Compared to Vonage...

Rightly or wrongly, Vonage's key marketing metrics get compared to those of cable or telco companies. Vonage's cost of acquiring a customer, its churn rate and average revenue per customer each month always are pointed to as issues. Well, compared to the best run telcos, that's true. Consider Telus, which operates largely in Western Canada. It has average revenue per unit of $64.50. Vonage is in the twenties. It has churn of 1.33 percent a month. Vonage's churn is double that. Acquisition cost is $436 a customr, which in about what Vonage spends. The issue is that Vonage's ARPU is less than half of what Telus gets, and Vonage keeps a customer half as long as Telus.

On the other hand, Vonage's costs of doing business are lower as well. Also, keep in mind that Telus is, by some measures, among the best-performing service providers in the world, and its fourth quarter 2006 results confirm that. On average, Telus keeps a customer more than six years. It is aided mightly in that regard by its wireless performance. So far, Telus and other leading wireless providers are turning in the best churn performance for virtually any consumer application one can think of.

Directionally Positive

North American fiber to home numbers still are small, but the direction is positive, says the Fiber to Home Council. The markets don't like the magnitude of investment, but telcos don't have much choice but to bet the farm.

Managerial prowess will prove important, but this bet will pay off. If IP-delivered video really does take off, in both the enterprise and consumer spaces, private networks have to be part of the solution.

And private networks will result in more revenue for access providers. To the extend that public networks are involved, it isn't clear that "all you can eat" plans can survive. Users will have to pay more for consumed bandwidth. That doesn't mean current pricing metrics necessarily are affected. But applications that chew up 1,000 times more bandwidth than voice will have to be provided at retail prices that reflect those levels of consumption. New networks will be built, no doubt.

Serious Moolah

The typical Fortune 500 company spends 3.6 percent of revenues on network services, gear and assets. Last year, more than $327 billion. The largest recurring cost is wide area network transport costs. Any wonder why enterprises are looking to switch that function to Ethernet?

EarthLink Wins Houston Wi-Fi

The City of Houston has selected EarthLink to deploy a large municipal Wi-Fi network covering 600 square miles. The network will be one of the largest in the U.S. and it will primarily serve urban and suburban sections of Metropolitan Houston. Another massive Wi-Fi rollout, in Michigan, is planned to serve urban and suburban regions as well as rural sections.

In winning the Houston contract, EarthLink adds to its list of municipal customers that include Philadelphia and New Orleans. Similar Wi-Fi deals with San Francisco and Pasadena are pending.

It remains to be seen how lucrative EarthLink's networks are. The deal also calls for the service to be made available for up to 40,000 low-income residents at $10 or less a month. There will continue to be pressure to keep the service affordable, though it may be possible to develop premium services or even advertising at some point, as The Yankee Group suggests.

And while cable companies and telcos will see this as compeitition, there may be ways even they will benefit, if some amount of traffic is offloaded from their own networks, much as offloading cellular network traffic to home broadband networks can help, even if there is a danger of some revenue cannibalization.

Cingular TV Broadcasts Start Later This Year

AT&T's Cingular Wireless unit will use the QualComm MediaFLO network to broadcast TV programs to cell phones in about 30 U.S. metro markets starting in late 2007. AT&T is QualComm's second customer for the service after Verizon. MediaFLO has arrangements in place to provide TV content from CBS, Fox and Comedy Central. It is also planning to provide information services like live stock quotes and sports scores. Nobody knows yet how popular this sort of thing will be. But it will have a couple advantages, such as not strangling the public Internet with multicast video.

Google Warns

New Internet TV services such as Joost and YouTube may bring the global network to its knees, at least one Google executive has said publicly.

At some level, of course, statements that "the Web infrastructure, and even Google's doesn't scale,” as Vincent Dureau, Google's head of TV technology says, are simple observations about the best effort nature of the Internet. It wasn’t designed for real time services. Unlike the global telecom networks, the Internet wasn’t built expressly incorporating quality of service measures.

At some level, Google saying today’s Internet is “not going to offer the quality of service that consumers expect” is simply an observation about the way the Internet now works, unaided by priority-enhancing measures or further raw bandwidth upgrades.

Google in Europe appears to be offering to work together with cable operators to combine video search and tailored advertising with the cable network access networks, which are, by design, closed and quality controlled.

That should have come as quite a comforting perspective for cable operators who have reason to feat the emergence of over the top video. At while there is great truth in what Dureau says, it may not, strictly speaking be completely true of all IP networks. Private networks can be created to ensure quality video delivery, even if will be difficult to ensure that the public network supports video using “best effort” delivery.

Compared to a voice-centric network, a video-capable network must support sustained throughput two orders of magnitude or 1,000 times greater than required for voice. That is not to say the Internet will not support video. It just might not be completely satisfactory as a means of delivering real time video. Downloaded video won’t be as big an issue.

In fact, Gartner Group analysts estimate that 60 pecent of the Internet traffic that is uploaded from computers is peer-to-peer traffic, mostly from consumers swapping films and TV shows.

Wireless Access Substitution?

At a recent carrier event hosted by Denver-based carrier neutral co-location provider Comfluent, an independent provider of Ethernet access in the Rocky Mountain region was musing about how he would be able to compete with the likes of Qwest in the enterprise space, not to mention Time Warner Telecom. One of his particular worries was wireless substitution in the Ethernet access domain.

So Brough Turner notes that DoCoMo, in an experiement, has squeezed about 50 bits into one Hertz of free space bandwidth, albeit at the cost of 100 MHz of spectrum in an unused and very high frequency. The best modulation techniques out there commercialy for mass applications run at about 50 bits per Hertz (the symbolic information conveyed by the oscillation time of a single radio wave in one second). Impressive.

But there are issues. That much continuous spectrum is going to be hard to find in North America or Europe. And when found, it will be at very high frequencies. And the problem with very high frequencies is signal attenuation. Signals won't go very far. Nor will they penetrate tree leaves or walls very well at all. So while useful for mobile, outdoor or short-range indoor distribution, really high modulation techniques won't rival optical Ethernet.

A single optical wavelength replicates the bandwidth of the entire radio frequency, plus all the optical frequencies, and every wavelength can replicate the same frequency again. Every fiber can replicate all of the bandwidth provided by all the multiplexed waves. There's just no way free space is going to keep pace with that.

One Internet or Several?

An issue clearly emerging in the wireless business is its need to figure out a way to unify the "wireline accessed" Internet and the "wireless accessed" Internet, including the latest generation of participatory Web 2.0 applications, says The Yankee Group analyst Matthew Hatton. Of course, that is going to raise a question mobile operators might not want to answer. The question is transparent access to such apps on the same basis users would have if they were using their fixed connections.

That's an issue because mobile historically has been among the most walled of walled gardens. Of course, there was a time when AOL's controlled experience seemed to be "the Internet" for lots of users, and we can see how that all turned out. This isn't going to be an easy tension to overcome, though there's no question it must be surmounted if a seamless Web experience, transparent to devices and networks, is to be obtained.

Web Channel Grows

Large cable firms and telcos appear to be getting some traction in the Web channel, says The Yankee Group. That's significant for a couple reasons. For some customers and products, nothing beats the Web as a sales vehicle. There also is growing evidence that customers who order using Web channels churn less, at least in part because they have done more research into the products they are buying, and especially may be more knowledgeable about technology products.

Bye Bye Fiber to Node, Analyst Says

AT&T will alter the strategy on its broadband network upgrade within the next 12 to 18 months, shifting to a fiber-to-home design, says market research firm Pike & Fischer. Keep in mind that this is a separate issue from how well U-verse might be working.

Unless AT&T makes that investment, the U-verse service will not keep up with the cable industry's improvements in bandwidth and functionality, says Tim McElgunn, Pike & Fischer chief analyst.

"Pair bonding and compression, AT&T's current response to its network's bandwidth limitations, will not change copper to glass and will not provide AT&T with a long-term solution, in our opinion," says McElgunn.

Fiber to the node retains a cost advantage over fiber to the home, but costs continue to decline, and there's an overriding strategic consideration here. Sooner rather than later, FTTN will find itself unable to compete in a superior way with similar cable operator Hybrid Fiber Coax network designs, which FTTN essentially is, except for modulation techniques.

YouTube iTunes?

Ted Wallingford suggests iTunes go YouTube in its embrace of user generated content. That would be a bit of a switch for Apple, whose approach to innovation historically has involved working with legacy players rather than attacking them, and there is at least some reason to think powerful content companies still are ambivalent about YouTube.

Link

Style Counts

Mobile phones are the most widely sold consumer electronics product in the world. By some estimates more than 600 million handsets are sold every year. That's five times the number of TVs or personal computers sold annually. And every successful producer of consumer electronics will tell you that "style" counts as much as "price." So maybe industry executives ought to focus a bit more on the details of the devices as much as the pricing and packaging of their services plans. Fair enough?

There's clear upside, as well. Tired of selling voice minutes or bandwidth forever-decreasing retail prices? Then stop selling commodities. The point is that the ability to talk is just part of the value of a mobile handset, as we would all agree. There's all the text, camera, Web access, faceplate customization, ringtones and other personalization angles.

The mobile phone is a consumer electronics product, not a "telecom" product. So fashion is important. Looks are important. Image is important, and not just for the super trendy younger users executives normally assume are the only people who care about the details of their devices. Lots of people care about those things, because most people care about the little details of their highly-used consumer electronics products.

I suppose it isn't necessary to dwell further on the iPhone, huh?

Site Temporarily Unavailable

Probably not the best way to run a video download service such as Wal-Mart has launched.

Wal-Mart's beta service includes more than 3,000 movie and TV titles for view on PCs, laptops and portable media players. All the major studios are on board and new movie releases will be available for video download on the day of the DVD release. The price for new movies ranges from $12.88 to $19.88. Catalog titles cost $7.50. TV shows cost $1.96 per episode.

Wal-Mart allows customers to purchase the physical DVD and have the option of downloading the same title for a small additional price to use on portable devices and PCs. Among the likely results are further deals by studios with other services such as iTunes.

He said other studios have been reluctant to participate due to fear of a Wal-Mart reprisal. The chain represents a large percentage of Hollywood's multi-billion dollar DVD business. If a studio agreed to sell movies on iTunes at a price too low for Wal-Mart's taste, that studio might suddenly find its movies removed from Wal-Mart's shelves.

Wal-Mart's video download service doesn't work with Firefox version 2.0.0.1...aside from not working at all on any browser.

The Business Case for Fiber Just Got Better

According to TVover.net, Verizon customers in West Virginia have suffered outages because thieves now are after copper, and telecom cables contain lots of copper. The most recent copper cable theft occurred at the end of January, when a twenty-foot-long section of cable was stolen, causing an outage which affected not only residential customers but also the emergency departments in the area. Verizon has lost a significant amount of money responding to the thefts. This used to be a problem confined to developing countries.

The upshot, however, is a potential uptick in costs to maintain copper plant, plus financial penalties for violating service level agreements, plus increased customer churn.

More iPhone Ripples

Though there has been speculation about the ultimate impact the iPhone will have on the wireless business, one effect is undeniable. Other phone makers are going to have to respond, pushing device development in a new direction. Samsung Electronics Co., for example, has unveiled a new mobile phone that features some of the sleek design and functions of the iPhone.

The Ultra Smart F700 operates using a touch screen and also runs a version of the Mac OS X operating system. The phone also features a slide-out key pad as well.