rules is that they might make illegal such efforts to maintain overall network performance for most applications and most users. One can hope that will not be the result, but it remains a danger.

The other issue is creation of new services or applications that can take advantage of expedited handling. Users might want their video or voice packets to have highest priority when there is network congestion. Crude net neutrality rules might make that impossible. But one can hope policymakers will take that sort of thing into consideration.

Net neutrality is a very-complicated issue with multiple facets. Ironically, end users might, in some cases, actually want packet discrimination.

Will Telecom Markets Grow in 2010?

Worldwide telecom spending will decline four percent in 2009 with revenue of nearly $1.9 trillion. In 2010, telecom spending is forecast to grow 3.2 percent, say researchers at Gartner. The question lots of people logically will have is what pattern growth in U.S. enterprise and smaller business markets will take.

Qwest provided some anecdotal evidence during its third quarter earnings report. "As far as the activity in BMG and wholesale, I would say, yes. we are seeing some quicker decision making," says Teresa Taylor, Qwest COO. "Quicker decision making" is a sign of more buying intent and activity, as longer decision cycles represent less intent and activity.

Qwest's business markets group sells to enterprises, so the anecdote suggests enterprise demand, at least for Qwest, is growing. Business markets segment income of $409 million was flat, compared to the second quarter, but increased 11 percent year over year.

The caveat here is that Qwest believes it has been doing better than AT&T and Verizon over the last couple of quarters. All Taylor will say that trends are "positive."

Wirefly’s Top 10 Most-Anticipated Cell Phones

In a major change, the top-two "most anticipated" new mobile devices are made by Motorola. That hasn't happened for quite some time, and will be a huge test of Motorola's decision to rely on Android as its ticket back into the top ranks of manufacturers of "hot" devices.

The launches are equally important for mobile service providers, who have found devices to be primary ways of differentiating their services. We'll have to see, but it is possible, perhaps likely, that a key new feature of the top-two Android devices will be their methods of integrating contact information and status updates across applications. That's an angle on "unified communications" we have not seen so much in the mobile arena.

Here's Wirefly's ranking and commentary.

1. Motorola Droid (Verizon Wireless) - The most anticipated cell phone launch of the season is just days away, but the hype for this the Motorola Droid smartphone has been building for quite some time.  Verizon Wireless has invested heavily in a national “teaser” marketing campaign, while keeping the details about this Android-based device close to the vest.  The Droid is the first commercial phone released with the new Android 2.0 platform, and has been dubbed the “iPhone killer” by many a technology-writer.  Verizon Wireless is stoking the fire with a campaign that touts all the things the Droid does that the iPhone doesn’t – from running multiple apps, to a full slide-out keyboard, to changeable batteries and memory to a 5.0 megapixel camera that takes photos in the dark.

2. Motorola CLIQ MB200 (T-Mobile) - The highly-anticipated Motorola CLIQ is the new king of the T-Mobile Android smartphone lineup, and the first since the original G-1 to have a full slide-out keyboard.    What really makes it buzz-worthy, though, is that it utilizes the new MotoBlur user interface that syncs your social media, contacts, and e-mail in real time, providing instant access to the latest happenings and messages from friends.  (The Cliq is currently available to existing T-Mobile customers, however, new customers will not be able to purchase the device until November 2nd, and therefore, it still garners a spot on our top picks.)

3. Samsung Moment (Sprint) - Sprint’s second Android device, the Samsung Moment, mark’s Samsung’s entry into the Android smartphone market with a full slide-out keyboard and a first-of-its-kind AMOLED touch screen, providing unprecedented brightness that’s also kind to your battery life.

4. LG Chocolate Touch (Verizon Wireless) – The LG Chocolate is an iconic Verizon Wireless phone, and this new touch version should be even sweeter than its predecessors.

5. Samsung Behold II (T-Mobile) – The Behold II is the sequel to the very successful Samsung Behold but with one MAJOR difference - the latest version runs on the Android smartphone operating system.  The Behold II also features a "cube menu" that provides quick access to six multimedia features at the flick of a finger: music, photos, videos, the Web, YouTube, and Amazon MP3.

6. HTC Desire 6200 (Verizon Wireless) – Verizon Wireless is making headlines with the Droid, but is expected to follow quickly with a second Android-powered smartphone dubbed the Desire.  The Desire will not have a keyboard, and will boast HTC’s touch screen “Sense” interface that has won rave reviews on the HTC Hero.  

7. Sprint Palm Pixi (Sprint) – The Sprint Palm Pixi is being touted as a tiny, sleek webOS-based handset that offers many of the same features and functionality as the Pre without the hefty price tag.

8 . BlackBerry Storm 2 (Verizon Wireless) – This next generation of the touch screen BlackBerry Storm looks similar to the original model on the outside, but boasts notable improvements on the inside such as a Wi-Fi radio, sleeker design, and an improved SurePress typing system.

9. BlackBerry Bold 9700 (AT&T & T-Mobile) –This smartphone is an updated version of the high-end Blackberry Bold that hit the market last year.  It is thinner and lighter with a faster Web browser than its predecessor and replaces the original Bold's track ball with an optical track pad.

10. LG Shine 2 (AT&T) – The successor to the immensely popular Shine; but as its name indicates, it promises to be twice as sleek and sexy.

Might Verizon Still Get the iPhone?

Given the direct knocks on the Apple iPhone in Verizon's latest "Droid Does" marketing campaign, there has been speculation that Verizon has given up on any plans it might have had for offering the iPhone on the Verizon network.

But Verizon chairman and CEO Ivan G. Seidenberg surprised observers by saying Verizon has not given up hope of offering Apple's iPhone.

"This is a decision that is exclusively in Apple's court," Seidenberg said on Verizon's third quarter 2009 earnings call. "We obviously would be interested in any point in the future they thought it would make sense for them to have us as a partner."

"We have expanded our base of other devices," explained Seidenberg. "So our view is to broaden the base of choice for customers and hopefully along the way, Apple as well as others will decide to jump on the bandwagon."

Although AT&T's exclusive deal to offer the iPhone in the US is thought to be nearing an end, Verizon Wireless, which uses the CDMA air interface, is viewed by some an unlikely candidate to offer the iPhone, which currently is designed to run on GSM networks.

AT&T's iPhone exclusive is seen as a key factor in differing net new subscriber performance in the third quarter. Verizon Wireless added 1.2 million new mobile customers during the quarter to reach 89 million in total, while AT&T had earlier reported growth of two million net new subscribers, to reach 81.6 million total subs.

AT&T said it activated 3.2 million iPhones in the third quarter of 2009, the company's largest quarterly total to date.

Kindle Connections Now Go to AT&T

In a business with true scale and scope economies, ownership of a global network can be a key advantage. Consider network support for the Amazon Kindle book readers, which now are sold internationally.

The U.S. version of the Kindle 2 has used the Sprint 3G network. But both international and U.S. versions will henceforth use the AT&T network globally. Existing U.S. Kindle owners will continue to use Sprint, but all new devices will be powered by the AT&T network.

Of course, there are other ebook readers. Barnes & Nobles sells the Nook, Sony sells the Daily Edition and Plastic Logic sells the Que. All of those readers use AT&T's network.

Verizon will provide service for the upcoming iRex e-reader.

The financial impact to Sprint might be a relatively minor issue. Sanford Bernstein analyst Craig Moffett estimates the Kindle will drive one million Kindle users a year to AT&T that Sprint would otherwise have gotten.

Moffett estimates that Sprint makes about $5 for each subscriber addition and $2 per every e-book downloaded onto Kindle over its networks, according to Business Week writer Olga Kharif.

The real issue is whether other upcoming devices and services have enough of a global angle, and enough sales volume, that providers such as Sprint are unable to compete in those new lines of business as well.

How Long Will 40 Gbps, 100 Gbps Networks Last?

The problem with networks is that they do not last as long as they used to, which means they need to be upgraded more frequently, which also means the ability to raise capital to upgrade the networks is a bigger issue than it once was.

Qwest CTO Pieter Poll, for example, notes that Qwest's bandwidth growth now is 45 percent growth compounded annually, or nearly doubling every two years or so. That in itself is not the big problem, though. The issue is that consumers driving most of that new consumption do not expect to pay more for that consumption increase.

"From my perspective, the industry really needs to focus on tracking down cost per bit at the same rate, otherwise you'll have an equation that's just not going to compute," says Poll. Whether on the capital investment or operating cost fronts, adjustments will have to be made, one concludes.

Still, raw bandwidth increases are not insignificant. "If you look at 2008 for us it was unprecedented in terms of the work we did in the backbone," says John Donovan, AT&T CTO. "The capacity we carried in 2008, five years out, will be a rounding error.

Donovan notes that AT&T's 2 Gbps backbone lasted 7 years, the10 Gbps backbone lasted five years, while the 40 gigabit will last three years.

By historical example, one wonders whether 100-Gbps networks might last as little as two years before requring upgrades.

Donovan suggests carriers will have to rethink how they design networks, how routing is done and how content bits get moved around. One suspects there might be more use of regional or local caches, to avoid having so many bits traverse the entire backbone network.

AT&T Chief Warns About Heavy Users

The top three percent of smartphone users consume 40 percent of all mobile data bandwidth, says AT&T Mobility and Consumer Markets president Ralph de la Vega. Those three percent of users also consume 13 times the data of the average smart phone user, he adds. Another way of quantifying such usage is to note that users who consume 40 percent of AT&T's mobile data bandwidth constitutute just 0.9 percent of all AT&T postpaid mobile subscribers.

The point was clear enough: Without adequate management of network access, most customers will find their experience damaged because of a small number of other users.

There are legitimate public policy concerns about anti-competitive behavior in the wireless and wireline businesses where it comes to gatekeepers of any sort using that power to impair competition. But that is a different and distinct matter from the obvious need to manage shared network resources in ways that actually preserve reasonable access for all other users.

De la Vega used the word "crowd out" to describe such contention, and it is a legitimate issue. Anti-competitive actions certainly are to be protected against. But there are valid network resource managment issues that obviously have to be addressed as well, especially in the wireless domain.

Beyond that, there are valid reasons for wanting competition protected, but without stifling consumer access to new products that offer mass market customers features enterprise users take for granted, such as the ability to prioritize their own use of bandwidth to perserve performance of mission-critical applications. If any consumer end user wants to prioritize their own video, voice or other bits, they ought to be able to do so.

There is nothing anti-competitive about this, so long as any applications in the class can receive such prioritization. Consumer advocates are right to note that issues can arise if voice bits sold by the ISP can be prioritized, but not voice bits sold by other competing service providers.

Some approaches will work better than others, and that is an issue one would hope policymakers take seriously into account as new "neutrality" rules are crafted.

Verizon and AT&T: F. Scott Fitzgerald Said it Best

First-quarter financial reporting by AT&T and Verizon Communications now illustrates clearly how diverse telephone industry contestants, and the market, now has become.

Wireless now constitutes 57 percent of Verizon Communications consolidated revenue. Also, 27.9 percent of service revenue comes from data, with 58 percent of data revenue now earned from non-messaging services.

At AT&T, fully 72 percent of revenue now comes from sources other than landline voice.

Compare that with revenue sources at a typical independent, probably rural telephone company. There, revenues are very much tied to voice landlines in service. A typical small telco might earn 45 percent--nearly half--of its money from access revenues (terminating long distance traffic for another carrier), according to Telecom Think Tank.

About 35 percent of total revenue comes from universal service funds. Local service fees paid by end users is about 18 percent of total revenues.

Add it all up and 98 percent of small telco revenue is dependent on active voice lines. So note the clear dichotomy. AT&T and Verizon represent something on the order of 80 percent of all U.S. communications market share. And for these two companies, mobility drives the business, while multi-channel TV is becoming a key contributor, with broadband Internet access, to overall revenues.

Verizon also had 299,000 net adds for its FiOS TV service, which now is at 23 percent penetration of homes that can buy the service, and added 298,000 net FiOS Internet access customers, bringing penetration up to 27 percent.

Most other telcos do not have the option of relying on mobility, television or global enterprise customers to dramatically change their revenue composition. That is the big cleavage in the U.S. telco market.
The rich are different from you and me, " F. Scott Fitzgerald once wrote ("The Rich Boy" in the volume of short stories "All the Sad Young Men."). One might say the same about AT&T and Verizon, compared to virtually every other telecom company in the U.S. market.

For AT&T and Verizon, the transition to new revenue sources--away from wired voice--is largely completed. For many other telco, the future pattern is less clear.

Very-small telcos often also own separate cable TV or local wireless operations. The good news is that the "video" and "mobile" functions possibly already are provided. The less-good news is that small video and small wireless operations do not spin off the same level of gross revenue or margin that the national operators are able to.

So some independent telcos might well be said to have, or will in the future have, the same basic wireless-video-broadband strategy employed by Verizon and AT&T. Many others, though, will not be able to do so, and will have to craft strategies based on a different pattern. The issue now is what those patterns might be.

CallVantage Closing Highlights VoIP as Part of Triple Play

AT&T is discontinuing its CallVantage "over the top" VoIP service, a move that has some observers calling AT&T stupid for turning its back on the future. But that isn't what AT&T is doing. It will focus on using VoIP as a key part of its triple-play or quadruple-play consumer offerings, instead of devoting resources to a small, if well-run service that offers little synergy or business value with the other things the company is doing.

It just makes more sense to focus on VoIP as a part of a bundle.

AT&T Wireless-Broadband Bundles Show Strong Growth

Worth noting: AT&T CFO Rick Lindner says "our stand-alone DSL product which about 50 percent of the time is bundled with wireless has been very strong for us."

You might suspect there has been some recent promotional activity to encourage such behavior but that is not the case. "We haven’t been running any significant promotional activities I think in the last few quarters," Lindner says.

The implication: high-speed Internet access and wireless are the two foundation communications services.

AT&T Results: No Negative Recession Impact

AT&T's first quarter 2009 results suggest it is not suffering from economy-induced customer budgetary caution. Its earnings per share were in line with its full-year outlook, the company gained 1.2 million net wireless subscribers to reach 78.2 million, ading 875,000 retail postpaid net adds, up 24.1 percent compared to the first quarter of 2008.

The company also posted its fifth consecutive quarter with a year-over-year increase in wireless postpaid subscriber average revenue per user, up 2.1 percent versus the year-earlier quarter to $59.21.

AT&T firther saw strong growth in its U-verse IPTV segment, adding 284,000 net customers, nearly double the company’s gain in the first quarter of 2008, to reach 1.3 million in service.

The company also posted a 471,000 net increase in total broadband connections, including wireline and wireless LaptopConnect cards, to reach 16.7 million in service.

AT&T Reports Ap 22: What to Look For

AT&T reports first quarter results on April 22. I suspect most of us will be watching for any weakness in wireless net additions or average revenue per user. Everybody expects residential voice lines to decline, so the issue there might be a slowing of the rate of loss. Business customer revenues likely will be considered a success if growth essentially is flat.

A consumer landline loss in the 10 to 12 percent range is probably to be expected, while enterprise segment revenue likely will be off a couple to several points. None of that would be unexpected.

Video entertainment subscribers should grow, but will not likely have a material effect. Broadband net additions will be less robust than in the first quarter of 2008.

AT&T Seeks to Extend iPhone Exclusive

AT&T is now in discussions with Apple Inc. to get an extension of AT&T's exclusive on the iPhone until 2011, the Wall Street Journal reports. AT&T also is seeking to overhaul AT&T's marketing to make wireless the priority. Ultimately, that likely will mean that customers can qualify for AT&T discounts on IPTV or broadband access if they are a wireless customer, where tradtionally AT&T has tied discounts to being a wireline voice customer.

AT&T has 77 million wireless customers and 30 million consumer voice lines.

The intensified focus on wireless shows just how much is changing in the world of former wired telephone companies. Where once most telcos were very similar in terms of services offered, customer base and strategy, firms are becoming quite differentiated. Verizon and AT&T have options, footprints and business segments quite distinct from those of virtually all other U.S. carriers.

The big challenge is what wired network providers without the scale and wireless assets of those two firms will fashion their business strategies.

http://online.wsj.com/article/SB123973238611017715.html

AT&T Tests New Bundle: Netbook, Wireless and Wired Broadband for $59.95 a Month

AT&T is testing its new netbook-plus-wireless broadband bundle in its Atlanta and Philadelphia markets, offering a ultra-portable netbook with built-in AT&T 3G wireless capabilities when bought with a $59.95 per month "Internet at Home and On the Go" broadband service that includes both at-home digital subscriber line service plus wireless broadband.

Mini laptops available in selected AT&T stores in Atlanta and Philadelphia include the Acer Aspire One, Dell Inspiron Mini 9 and Mini 12, and LG Xenia. Promotional prices range from $49.99 to $249.99 with the purchase of an "AT&T Internet at Home and On the Go" plan, which includes an AT&T DataConnect plan and AT&T Fast Access DSL, starting at $59.95 per month. Without those AT&T services, these mini laptops range in price from $449.99 to $599.99.

AT&T is offering two mobile DataConnect plans in the trial, including a 200 MByte plan for $40 per month and a 5 GByte plan for $60 per month.

For users who wnat more standard notebooks, the trial also will feature the Lenovo X200 for $749.99 with "Internet at Home and On the Go." The laptop is available for $849.99 if a user buys only the two-year DataConnect plan.

The embrace of traditional mobile phone subsidy models is part of the story. The bundling of wireless and wired broadband might ultimately be just as big a part of the story. Consider that the $60 a month plan includes both wireless broadband and DSL as well.

Though the DSL likely will not include the faster speeds many users now require, you might think of the offer as something like a "free DSL" program, as wireless broadband access now costs about $60 a month for 5 Gbytes of usage. The new AT&T includes the heavily-discounted PC plus wireless and DSL broadband for just $59.95 a month.

http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=26676