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. 

Comcast, Time Warner Cable, Bright House Sell Spectrum to Verizon

SpectrumCo, LLC, a joint venture between Comcast Corporation, Time Warner Cable, and Bright House Networks, is selling Verizon Wireless its 122 Advanced Wireless Services spectrum licenses covering 259 million POPs for $3.6 billion. What might be noteworthy is the strategic change of direction. The cable companies purchased the AWS spectrum at least in part as a potential foundation for wireless service.

The sale, and the agreement by the owners to resell Verizon Wireless services instead, suggests the cable operators once again have decided that they could not create independent wireless operations.

Moreover, given the business relationship cable companies have had with Sprint since at least 1994, the move also suggests that the cable operators are breaking with the idea of Sprint as a strategic partner. Since cable companies have been among the potential buyers of Sprint Nextel, the latest moves would seem to indicate no interest in that area.

Cable TV operators have been spending money to get into the wireless business for decades, with little success. In 1994 Sprint, Tele-Communications, Comcast and Cox Cable formed a joint venture to build a nationwide network to provide wireless service.

However in 1998, Sprint assumed control of the business and bought the cable companies' interest in the company.

In 2005 Comcast, Cox, Time Warner and Advance/Newhouse formed a joint venture with Sprint Nextel to provide a quad-play cable TV, high-speed data, landline and wireless service to their customers. But the quad-play idea never panned out and Pivot never grew beyond the initial 33 markets Sprint launched in November 2007.

Sprint said that Pivot was being hindered by provisioning issues. Time Warner later said that demand for Pivot services was "tepid." Pivot users eventually were given the option of switching to Sprint's regular service.

In 2008, Sprint and Clearwire announced that they would combine their WiMAX businesses and create a new company that would include a $3.2 billion investment from Intel, Google, Comcast, Time Warner Cable, Bright House Networks and Trilogy Equity Partners.  Cable wireless history

Recently, Cox Communications decided to shutter its own wireless business as well.

Comcast owns 63.6 percent of SpectrumCo and will receive approximately $2.3 billion from the sale. Time Warner Cable owns 31.2 percent of SpectrumCo and will receive approximately $1.1 billion. Bright House Networks owns 5.3 percent of SpectrumCo and will receive approximately $189 million. Comcast, Time Warner Cable sell spectrum to Verizon

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. 

Does Amazon Want to Monopolize The Entire Publishing Chain?

How Will Comcast Compete, in the Future?

Netflix Now Has More Subs Than Comcast

If all that mattered was subscribers, Netflix would be a bigger company than Comcast, the largest U.S. cable company. In the first quarter of 2011, Netflix added 3.6 million subscribers, ending the period with more than 23.6 million subscribers in total. That was up 69 percent from the 14 million subscribers it had a year ago.

Comcast ended 2010 with 22.8 million pay TV subscribers. Of course, subscriber numbers are not the only metric. Comcast's average revenue per user is much higher. Netflix ARPU is about $12 per subscriber, per month. Comcast ARPU is somewhere north of about $82 a month.

read more here

Comcast Tests New Service That Combines Internet, TV

Comcast Corp. is testing a new service that combines linear television and some Internet content. The new set-top device combines digital video recorder functions with the ability to watch some web-delivered video and search for programs.

(click on image for larger view)

But it isn't just the ability to protect themselves from Netflix, Apple TV and other competitors. Typical cable set-top boxes are a bit underpowered in terms of supporting elegant user interfaces.

Time Warner Cable CEO Glenn Britt admits that over-the-top services have better user interfaces.

"I would not sit up here and say our user interface is really good," Britt said recently. "It's not as good as theirs."

Edward Rogers, deputy chairman and controlling shareholder of Rogers Communications also pointed out that set-top evolution in the cable industry has not kept pace with other developments in consumer electronics. "We realize that the evolution of these boxes has been a little slower than what we need," Rogers said.

Comcast Tests New Service That Combines Internet, TV - WSJ.com (subscription required)

http://www.cable360.net/technology/MSOs-Blame-Set-Tops-For-Their-OTT-Problems_44366.html

Why Don't All Users Buy the Broadband Equivalent of a Lexus?

Faster is better, where it comes to broadband. But so is a Lexus, right? But there's a reason we have vehicles in all sizes, optimized for different applications, at different price points.

We do different things with vehicles, and for most of us, money is not unlimited. Were it not so, perhaps most people would drive a Lexus. If one assumes there is very little a single cannot do with 15 Mbps, then a family can well benefit from 50 Mbps, if it believes it will have three or four users online, all at the same time, all watching video at the same time.

Lots of households will find that overkill, at least for the moment. In some cases, users can buy 50 Mbps service from Comcast, for about $100 a month. That's a better deal than $145 a month. But the issue for many users will be how much those users really want to spend for service, when they are paying their own money.

Top-10 U.S. Telecom Sites Suggest

The May 2010 Hitwise report on site traffic has some interesting potential implications for communications service providers.

The top single site was Cricket, a firm historically focused on the wireline replacement market and using value pricing to replicate the unlimited free local calls element of fixed line service.

Verizon has three sites in the top 20, as well as holding spots two and three for traffic.

What is notable is that one of the three Verizon sites is the customer portal, indicating that people are becoming quite comfortable with using the portal for paying bills, asking questions and checking on usage and status information.

AT&T has two sites on the list, and the percentage of traffic for the four leading U.S. mobile carriers mobile sites is in line with their respective market shares.

T-Mobile USA also has two sites in the top 10, one of them its customer service portal, which likewise suggests user comfort with online support, as well as T-Mobile's possible success converting its customers away from paper billing to online-only billing.

Comcast's site in the top-10 also is a customer support portal. Back in the "old" days the top-10 sites were likely to be retail sales and transaction portals. These days, three out of 10 are relatively strictly customer support sites.

Want 105 Mbps? Comcast Will Sell it to You

Want 105 Mbps Internet access? You soon will be able to buy it from Comcast Corp. "Extreme 105" will cost $200 per month after an installation fee of $249. This service is expected to be available in early June. The new “Extreme 105” will support 105 Mbps download and 10 Mbps upload speed.

Comcast predicts that all of its residential networks will be upgraded to for such service by mid-2010.

The existing residential-tier “Extreme” offers 50 Mbps downstream and 10 Mbps upstream speed for a price of $99.95 per month.

Comcast Moves to Becomes Fastest Internet Provider -- Seeking Alpha:

Consumer Satisfaction With Video, Wireless Up, Sprint Gains Most

Customer satisfaction with cable and satellite TV rises to its highest level in 10 years, up five percent, with nearly all companies registering improvements, according to the American Customer Satisfaction Index.

Sprint Nextel seems to have made the largest gains over the last two years, jumping by double digits for each of the past two years. That's important as Sprint Nextel's customer service was widely seen as the cause of its high churn over the past several years. The improvement in customer satisfaction is mirrored by steadily better churn performance over the last couple of years.

Both Verizon’s FiOS and AT&T’s U-verse lead the way with scores of 73 and 72, respectively. Satellite TV still leads over traditional cable, with Dish Network soaring 11 percent to 71 to overtake rival DirecTV for the first time since 2005.

DirecTV fell four percent to 68 as aggressive pricing promotions by DISH, coupled with a price increase by DirecTV, has the two satellite TV providers moving in opposite directions.

All four of the largest cable providers show some improvement. Charter Communications makes the biggest leap, gaining 18 percent to 60. The company is now statistically tied with Comcast and Time Warner Cable, both up three percent to 61.  Cox Communications gained two percent to 67 to lead all traditional cable companies for a seventh straight year.

“Having enjoyed near-monopoly status in most areas for many years, cable companies had little incentive to provide quality services at a good price,” says Claes Fornell, founder of the ACSI.  “Now that satellite and fiber-optic TV providers have created a competitive challenge to cable, the cable companies have started to step up customer service and realize some gains in customer satisfaction, but they still remain far behind both satellite and fiber-optics.”  

Traditional local and long distance service improved four percent to 75, the highest level in more than a decade.  AT&T is on top after a six-percent surge to 75, followed closely by Cox Communications, unchanged at 74, and Verizon, up three percent to 73. CenturyLink and Comcast round out the bottom of the industry, with CenturyLink gaining three percent to 70 and Comcast rising two percent to 68.

Customer satisfaction with wireless telephone service set a new all-time high for the second consecutive year, rising four percent to 72.  T-Mobile gained three percent to 73, tying for the lead with Verizon Wireless, which declined one percent.

AT&T Mobility improved three percent to 69. Two years after the iPhone was introduced as an exclusive product, AT&T seems to have made strides to relieve some of the strains on its network caused by the rapid influx of iPhone customers.

Sprint Nextel had the largest improvement, gaining 11 percent to 70 a year after a similarly large 13 percent jump, pushing the wireless carrier from well below to very close to the industry average.

Perhaps the most-intriguing bit of commentary provided by ACSI was the brief note that "with wireless looking to be the future of telephone service, providers are ramping up efforts to provide new services, simplified usage plans, and better pricing." Note the language: "wrieless looking to be the future of telephone service."

Clearwire Emerging as a Wholesaler

Perhaps Clearwire did not initially think its business model would be anchored by wholesale wireless, but that seems to be shaping up as key to its future. Of the 283,000 net new subscribers added in the first quarter of 2010, 111,000 of them, or 39 percent, were gained by wholesale partners.

Most of the other major national wireless providers also have some wholesale operations, but none likely approach Clearwire's percentage. Clearwire’s network is behind Sprint’s 4G services as well as Comcast and Time Warner Cable wireless services. Then there is T-Mobile USA, which seems to need wholesale 4G capacity as well.

It might not be unreasonable to speculate that one reason Clearwire is preparing for a transition to Long Term Evolution, instead of sticking with its WiMAX air interface, is that T-Mobile USA might well require LTE capability in order to sign up.

"There was an agreement before that was really a commercial deal between Intel and Clearwire that would restrict us from using anything other than WiMAX up to, I think it’s February of 2012," said Bill Morrow, Clearwire CEO. "That deal is no longer in effect."

Now, either Intel or Clearwire can give 30 days notice and the deal is over. "So it does give us the flexibility that if we wanted to do a commercial launch of LTE or some other technology, that Intel would not be holding us back," said Morrow.

With less than a million total subscribers, it is too early to say how the retail versus wholesale customer mix holds up over time. Should Clearwire pick up T-Mobile USA as a wholesale partner, and as Comcast and Time Warner Cable gear up their wireless operations, it is not hard to envision wholesale growing to be a majority of customers.

"Soaring Profits" for Broadband Access Providers?

The Phoenix Center says claims by proponents of increased Internet regulation are quite wrong in claiming that firms such as AT&T, Verizon, Sprint-Nextel, Qwest, Comcast, and Time Warner Cable are making "record profits," "substantial profits" or  "soaring profits" that justify further regulation.

Quite to the contrary, those firms are earning at lower rates than the average Standard & Poors 500 firms does, and have done so for the last five years.

The Phoenix Center found that the profitability of the larger broadband access service providers is generally equal to, or below average, for firms in the S&P 500. It would be more accurate to say that profits are "'typical," not "soaring or 'substantial.'

Conversely, content firms like Google and EBay are substantially more profitable than the access providers are,  implying that access providers are not benefiting as much as others in the Internet ecosystem from the surge in broadband adoption and use.

Across all measures of profitability, Google and Ebay are two-to-four times more profitable than the better performing broadband providers.

In fact, the Phoenix Center found that both Wal-Mart and Colgate-Palmolive have much higher profits than the large access providers.

FCC Chairman Julius Genachowski has issued a challenge to the industry for data-driven analysis," according to study co-author and Phoenix Center President Lawrence J. Spiwak. "Accordingly, parties calling for regulation need to present more than just hyperbole about 'soaring' profits -- they need to present facts."

"The evidence shows that BSP profitability is fairly typical of American industry, if not a little low" said study co-author and Phoenix Center Chief Economist George S. Ford, PhD. "Based on available evidence, regulatory intervention based on substantial profitability by large BSPs has no basis in fact."

Cablevision, Time Warner Cable, Comcast Federate New York Hotspots

Federation nearly always is good for widespread adoption of any application. Email and text messaging provide recent examples, as usage exploded once messages were made interoperable. But one can point to any number of other examples, including railroad, telegraph and telephone services, each of which benefitted from interoperability.

A positive usage effect likely will happen for cable public hotspot users as Cablevision Systems Corp., Time Warner Cable Inc. and Comcast Corp. have agreed to allow their broadband Internet subscribers to roam freely across the Wi-Fi deployments of all three major cable operators in the New York metro area.

The agreement will allow customers of those companies to use Wi-Fi for no additional charge in places like Madison Square Park in Manhattan, areas of the Jersey Shore and the Hamptons on Long Island.

In key ways, the agreement attempts to keep pace with public hotspot access offered by Verizon Communications and AT&T. The issue isn't so much the public hotspot access as such, but the fact that cable modem, DSL and wireless dongle services now typically come with "no additional charge" Wi-Fi hotspot access. So any provider that can offer free Wi-Fi at more locations has an advantage retaining and acquiring fixed broadband access customers.

AT&T, Cable Companies, Intel, Microsoft Back Broadband Stimulus Application

A newly-formed coaltion of cable companies, AT&T, Intel, Microsoft and industry trade and non-profit groups have created a "Digital Adoption Coalition" to apply for funding under the "broadband stimulus" program.

The Digital Adoption Coalition includes AT&T, BendBroadband, Bresnan Communications, Bright House Networks, Cablevision Systems Corp., Charter Communications, Comcast, Cox Communications, Connected Nation, Eagle Communications, Inc., Dell, Intel Corporation, Mediacom Communications Corp., Microsoft, Midcontinent Communications, the National Cable & Telecommunications Association (NCTA), One Economy Corporation, Sjoberg’s Cable TV, Suddenlink Communications, Time Warner Cable, US Cable Group, and USTelecom.

To improve broadband access, services, and technology in approximately 250,000 low-income households nationwide, the coalition would work with the U.S. Department of Housing and Urban Development to increase broadband outreach efforts in public housing, project-based Section 8 properties, and multi-family assisted communities.

One Economy, a global nonprofit, filed an application with NTIA on March 15 on behalf of the coalition for funding through the Broadband Technology Opportunities Program (BTOP) to support digital literacy training, discounted computers, and project administration.

FCC has No Current Authority to Impose Network Neutrality Rules?

The U.S. Federal Appeals Court reviewing whether the Federal Communications Commission currently has authority to create or enforce "network neutrality" rules has not yet ruled.

But initial questioning suggests the court questions whether the Federal Communications Commission has current jurisdiction to write, much less enforce, net-neutrality rules for the Internet. So some legal observers now suggest the appeals court will in fact rule that the FCC had not authority to sanction Comcast for the way it managed peer-to-peer services.

A 2008 FCC order forced Comcast to stop throttling BitTorrent applications as a means of managing network congestion.

U.S. Court of Appeals for the District of Columbia Circuit Jude Raymong Randolph pointed out to an FCC attorney that “you have yet to identify a specific statute.”

Since the Congress has passed no laws relating to network neutrality, the FCC had, and has, no authority to take action on the matter, the judge seems to suggest.

A ruling of that sort would at least temporarily delay any new efforts by the FCC to codify new network neutrality rules, and shift the battle over such rules to the Congress.

FCC Chairman Julius Genachowski has argued the agency has authority to set net neutrality rules because of the "Internet Freedoms Principles" set in 2005, which say that users have the right to use lawful applications, which P2P is, though the use of P2P sometimes includes transfers of copyrighted content without permission.

But Comcast argues it has the right to manage its network, which it interprets as permitting rate limiting of P2P services, when necessary to preserve user experience and relieve congestion.

To be sure, the specific issue at hand seems primarily about whether the FCC’s decision was improper for statutory reasons, as Congress has not given the FCC legislative permission to create such rules, observers say.

On a wider legislative front, some observers think the White House is dialing back its efforts to get "strong" network neutrality rules adopted. The evidence is indirect, but some point to the late-October resignation of of Susan Crawford, University of Michigan law professor, previously a key adviser to the president on technology and communications, and a proponent of "strong" network neutrality rules.

According to the American Spectator, Crawford's version of Net neutrality was too radical for White House economic adviser Lawrence Summers, contributing to her early departure. If that observation is correct, it would be a sign that any new rules would not strictly ban "every" form of packet prioritization.

Many observers note that quality of service measures typically are needed when users want to interact with important video or voice services, especially as video already has become the primary driver of bandwidth consumption on a global level.

Those observers also would note that strict versions of net neutrality, that would absolutely ban any packet prioritization, would prevent Internet access providers from applying prioritization on behalf of their users, even when those users might specifcially ask for, and desire, such prioritization.

"Packet discrimination" sounds bad, and is, when it is used as a business weapon, allowing unfair competition. But packet discrimination is a good thing when it helps maintain quality of experience for the emerging applications users say are important, especially video and voice.

Also, at the recent Consumer Electronics Show, White House deputy CTO Andrew McLaughlin said the FCC had yet to determine whether Net neutrality is needed to preserve the "open Internet."

If that seems unremarkable, consider that in 2009 McLaughlin had said network management practices of cable companies that limited the speeds of large file downloads were essentially the same thing as Chinese-style Internet censorship.

Management of bandwidth-heavy applications by some users at times of network congestion is not application "blocking" or censorship. It is an effort to maintain quality of service for most users. Some methods will be more palatable than others.

The analogy is access to the old voice network. Telcos do not "censor" speech when, at times of peak load, a user might encounter a "fast busy" signal indicating that no circuits are available. The point is that every network gets congested at least some of the time.

And it always has been recognized that some method of regulating access at such times is a legitimate network management matter. In fact, a fast busy tone does mean a user has temporarily been "blocked" from the network. Sometimes a mobile voice call experiences the same sort of temporary blocking.

That sort of access blocking is not any suppression of freedom of communication or expression. It is not an infringement of Internet freedom. It is a simple way of managing a congested resource at times of peak load.

The immediate matter at hand, though, is the simple matter of legislatively-granted authority. The appeals court seems to be signaling its belief that Congress has granted the FCC no authority to impose rules about network congerstion management or methods of doing so.

What Does Comcast-NBC Universal Merger Mean?

The Comcast merger with NBC Universal will be viewed in many ways: a way for Comcast to move upstream in the content business or a chance to grow the "digital" or "new media" side of the merged company's operations.

The merger also is about protecting the value of the exsiting video distribution ecosystem from destabilizing change. "TV Everywhere," the cable industry approach to enabling use of paid-for video content on any screen, is a similar initiative.

The move also suggests a view on the part of Comcast management that the cable TV distribution business has limited upside left. Revenue growth for virtually all of the cable companies now is coming from voice and high-speed data services, with the emphasis now shifting to business customers, as even the consumer elements of that business are seeing slower growth.

One might question the ultimate value of the move, either as a way of growing revenues near term, or as a strategic bridge to the future. The near term value is clearer, though.

Essentially, the attempt is to provide low-cost or no-incremental cost, convenient access to large quantities of popular professional video while baking in an indirect business model. If you think about the way metro Wi-Fi hotspot access now is positioned by cable and telco service providers, you'll get the idea. The direct revenue actually is produced by purchases of fixed broadband access service.

Then Wi-Fi access is added as a "no incremental charge" enhancement. In the same way, some mobile broadband plans might be pitched as fees for "mobile Internet" access, but then also allow no-incremental cost email access.

In other words, Comcast wants to hang onto the proven business it has--all it "cable TV"--while merchandising "new media" access to that content on smartphones and PCs, for example.

Perhaps Comcast and others would prefer to keep the old business while growing a new one with a direct revenue model, but that seems problematic for most content distributors and owners.

Some studies suggest users will pay some amount for mobile or on-demand video and TV. The issue is how much such users would be willing to pay. Consider a scenario where a typical user pays $10 a month for mobile and other on-demand access, and where the typical household consists of three people, for a total revenue of $30 a month.

Consider that for most households, multi-channel video now costs between $70 and $100 a month, and that is a flat charge for all users in the home. That works out fine if there is no cannibalization of the fixed connection.

But it won't take much substitution to wipe out all the gains from the incremental on-demand revenue. Unless, of course, the different approach is taken: keep your regular subscription and we'll give you the additional on-demand capbility for no incremental cost or low cost.

Comcast Launches Usage Meter: Some Users Might be Surprised

Comcast is launching a "free to use" data usage meter in the Portland, Oregon market, with plans to roll the application out nationally. . The meter will help customers understand how much data they consume in a month. It is an essential sort of tool if users someday are required to buy data packages the way they buy mobile buckets of voice and data.

That is not to say Comcast has any current plans to do so; simply to point out that since few, if any, consumers know what their usage pattern actually is, they certainly cannot be expected to be rational consumers of subscription plans that require such knowledge.

Nor will most users have any problems, even if retail pricing plans were to change, someday. Comcast defines "excessive use" as consumption above 250 gigabytes a month, and the median usage for Comcast’s customers at present is about 2 to 4 Gbytes a month.

The meter is accessible by logging in to "Customer Central" at http://customer.comcast.com and clicking on the “Users and Settings” tab. From there, click on “View details” in the “My devices” section (located toward the upper right hand of the screen) and that will go to the meter page. The meter will show usage in the current calendar month when it’s first launched. Over time, it will show the most recent three months of use (including the current month). The data is refreshed approximately every three hours.

The meter measures all data usage over a cable modem, including any other devices connecting using Wi-Fi. Online gaming consoles, smartphones using Wi-Fi,  digital video recorders, printers, cameras or the iPod Touch are examples.

The Windows operating system and most popular software applications have automated update programs. These updates often download and are installed automatically without the need for user intervention. The automation is generally designed for the convenience and protection of the consumer, but the traffic it generates may come as a surprise.

Cable modem connections supporting multiple PCs will have a correspondingly higher amount of such update activity.

Aggressive update settings, with some default settings checking each hour and downloading every possible option even though they are not all needed, could cause unexpected levels of traffic.

For example, a software program may load its interface in a dozen languages even though all household members only know how to read English.

Another possible “surprise” upstream traffic source is online file backup or uploading to photo sharing sites. Also, many news and information services preload content onto their subscriber's PC or smart phone over the Wi-Fi home network. The content often arrives overnight for convenient viewing in the morning.

Assume each night's upload is only 1GB, which takes up a modest 1GB on the device's storage, and assume too that it never consumes more than 1GB because it overwrites the old content with fresh content each night. That can add up to 30GB over a month on the meter.

A large volume of traffic may be going to digital video recorders such as TiVo. A user in the home may have rented a movie from Amazon, Netflix or Blockbuster. Renting the movie will be a known traffic-generating event. But many services also preload the start of other movies as well as trailers to make them instantly available should they be called for.

The meter will be a useful tool for managing both intended and unintended bandwidth consumption.

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.

Consumer Behavior in Recession was as Expected

Time Warner Cable's third quarter results provide a bit of concrete evidence that consumers did what they said they were going to as far as watching their spending on communications and entertainment services because of the recession.

Consumers said earlier in 2009 they were least likely to cut or reduce spending on Internet access and most likely to cut back on buying pay-per-view movies downloaded over the Internet, according to a new survey by Alcatel-Lucent. But mobile service, basic entertainment video service and telephone lines were among the items consumers said they were most likely to keep, though cutting back on things such as going to night clubs and concerts or going out to movies and restaurants.

All of those patterns would be in keeping with past consumer behavior in recessions.

(see http://ipcarrier.blogspot.com/2009/06/network-services-generally-safe-but.html, http://www.blogger.com/post-edit.g?blogID=7312392900566055630&postID=5497830666217750659)

Generally speaking, people said they would be keeping their broadband Internet, wireless and video entertainment services, though showing much more willingness to curtail adding new enhanced or premium services.

Some surveys suggested consumers would accelerate their abandonment of wired voice, while others suggested demand for fixed telephone services would hold up.

Time Warner Cable's results show that broadband Internet additions held up as expected, though sales of digital video, a premium upgrade, fell, as consumers suggested would be the case.

Time Warner's new voice customers also appear weak, though that bit of data does not necessarily confirm analyst expectations. Existing customers of other voice services might simply have stuck with their existing providers instead of switching to Time Warner Cable.

Overall net new additions tend to show the impact of consumer caution. The company added 117,000 revenue generating units in the third quarter, compared to 522,000 a year ago.

More to the point, Time Warner added 8,000 net new digital video customers, compared to 56,000 net new subscribers analysts were expecting. It added 62,000 net new voice customers where analysts had expected 107,000. The firm also added 117,000 broadband Internet access customers, where analysts had expected 115,000.

So broadband held up, while digital video activity fell, as did voice services.

Still, there are lots of variables to consider. Local market competitive conditions can sharply affect results, as do promotional activities.

Comcast, for example, saw its digital video customer base grow a net 7.4 percent, while adding 6.4 percent net new broadband customers and 20.3 percent voice customers.

Still, the point is that consumers had suggested, and history suggested, that wireless, broadband Internet and entertainment video growth rates would slow, but that the services themselves would hold up. It appears they did, at least for these two large cable operators. At&T and Verizon also added large numbers of wireless customers, as well as a decent number of video and broadband access customers.

Broadband Stimulus Delays Continue

It should not come as any surprise--given earlier delays--that the first project awards under the the American Recovery and Reinvestment Act's "broadband stimulus" program will be late. Some might not happen at all, unless they can adequately document that there is no existing provider able to provide service in project areas.

The program is supposed to allocate $7.2 billion to provide broadband services or training to rural and other underserved communities, through the Department of Commerce’s National Telecommunications and Information Administration and the Department of Agriculture’s Rural Utilities Service.

The problem is that the work load required to evaluate and award funds so vastly exceeds the volume of work either agency has handled in the past. The NTIA must now disburse sums that are about 4.7 times greater than normal, while the RUS faces the task of disbursing amounts 192 times larger than normal.

Those would be challenges under the best of circumstances, so it is no surprise that the first awards may not be made until December, about a month later than anticipated. There are other risks, says the Government Accountability Office, including a lack of funding for oversight beyond fiscal year 2010 and a lack of updated performance measures to ensure accountability for NTIA and RUS.

Some awards might never happen. The program rules relating to new services in "unserved" areas forbid projects in areas already served by existing providers. Comcast and other cable providers believe some projects violate just those provisions. Comcast says it will file supporting data Oct. 28, 2009, supporting its contentions.

The National Cable & Telecommunications Association claims funding has been sought in "hundreds" of areas where its members already provide broadband service.