EchoStar, Dish Now Separated

EchoStar has completed the spin-off of its set-top box business into a new a company called EchoStar Holding Corp. The parent company, which now consists primarily of its satellite TV broadcasting business, will change its name to DISH Network Corp., and keep DISH as it stock symbol.

The transaction makes Dish a pure-play video entertainment provider, and arguably a cleaner asset for an acquirer or merger partner. There has been much speculation about an at&t purchase, but that seems unlikely given at&t's recent decisions about its stock buybacks, acceleration of its U-verse deployment and dividend increases.

The earlier proposed merger of Dish with DirecTV didn't pass regulatory muster, in part because the market was defined as "satellite TV" rather than multichannel video entertainment. At some point, as telcos gain more video market share, that argument might not be so compelling, and Dish and DirecTV might be allowed to merge.

Given that the consumer market increasingly is dominated by triple play, dual play and quadruple play providers, and where each of the services markets increasingly are saturated, regulators might take a fresh look at allowing the two satellite providers to merge.

The Dish Networks separation from the the EchoStar set-top manufacturing operations will help.

at&t Naked DSL Available

As part of its obligations as the acquirer of BellSouth, at&t was required to offer naked DSL--DSL sold without the requirement to buy a phone line--before the end of 2007. It appears to have done so, offering $19.95 DSL-only service on December 20.

The service is referred to as DSL Lite, and must be made available for the next 2.5 years. The company probably will not go out of its way to let consumers know it is available, or how to get it. And there are no assurances the product still will be availabe when the 2.5 year period is over.

Given the likely state of broadband access penetration by that point, at&t will have to keep doing so. In a couple of years, about the only way any service provider is going to get a broadband access customer is to take one away from another provider.

In Europe, where stand-alone DSL services are more readily available, penetration ranges as high as 30 percent.

Call Centers, Leaky PBX, Grey Markets

There are lots of reasons entities set up call centers: sell products; answer questions; technical support; fund raising; set up appointments.

Or, in some cases, to create not-quite-legal terminations for international long distance. Sometimes known as "leaky PBX" operations, the motivation for doing so is money. Significant amounts of money.

By some estimates, 30 percent or more of inbound global calls to Indian numbers are terminated outside the carrier-to-carrier settlements regime.

Estimates of traffic that skirts the settlements regime range upwards of 3.5 billion minutes a year or $150 million to $300 milliion a month that otherwise would have been earned by a licensed carrier.

In recent years, global carriers have paid Rs 5.50 in termination charges to an Indian domestic telephone company. In a leaky PBX or "grey market" operation, a service provider launders the traffic, making it look like a local call, avoiding the termination charges. This saves the global carrier about half what it otherwise would have paid. And the local termination network gains revenue because it makes money from the higher volume of traffic it gains.

The most popular grey market routes serve mobile phone traffic in high-cost termination markets. And that's where the call centers come in.

Grey routes often are created by call centers, as VoIP in some markets is legal when it is IP-based endpoint to endpoint. Until the laws change, and as India market mobile penetration climbs, so will the grey market.

"Nothing But Net"

Online ad spending is growing at a faster rate than broadband access, according to PMorgan Internet analyst Imran Khan. In a nutshell, the story is that Internet stocks will do well in 2008.

JPMorgan expects 34 percent earnings growth in 2008 for the Internet stocks it covers versus 8 percent earnings growth for the S&P 500.

From my perspective, the story is that online advertising is going to grow because attention is shifting that way. And advertising follows attention.

A Must-Attend Conference

If you are the sort of person who is very interested in the future of IP applications as they relate to the global telecom business, EComm, to be held in March in San Jose, is going to be a "must-attend" event. Go to the link at the bottom of this post to get the details. Check it out. Register.

Aside from the quality of the program, I am compelled to note that this is a bottoms-up, user-generated event with no corporate sponsorship. It is the community pulling itself together, with Lee Dryburgh doing the heavy lifting. We need your support, in the form of your attendance.

You won't agree with everything you hear. But you will hear from some smart people who spend their time thinking about and building the next generation of communications. Fair and balanced. Policy advocates, telcos, application developers, consultants, solution providers.

Up close and personal. Some of you know I am a huge fan of smaller, intimate meetings where people get to talk to each other a lot. This will be that kind of place. Get there.

Confirmed speakers:

Lee S Dryburgh, SS7 Networks Limited
Martin Geddes, STL
Tony Nadalin, IBM
Phil Wolff, Reef9 Media
Brough Turner, NMS Communications
Sean O Sullivan, mySay
Ken Banks, kiwanja.net
Gary Miner, MIR3, Inc.
Stanley Chia, Vodafone
Thomas Huhn, Solution Media
Michael Codini, VoiceObjects, Inc.
Shidan Gouran, Jazinga Inc.
Blaine Cook, Twitter
Evan 'Rabble' Henshaw-Plath, Yahoo! Brickhouse
Kellan Elliott-McCrea, Yahoo! Inc.
Shai Berger, FōnCloud
Dean Bubley, Disruptive Analysis
Anders Carlius, TerraNet
Johannes Ernst, NetMesh
Michael Roth, British Telecom
Adrian Cockcroft, Netflix
Mark Rolston, Frog Design
Kevin Nethercott, LignUp Corporation
Ken Rehor, VoiceXML Forum
Thomas McCarthy-Howe, The Thomas Howe Company
Brian Capouch, Saint Joseph's College
Matthew S. Hamrick, Homebrew Mobile Phone Club
Stipe Tolj, Kannel Software Foundation
Rocky Nevin, DataSea, Inc.
Piotr Cofta, British Telecom
Norman Lewis, Wireless Grids Corporation
Ram Fish, Trolltech
Blaine Cook, Twitter
Sheldon Renan, Vision (+) Strategy
James Body, Truphone
Jim Van Meggelen, Core Telecom Innovations
Paul Amery, Skype
Tim Panton, Westhawk Ltd
Gabriel Sidhom, Orange-FT Group
Moshe Maeir, The Flat Planet Phone Co.
BJ Fogg, YackPack
Simonie Wilson, Open Methods
Michael Roth, British Telecom
Peter Saint-Andre, XMPP Standards Foundation
Michael Shiloh, OpenMoko
Marc A Smith, Microsoft Research Internet Services Research Center
Boaz Zilberman, Fring
Bob Frankston, Frankston Innovating
Mark Cooper, Consumer Federation of America
Kevin Nethercott, LignUp Corporation
Fabrizio Capobianco, Funambol
Koushik Chatterjee, Embarq
Sam Aparicio, Angel.com
John Waclawsky, Motorola
Michel Bauwens, P2P Foundation
Michael Codini, VoiceObjects, Inc.
Amit Desai, Dial Directions, Inc.
Dawn Nafus, Intel
Nathan Eagle, MIT Design Laboratory
Jeff Bonforte, Yahoo! Inc.

Do People Want Dual Mode, Convergence?

Dean Bubley has a nice list of things that will happen in the wireless market this year. Several caught my eye, one of them being that in our rush for all things "converged," we might be missing something, and taht is that people might be better at managing multiple devices, numbers and identities than we usually give them credit for.

Bubley argues that suppliers and service providers have a hard time creating the "one device that does everything" because, in fact, "people are happy with complexity."

"People like multiplicity," Bubley argues. "They want multiple service providers."

Some people certainly seem not to mind complexity, multiple bills or providers. Others probably prefer to buy in a sort of "best of breed" mode, despite some incremental friction.

I suspect that although lots of people say they like triple play services because it is more convenient using one provider instead of three, the adoption driver really is the discount.

The issue here probably is that many attempts to converge functions, identities and so forth involve some compromises, some effort and some limitations. People might be willing to put up with some amount of complexity or effort to get more choice.

But not much. According to the Reuters news service, half of all malfunctioning products returned to stores by consumers are in full working order, but customers can’t figure out how to operate the devices.

Product complaints and returns are often caused by poor design, but companies frequently dismiss them as “nuisance calls,” Elke den Ouden found in her thesis at the Technical University of Eindhoven in the south of the Netherlands.

The average consumer in the United States will struggle for 20 minutes to get a device working, before giving up, the study found.

Sprint Settles Patent Infringement Suit

...and it doesn't involve Vonage. A subsidiary of Acacia Research Corp. and Sprint Nextel Corp. have settled a lawsuit alleging that Sprint Nextel had infringed on four patents for technology used to display mobile vehicle information on maps. No terms were revealed.

Telecom has been a tough business for a decade. But operations seem to be getting riskier in the service provider business, for reasons that used to be an issue primarily for hardware and software suppliers.

Search Ads Will Drive U.K. Spending Growth

Internet searches will contribute around three-quarters of the growth of U.K. advertising in 2008, according to Group M, a unit of WPP Group, says the Dow Jones news wire.

U.K. advertising will grow by six percent in 2008, and all but 1.5 percent of that will come from search engine ads.

Group M also said the value of the Internet advertising market will come close to that of the television advertising market in 2008.

Newspaper advertising revenue is expected to decline by 2.8 percent in 2008, after a 3.4 percent decline in 2007, Group M forecasts.

Mobile to Lead Japan Online Ad Growth

Online advertising in the Japanese market is lower than in other markets, but growing at a faster rate.

Japan’s leading advertising agency, Dentsu Group, says search spending accounted for 27 percent of Japan’s online ad marketing in 2007, a figure significantly lower than in the United States (40 percent) and the United Kingdom (60 percent), eMarketer notes. By 2010, Dentsu predicts search will reach just 30 percent of Japanese online ad spending.

Dentsu also estimates that Japan’s mobile ad market grew by 42.5 percent in 2007. Mobile advertising is expected to remain the fastest-growing segment through 2010. Dentsu forecasts double-digit growth for the entire Japanese online ad industry to 2011, when growth is expected to slow to 9.6 percent.

54% of U.S. Cable Operators Face Telco Video Competition

Fifty-four percent of the cable systems surveyed by In-Stat say they face a telephone company that already is offering video service in their cable TV service area, In-Stat says. Oddly enough, though rural areas often are considered to be service backwaters, lagging urban and suburban areas in broadband access, for example, rural areas often are places where telcos have moved early to offer entertainment video services.

Historically, rural telcos have been licensed cable operators as well. But some telcos that aren't wired competitors rely on satellite partnerships to get the job done. And there's a scale effect here. It takes a long time for a large telco to upgrade nearly any part of its infrastructure.

Small operators, simply because they are small, can upgrade much faster. Keep in mind that rural operators often have a few hundred to several thousand customers, not millions. The same sort of process works at the level of a country. A small country can upgrade its facilities much faster than a larger country, simply because of the differences in scale.

Solid State Storage is Coming

It appears that the Asustek Eee PC was among the top-ten notebook PCs sold by Amazon over the Christmas season. That might be interesting for several reasons, including the fact that it is a Linux machine or that it uses solid state storage.

Up to this point, solid state storage has been expensive enough, compared to hard disk alternatives, that its use has been limited. The smallest iPods use solid state, but the larger-capacity devices use hard disks, for example.

But Moore's Law continues to operate. Even if solid state costs an order of magnitude more than hard disk storage, costs are declining fast enough that one can predict a point where solid state storage is cheap enough to be useful in a much-wider range of settings, including many that currently rely on hard disk drive storage. And it isn't simply consumer devices where that trend will be important.

So far, the biggest barriers to adopting solid-state drives (SSD) in the data center have been price and capacity. Hard disk drives (HDD) are much less expensive and hold much more information. For example, a server-based HDD costs just $1 to $2 per gigabyte, while SSD costs from $15 to $90 per gigabyte, according to IDC. So far, the cost disparity has been so high that SSD has not been an option, though some would argue it has other advantages.

Alan Niebel, Web-Feet Research Inc. CEO says the average cost of solid state storage per gigabyte is $10 while and hard disk drive storage costs 30 cents for a gigabyte of storage. Many observers say a price point of $1 per gigabyte is the inflection point at which solid state really takes off. And at an expected 50-percent annual price decline, that might happen by 2011. Of course, hard disk drive storage will cost just three to 10 cents a gigabyte at that point.

And prices are falling fast. Right now, the industry trend is a 40 percent to 50 percent drop in SSD pricing per year, according to Samsung.

At that rate, how long can it be before solid state storage starts to become a bigger factor in both enterprise data center, consumer electronics and computing devices, especially mobile devices?

Assume a gigabyte of hard disk storage now costs about one dollar. Assume the highest price for solid state storage is $90 a gigabyte in 2007, and that prices will drop 50 percent a year. By 2010, one then sees solid state storage at about $5 to $6 a gigabyte, competitive enough with hard disk drive storage to be reasonable in some applications where energy costs, extended battery life or light weight are important considerations. Make that data center storage applications, notebook computers and portable gaming or music devices as primary examples.

By 2011, one is down to about $2.50 a gigabyte of storage for solid state media. Of course, hard disk drive costs will decline as well. If hard disk storage costs drop at the same rate, a gigabyte of hard disk storage will cost three cents per gigabyte by about 2011. That's still an order of magnitude difference, but for many applications the cost of solid state storage will no longer be a barrier to use in many consumer device or data center applications.

iPhone Mobile Browsing Tops Windows Mobile

In December, it appears that the iPhone OS was used by twice as many users as Windows Mobile, according to Net Applications data for that month. Considering the vastly greater number of Windows Mobile devices in use, that's something.

Mac OS Gains in December

Though Windows remains the overwhelming leader in operating systems, December browser data shows a surge by Apple, iPod and Linux, says Net Applications.

The Mac OS was in use by 7.3 percent of users, up from 6.8 percent in November. The iPhone nudged up to 0.12 percent, up from .09 percent in November.

Microsoft’s Windows still dominates, with a 91.8 percent share.

Net Applications’ monthly surveys represent data from visitors to some 40,000 websites operated by the firm’s clients.

The Linux operating system also showed strong growth, up better than 10 percent to hit a .63 percent share.

60% Medium Enterprise IP Comms in Korea, China, India and Hong Kong

More than 60 percent of mid-sized companies with 2,500 to 9,999 employees in China, Hong Kong, South Korea and India currently are using managed IP PBX and hosted IP telephony for their voice communications, according to researchers at The Yankee Group.

Although enterprises experienced or expect savings on domestic long distance and international direct dial charges when using IP telephony, they also experienced or expect increased spending premium on network equipment, telephony equipment and network security by up to more than 25 percent, Yankee Group says.

User training seems to be the biggest challenge for enterprises deploying IP telephony and UC is user training issues. By geography, user training is a more pressing challenge for companies in Hong Kong (56 percent) and India
(58 percent). Inability to understand the link between technology and business process challenges Korean companies the most (52 percent).

48% Increase in Local Online Ad Spending This Year

Borrell Associates expects a 48 percent increase in local online ad spending in 2008, bringing spending to $12.6 billion. Local search and online video advertising will drive much of the activity, Borrell says.

Local search advertising will more than double to $5 billion, while locally placed online video will triple to almost $1.3 billion.

A major component of local video advertising will be long-form pieces for home, automotive and health-related categories, the firm argues.

Most yellow pages publishers, cable companies, newspapers, radio stations and TV stations are still pinning their hopes on their traditional sales reps being able sell online ad packages. But local sales entities might have to create separate online-only sales forces to get the job done.

Most sales entities face the same problem: it is tough to grow sales for new lines of business when those new lines represent a small percentage of the overall sales opportunity and might even cannibalize the existing business.