Broadband Access Revenue: Bad News

Broadband access penetration might be climbing just about everywhere. Unfortunately, it looks like revenue is going to fall significantly, if Yankee Group analyst Vince Vittore is right. He projects Digital Subscriber Line revenue, which represents the overwhelming share of global revenue, is set to fall precipitously.

You might think fiber-to-home (OLT)revenue or cable modem revenue (CMTS) is poised to take up the slack. Vittore doesn't think so.

It looks like broadband access is turning out to be a product just like the Internet: useful, ubiquitous, necessary and something service providers can't make much money on.

European VoIP Market Soars

Though VoIP might largely be driven by cable companies in the U.S. market, the 22 million-plus VoIP subs in the European market bear witness to dramatically different market dynamics. In part because of robust local loop unbundling rules, independent broadband competitors have had quite a field day, both as providers of broadband access and VoIP services.

In the French market, for example, France Telecom (Orange) is "the number two provider of VoIP in the world," says Carlos DeSilva, France Telecom director. "In France, 30 percent of all calls are VoIP and it is used by about eight million customers."

Teens IM; Adults Send Email

About 25 percent of surveyed respondents send IMs from their cell phones, including one in three (32 percent) teens, according to the second annual AP-AOL Instant Messaging Trends Survey.

Keyboards make a difference, it seems. So do social networking services and the IM providers themselves, all of which now support IM-over-mobile capabilities. All of the major instant messaging services also let users have their instant messages forwarded directly to their cell phones when they're on-the-go. In addition, IM users are instant messaging from within their social networking profiles.

Workplace use also is becoming commonplace. More than one in four (27 percent) users say they use instant messaging at work. Further, half of at-work IM users say that instant messaging makes them more productive at work, a 25 percent increase over last year.

More than half (55 percent) of teen IM users have used instant messaging to get help with their homework. This is a 17 percent increase over last year. Meanwhile, 22 percent of teens say they have sent an IM to ask for or accept a date.

Forty-three percent of teen IM users say they have used instant messaging to say something they would not say to someone in person. Teenage girls are more likely than boys to do so. Nearly half of teenage girls surveyed have used instant messaging to say something they would not say in person, compared with just over a third of teenage boys.

Teens today are more likely to upload photos (42 percent in 2007 vs. 34 percent in 2006) while instant messaging. They are less likely to conduct online research for school (57 percent vs. 63 percent) or update their blog or social profile (33 percent vs. 42 percent) while sending IMs.

Nearly three in four teens (70 percent) and one in four adults (24 percent) send more instant messages than emails.

IM users tend to engage in multiple online activities while sending instant messages. Checking email is the most popular activity among eight in ten adult and teen IM users. After email, adult IM users most often conduct online searches (49 percent), while teens say they like to research homework assignments online (57 percent).

Nearly four in five (79 percent) at-work IM users say they have used instant messaging in the office to take care of personal matters. One in five (19 percent) IM users say they send more instant messages than emails to their co-workers and colleagues.

CLECs Touch Few Buildings in 6 Verizon Markets

By now, you'd think there would be significant optical fiber pulled to commercial buildings in major and secondary markets, even though you'd suspect it is tough getting fiber in outlying suburban strip malls, for example. But it appears optical fiber connections to commercial sites remains a significant work in progress. In six Verizon markets, for example, all competitors to Verizon put together can reach but a small fraction of sites.

Limited Fiber in 6 Verizon Markets

In disclosing for the first time its own facilities-based access to buildings in the New York market, XO Communications provides evidence of just how tough the high-bandwidth metro access business remains.

Specifically, XO has its own facilities in place at just 0.01 percent of all commercial buildings in six markets Verizon serves, and in which Verizon seeks further deregulation of its wholesale obligations.

XO Communications's data on alternate access facilities is consistent with GeoResults data showing the total on-net building presence, XO says. In aggregate, competitors serve only 1.49 percent of commercial buildings in the six markets.

XO Communications also says that even in the areas where Verizon central offices have the highest density of alternate high-capacity facilities, competitors have slight access to most buildings, reaching a bit more than four percent of commercial buildings only in Virginia Beach, Va.

In Boston, less than 1.5 percent of commercial buildings have alternate facilities-based access, even in the areas with the highest density of alternate providers. In Philadelphia and Providence, R.I., less than one percent of commercial buildings have competitive access facilities.

At least one-third of all wire centers in five of the six MSAs have no competitive provider lit fiber at all. In Pittsburgh, nearly 80 percent of all wire centers have no competitor lit fiber connecting any commercial buildings.

Google will Bid for 700-MHz Spectrum

Google plans to submit at least an initial bid for 700-MHz wireless spectrum, the Wall Street Journal reports. There is some thinking that with Verizon's declaration of willingness to open its network to any technically-compliant device, as well as similar open access provisions for any winner of 700-MHz C block spectrum, Google has less need to acquire its own spectrum to ensure an open environment for wireless Internet services.

Google also is working with Sprint and T-Mobile on open devices and applications on those wireless networks, plus Clearwire for WiMAX service. Given all of that recent development, there simply is less need for Google to own spectrum simply as a way of ensuring an open environment.

Sprint Turns Down $5 Billion

Sprint Nextel Corp. has rejected a $5 billion investment by South Korea's SK Telecom Co. and buyout firm Providence Equity Partners Inc. that would have brought back former Chairman Tim Donahue to run the mobile-phone company, according to Bloomberg.

The investment group reportedly proposed buying Sprint securities that would later convert into equity for 20 percent to 30 percent more than the current stock price.

Sprint's board apparently didn't meet with Donahue or the investors before turning down the deal, nor does it appear SK Telecom and Providence were interested in a hostile takeover.

Sprint Stands Alone

Now that Verizon Wireless has selected Long Term Evolution as its fourth-generation platform, and if Sprint continues with its WiMAX fourth-generation network platform, prospects for CDMA are dim in the U.S. market.

Of course, there always is the possibility that Sprint might reverse course and abandon WiMAX. But Sprint Nextel at the moment really stands alone in the platform area. It runs the Nextel iDEN network that no other major carrier supports and CDMA-based 3G that Verizon says it will abandon.

It is hard to imagine T-Mobile adopting anything other than LTE, so it appears CDMA is at a deadend in the U.S. market.

Verizon to Dump CDMA for 4G

Verizon Wireless will base its fourth-generation mobile broadband network on LTE – Long Term Evolution – the technology developed within the Third Generation Partnership Project (3GPP) standards organization and based on GSM.

The selection of LTE means Verizon wants to align itself with the scale opportunities the global standard will provide, rather than extending its existing CDMA platform.

Verizon and Vodafone have a coordinated trial plan for LTE that begins in 2008. Trial suppliers include Alcatel-Lucent, Ericsson, Motorola, Nokia-Siemens, and Nortel. Discussions with device suppliers have expanded beyond traditional suppliers such as LG, Samsung, Motorola, Nokia, and Sony Ericsson, as consumer electronics companies anticipate embedded wireless functionality in their future products.

Users won't see 4G for several years, however, so there's no need to worry about existing CDMA equipment. The decision does call into question how much actual developer interest there will be in Verizon's new "open" CDMA platform, however.

XO Preps FMC Service

XO Communications and Sotto Wireless will begin trials of a fixed mobile convergence solution in Seattle. The Unwired Office integrates customers’ fixed and wireless communications services into a single platform with one smart phone that can be used in the office or on the go for voice, email and Internet access as well optional IP desk phones.

The Unwired Office includes a business phone system, broadband network access and mobile phone service. Features include a high-speed dedicated Internet access; hosted private branch exchange system; individual smart phones with one telephone number for office and mobile calling, wireless email and messaging; optional IP desk phones; and anywhere coverage through in-office Wi-Fi networks and wireless service. In addition, the service enables businesses to transparently extend the office phone system to the home or branch office by using existing cable or digital subscriber line broadband services.

The service uses dual-mode smart phones from Nokia, such as the Nokia E61i, that feature both office Wi-Fi and cellular network connectivity options, full keyboards, and productivity applications. The hybrid wireless capabilities allow employees to use the Nokia smart phones to make calls over Wi-Fi networks and use cellular networks when employees are away from the office.

Online Time up 24%

User time spent online is up 24 percent over about the last year, according to Compete data.

3G iPhone Next Year

Make your plans accordingly.

Will Google Bid?

The deadline for filing an application for the 700-MHz auction is Dec. 3. The actual auction starts Jan. 24; the names of the bidders will be disclosed on Jan. 14.

Prediction: Google will submit a bid of $4.6 billion. But maybe no more than that, and the winning bid will certainly be higher. Now that Verizon has agreed to open up its mobile network to any compliant device or software, and having already gotten working agreements with Sprint, T-Mobile and Clearwire, Google might not need to secure spectrum simply to ensure that its open approach to the mobile Web has a place to develop.

European Commission, FCC Disagree on Competition

As U.S. competitive local exchange carriers and cable companies await key decisions from the Federal Communications Commission, the quantitative tests of "effective competition" are key. And on that score the FCC and the European Commission do not see eye-to-eye. In the video arena, the FCC targets the 30-percent market capture level as denoting "effective competition." In the voice services area the test seems to be 20-percent share loss by incumbents. The EC doesn't even think 50-percent loss of market share by incumbents is sufficient.

The disparities in thinking about what marks "effective" levels of competition leaves at least some room for new thinking on what measures might be required to stimulate even more robust levels of competition. In mass markets, 30 percent quite often is the share held by the market leader.

Verizon Wireless Takes Reasonable Gamble

One might argue that Verizon Wireless is gambling with its whole business model in allowing use of technically-compliant devices and software on its network next year. But one can point to the experience of wireless operators in Europe, who have used this "open" model for years, to see it is not so dangerous.

In fact, Verizon gains more than it might potentially lose, just about any way you want to spin the matter. First off, it gets great press for breaking the "closed" mobile model on a voluntary basis. Also, it is betting, likely reasonably, that the overwhelming mass of buyers still will prefer the old model of "discounted phone, two-year contract."

Verizon also uses the CDMA platform, which already means there is less handset choice than possible on a GSM network, since the GSM market is so much larger, globally. Verizon just might stimulate a bit more handset and software choice by going open.

Also, open is inevitable. The 700 MHz spectrum requires such device and software openness, so it is coming to the market, in any case. Verizon might as well "look good" rather than resisting the inevitable.

Open also means Verizon has a shot at creating a more robust developer community, a helpful asset indeed as more innovation moves to the software realm.

There's very little, if any, downside and lots of upside. Not since AT&T launched its "Digital One Rate" has any leading mobile provider taken a step that will reverberate throughout the whole industry. Sometimes, innovation is not just something small companies pull off. Sometimes very large companies do it as well. And maybe, sometimes, only a very-large company can cause a major change. On occasion, innovation may require the push only a very-dominant firm can supply. This appears to be such a case.