TeleBlend: More Steps to Ensure SunRocket Transition

In an effort to ensure it has the resources in place to manage a fairly sizable inflow of former SunRocket customers, should that occur, TeleBlend executives have signed an agreement with Sherwood Partners, the entity winding down SunRocket, for hardware and software assets that will make any customer transition seamless.

TeleBlend, a “preferred” provider for former SunRocket customers, is offering these customers a heavily discounted monthly subscription rate of $12.95 for the duration of their previous annual contract with SunRocket.

We won't know more until this afternoon, but it seems logical to assume the deal gives TeleBlend ensured access to in-service analog terminal adapters and the provisioning and operating systems used to keep them in service, at least through any transition period where customers are moved over the existing TeleBlend back office and network.

The agreeement does not seem to affect the earlier "preferred supplier" deals Sherwood struck with Packet8 and TeleBlend.

Verizon Bends on Net Neutrality

Lowell McAdam, chief executive of Verizon Wireless, says the company would agree to 700 MHz spectrum auction rules requiring the network operator who wins a portion of the spectrum to allow any device onto its network.

Such a nod to the wireless equivalent of "Carterfone" suggests Verizon now believes some such requirement will be part of license rules for the 700 MHz frequencies. The compromise won't go far enough to satisfy contestants who think a mandatory wholesale regime is needed.

But the move would for the first time allow users to buy and use virtually any device of their choosing on the network. As much as wireless carriers might like to preserve their ability to lock all devices used on their networks, device independence would be quite helpful for end users, application developers and device manufacturers, since it would allow some degree of innovation without the direct cooperation of the network services provider.

Verizon draws the line at guarantees that all games, video and the Web applications on the new phones or devices will work on anything other than a best effort basis, in essence, however. Verizon also said it would reserve the right to continue blocking certain applications and features for phones it sells, if it were to operate networks under such rules.

at&t earlier had signaled that it wasn't going to stand in the way of such rules. Some people might not think half a loaf is worth having. But Carterphone was a very important advance, as this also would be. Verizon arguably would not be shifting its stance were it not convinced the move is inevitable in any case.

SunRocket, Vonage Not the Whole Story

As much as people think VoIP providers (other than cable) have got traction problems in the U.S. market, that is far from the case elsewhere. In western Europe, for example, independent VoIP providers are not only the market share leaders, but their share of market might actually be increasing, even though major incumbent telcos are actively in the market as well.

And where U.S. cable providers including Comcast, Cox, Time Warner and Cablevision are the new driving force for VoIP-driven POTS replacement, that is hardly the case in western Europe, where cable operators still have relatively slight market share.

Still, there is no denying the traction problem. According to analysts at TeleGeography, VoIP growth already has hit a plateau in the U.S. market. In western Europe growth rates not only have accelerated but might not hit a peak until 2008, says TeleGeography.

Hence the interest in VoIP 2.0, the integration of voice services with Web and enterprise applications, portals, email, documents, gaming and other end user experiences.

EarthLink, Helio, Muni WiFi

Given that Earthlink essentially admits it now is more than a bit unfocused, and that something has to be done about it, it is pretty easy to predict that Helio and the municipal WiFi initiatives have to go. Earthlink will keep dial-up as a cash cow. It does just fine in the Digital Subscriber Line business and VoIP is not bleeding either. That pretty much leaves losses at Helio, which doesn't appear poised to make major subscriber gains any time soon, or the municipal WiFi business, which is in roughly the same position.

And one has to assume Earthlink will ultimately be set up for a sale. In such scenarios, long-term investments that drain cash are a no-no.

Something has to go. EarthLink now expects a loss of $110 million to $140 million for the year on revenue of $1.23 billion to $1.24 billion. Back out municipal WiFi and Helio losses and that problem takes care of itself.

Earthlink had a second-quarter loss, due to mounting losses at its Helio wireless joint venture and lower revenue from dial-up services. Earthlink says its Helio cellphone business exceeded the 100,000 subscriber milestone in the quarter, but the unit's losses mounted. Helio, a joint venture with South Koreas' SK Telecom, posted a loss of $83.8 million on revenue of $33.2 million.

Earthlink had a loss of $16.3 million, or 13 cents a share, compared with a profit of $16.6 million, or 12 cents, a year earlier. Earthlink said revenue for the quarter fell 6% to $312.2 million from $332.1 million a year ago.

Sure, there were continued losses in the dial-up area, but that's expected. At the end of June, the company had 4.3 million dial-up and broadband subscribers, down from 5.3 million a year ago.

Earthlink is a profitable Internet access company if the wireless and muni WiFi iniatives are abandoned. If you assume the assets are positioned for ultimate sale, that's a clean story.

BroadSoft Aastra: Man Bites Dog

Aastra Intecom, a provider of PBX-BASED enterprise communications and contact center solutions for large enterprises, now has a strategic alliance with BroadSoft. Aastra, which supports hundreds of thousands of enterprise voice systems, will use BroadSoft’s carrier-grade BroadWorks VoIP platform as the foundation for new next-generation IP-PBX solutions it will deliver directly to large enterprises.

So here's the "man bites dog" angle: in the past, enterprise suppliers have offered a richer menu of features than a large enterprise could buy from a communications service provider. To my knowledge, this is the first time a major PBX supplier has turned to a carrier platform to enrich its enterprise offering.

Joost Chooses Level 3

Level 3 Communications has been selected by Joost to provide content delivery services for the new Internet television service. Under the terms of the agreement, Level 3 will provide Joost with network solutions including high speed Internet access and colocation services in North America and Europe. Level 3 has made a big commitment to providing CDN services and can claim, by means of its (former Vyvx)broadcast video services unit, to be supplying top U.S. cable and over-the-air broadcasters with a significant part of their overall backhaul and studio feed operations. The Joost deal will not make or break Level 3's CDN business or strategy. But it is a nice customer to have.

Both 40 and 100 Gbps Ethernet, It Appears

It appears the IEEE is going to proceed with 40 Gbps and 100 Gbps Ethernet standards. Which strongly suggests there also someday will be a 120 Gbps standard, since it maps nicely with the 40 Gbps standard server vendors prefer for short distance connections between switches and servers.

The next logical step for the 100 Gbps suppliers, which tend to favor that standard for long haul and wide area network transport, isn't so clear. Following the 1, 10, 100 paradigm would suggest 1,000 Gbps, but nobody is talking about that right now. Bandwidth in the 400 Gbps up to 500 Gbps range is the sort of "next step."

Growth By Acquisition Works for at&t

Growth by acquisition clearly has been working for at&t, which is probably why executives there will stay on course with the strategy. The company reported a whopping 61 percent increase in second-quarter profit after $140 billion in acquisitions almost doubled revenue. This is an old strategy many competitive local exchange carriers attempted in the early 2000s, largely without success. Of course, CLECs had different problems. Investors were pushing them to grow fast, and organic growth obviously wasn't going to work. There also were more providers than customers (that's a bit of an exaggeration, but not much of one).

It remains to be seen how well the contrasting Verizon and at&t strategies work out. Verizon essentially is betting its future on the superiority of its wired assets, while not neglecting its wireless assets. at&t arguably is investing in acquisitions that lean in the direction of wireless while economizing on its wireless upgrades.

Growth By Acquisition Works for at&t

Growth by acquisition clearly has been working for at&t, which is probably why executives there will stay on course with the strategy. The company reported a whopping 61 percent increase in second-quarter profit after $140 billion in acquisitions almost doubled revenue. This is an old strategy many competitive local exchange carriers attempted in the early 2000s, largely without success. Of course, CLECs had different problems. Investors were pushing them to grow fast, and organic growth obviously wasn't going to work. There also were more providers than customers (that's a bit of an exaggeration, but not much of one).

Amp'd Customers Were a Collections Nightmare

Amp'd customers were heavy data consumers. Unfortunately, they also tended not to pay their bills. Amp'd apparently experienced an unprecedented growth of subscribers between November 2006, and February 2007 after running ads on MTV about the wireless phone company's lineup of mobile music and video content.

"Approximately 90 percent of the debtor's customers were on 18-month service contracts," according to Amp'd. By May this year, the number of nonpaying customers reached 80,000. That's nearly half of Amp'd's current customer base of 175,000 subscribers.

The filing in U.S. Bankruptcy Court in Delaware, which says the company owes more than $100 million to creditors, including Verizon Wireless. Since Verizon is one of the largest creditors, it might make sense for Verizon to salvage something out of the mess, and acquire the 50 percent of customers who actually do pay their bills, and exhibit behavior Verizon wants to encourage.

Allo Goes Dark

Allo.com, a small independent VoIP provider based in British Columbia, went live in February. It apparently now is going dark. Five months.

One Reason why Skype is Not Growing So Fast

Jaxtr allows free international calls using mobile phones. Jaxtr says its membership has doubled to 500,000 users in the past month, and is signing up new users on the Web at a rate of more than 12,000 a day.

And then there are Jajah, Jangl, Rebtel and GrandCentral as well.

"No download is required, and our direct numbers can be dialed from any type of mobile phone or even ordinary landline phones," Jaxtr CEO Executive Konstantin Guericke said, contrasting its Web-based approach to certain complexities of other services.

SME VoIP: 30 Percent Annual Growth

IP Lines being installed into small and medium-sized businesses (SMEs) will grow 30 percent a year over the next five years, according to the Dell'Oro Group. IP lines will grow from slightly less than 20 percent of lines shipments into SME locations in 2006 to almost 60 percent in 2011.

In contrast, digital and analog line shipments will decline at an average of 10 percent a year through 2011. Traditional systems will fair even worse, declining to less that 5 percent of the total market by 2011, Dell'Oro says.

This might be the least controversial forecast it is possible to make. Once analog-to-digital transitions really get going, it is hard to buy the older technology even if one really wants it.

Perhaps Google Can't Lose in 700 MHz Auction

If Google succeeds in getting a mandatory wholesale access requirement for the C block of spectrum, it wins. Whether Google itself wins the spectrum (probably not) or not, somebody will, so Google and Google can lease spectrum directly, or work with somebody else who will lease spectrum on its behalf.

Even if it entirely fails to win a mandatory wholesale clause, Google is no worse off than it used to be, because existing provisions for the 700-MHz equivalent of "Carterfone" will still make it easier for Google and its ecosystem to create features, devices and applications optimized for mobility.

One fact seems certain: as hard as it is to build a "wholesale-only" national infrastructure play, if mandatory access conditions are attached to the C block of frequencies, the business case will be harder for owners of retail spectrum in the other two blocks. The pricing umbrella of course will be set by the C block providers.

Clearwire and Sprint will face some issues because the radio propagation characteristics of the 700 MHz spectrum are much better than those for the 2.5 GHz blocks Clearwire and Sprint will be using to build their national 4G network. Like the old UHF broadcast stations who used the 700 MHz frequencies, signals got through walls pretty easily, even to "rabbit ears" antennae. Digital propagation should be better, since today's signal processing chips can reconstruct a signal from weaker or more refracted signal sources.

In fact, he 700 MHz signals should provide the "best" "through the walls" performance of any wireless networks, period. The higher frequencies conceivably will offer higher raw bandwidth potential (for reasons related to the more rapid oscillations of the radio signals at higher frequencies).

And there remains the possibility that the auction rules might emerge in final form someplace between formal wholesale access for the C block and hard-to-enforce "Carterfone" principles. In any event, Google's odds of winning are higher than its odds of simply being no worse off than it currently is.

Sprint, Clearwire to Create One National Network

Sprint Nextel and Clearwire say they will combine their efforts and spectrum to create a national mobile WiMAX network covering the entire United States. Sprint Nextel's network would cover 185 million people while Clearwire's would cover 115 million.

Services would be sold under a common brand. The two firms have set a target of 100 million potential customers initually, by the end of 2008. There is no word on what becomes of Clearwire's VoIP deal with BCE. As part of the deal, Clearwire will have the ability to offer Sprint Nextel’s third generation voice and data services as part of a bundle or on a stand-alone basis to Clearwire’s customers, which will also allow Clearwire to provide dual-mode services to its customers.

Sprint Nextel will take the lead in establishing relationships with national distributors and other potential strategic partners, including wholesale or mobile virtual network operator (MVNO) arrangements. The initial term of the arrangement is 20 years, with three 10-year renewal periods.

Nobody has excess capital to throw into a new national broadband access network, it certainly appears.