Cable Cuts Not That Rare

In the winter of 2000, Telstra, Australia's biggest Internet service provider had a cable cut of its own on Nov. 19, when its Internet backbone cable, sitting in less than 100 feet of seawater about 40 miles off Singapore, was damaged by unknown causes.

Telstra at that time relied on the cable, known as SEA-ME-WE 3 (for Southeast Asia, Middle East and Western Europe) for more than 60 percent of its Internet transmission capacity.

About 23,600 miles long, the cable connected 33 countries, touching places as diverse as Singapore, Malaysia, Thailand, India, Saudi Arabia, Egypt, Djibouti, Turkey, Greece, Italy, Portugal, France and the U.K.

WiMAX: Ultimate Role Unclear

Clearwire touts its vision of the future as mobile Internet. But so far, its customer base is a replacement for dial-up, cable modem or Digital Subscriber Line service. Just four percent of its customers appear to substituting a mobile service for WiMAX.

That isn't to say the customer base and apparent value proposition will remain as it currently is. WiMAX someday may compete more directly for the broadband-equipped mobile customer base.

That isn't the case today, where Clearwire seems to be competing with cable and telco fixed broadband services. At some point, the mobility play is supposed to have Clearwire and WiMAX competing more robustly for the data card and smart mobile phone customer. But lots of challenges remain.

WiMAX might someday primarily be a platform for mobile broadband. In Sprint's case, it might primarily be the next-generation replacement for 3G broadband. If the former winds up being the case, cost control will be more important. If the latter, feature richness will be more important.

The reason cost control is more important for a mobile broadband network is that the revenue sources will be less robust, on a "dollar for bit" basis, compared to networks that make lots of revenue from voice and texting services, which are highly efficient, on a "revenue for bit" basis.

Advertising also is more important if mobile broadband winds up being the primary attraction for WiMAX users. That suggests content access is more important than communications, and that in turn means media, and media always means advertising.

Cable Cut Disrupts India Call Centers

Cable cuts that damaged two undersea Internet cables off Egypt's coast now are disrupting call centers in India, the Wall Street Journal reports. Reportedly, about half of India's Internet bandwidth now is disrupted, and voice traffic to the United States and Europe also are affected.

It could take a week or two to fix the cables, in part because of bad weather, some executives say.

Users in India, Egypt, Qatar, Saudi Arabia, the United Arab Emirates, Kuwait and Bahrain are affected by the outages.

Observers think an anchor might have snagged the cables. At least that's what Flag Telecom Group Ltd. now believes. The incident took place 8.3 kilometers (5.2 miles) from Alexandria beach in northern Egypt.

Emirates Integrated Telecommunications Co., the United Arab Emirates' second-biggest mobile-phone company, is working with the cable operators, Flag Telecom and SEA-ME-WE 4, to find out why the cables were cut and to determine when service can be restored.

The outage is a reminder that physical infrastructure, however mundane, underlies all of modern computing and communications. It's also a reminder that if your business or life depends on Internet-based communications, commerce and content, you need a diversity strategy. It costs more money. But so does inability to do your work.

Amazon Elastic Compute Cloud: Heavy Use

A growing computing architectural theme is the move of functions out of proprietary data centers and "into the cloud," a return in some ways to the days of time sharing as a computing architecture. So it is that 330,000 or so developers have registered to use Amazon Web Services, up more than 30,000 from the prior quarter.

And those users are driving traffic and compute cycles. Amazon Elastic Compute Cloud (EC2) and Amazon Simple Storage Service (S3) consumed more bandwidth in fourth quarter 2007 than was consumed in the same period by all of Amazon.com's global Web sites combined.

At some point, the availability of cloud computing resources is going to fundamentally alter the tradtional "build versus buy" equation that has had enterprises and other large entities building and maintaining their own data centers. At some point the computing framework used by smaller entities and individuals is going to change as well.

At some point, one has to wonder whether communications and computing, increasingly intertwined, might also be thought about in different ways.

To the extent that servers, air conditioning, power, space and communications are the underpinning for applications, and to the extent that enterprises and individuals typically only care about infrastructure to the extent that it enables use of applications, one is lead to ponder the notion of outsourcing of infrastructure.

To what extent must even a large provider "own" its own conduits, routes, physical media, servers and software of an infrastructure sort? To what extent can those things be sourced more extensively on a "buy" basis rather than a "build" basis? In how many more use cases will it make sense to source wholesale capabilities from other providers instead of building, owning and operating facilities?

To the extent that it is the "computing" that matters, not the "computers," one also might ask whether it is the "communications" rather than the "network" that matters.

Margin, Churn Improvement at 8x8

Revenues from Packet8 Virtual Office hosted business phone service now contribute 48 percent of total 8x8 revenues, up one percent from the previous quarter. Virtual Office revenue grew eight percent over the prior quarter. That's important given 8x8's intention to focus on business customers, even as it fills out its revenue with consumer customers.

In the consumer segment, revenue was flat, and declined by three percent year over year. So the consumer business appears stable.

During the December quarter, 8x8 gross margins were 65 percent, an improvement 8x8 attributes to improved scale. Overall service margins rose to 70 percent. Packet8 Virtual Office service margins increased to an all time high of 83 percent, an impressive figure rivaling the sort of return an efficient provider gets from far-simpler T1 services.

Broadband Buckets: Way to Avoid Packet Discrimination

Many years ago, wireless and wireline minutes of use were sold on a metered basis. These days voice and texting are sold by the bucket. There's now more experimentation with that sort of model for broadband access as well.

It might seem odd, but changing the way broadband access is priced at retail, using a model similar to wireless minutes of use and texting, might be beneficial for end users, not simply for Internet Service Providers.

The reason is that if a user wants to buy a bigger bucket to move more packets for peer-to-peer video, the user is happier and so is the provider, who is able to match revenue with use of network resources.

That's arguably a better solution that having ISPs deploy sniffing and packet inspection capabilities so they can inspect all packets (as happy as some solution providers would be to sell all that capability).

Since deep packet inspection has to impose some overhead and latency, the user's applications arguably should work better as well (also avoiding privacy concerns). If any user is found to be shipping around video bits in violation of copyright, there are other remedies.

That's the way enterprises and businesses buy bandwidth, by the way. They pay more money but have unrestricted right to use the bandwidth they've purchased. Pricing consumer access in the same way wireless text and voice now can be bought would allow users to make their own choices about what applications they want to use, and how much.

It isn't metered usage in any way more objectionable than buckets of minutes or texting are. And it might allow ISPs to avoid the DPI effort.

Cable Cuts Take Internet Down

Two international submarine cables in the Mediterranean Sea were damaged on Jan. 30, causing significant disruptions to Internet and phone traffic in Egypt, Saudi Arabia, India and all of the Gulf states.

The two damaged cables are the FLAG Europe-Asia cable, operated by FLAG Telecom, and SeaMeWe-4 (South East Asia-Middle East-Western Europe-4), a consortium cable owned jointly by fifteen telecommunications companies. These two cables account for the majority of international communications capacity between Europe and the Middle East.

The two cable cuts leave the older SeaMeWe-3 system as the only cable in service connecting Europe to the Middle East via Egypt.

The cable cuts have reduced the amount of available capacity on this direct route to Europe by 75 percent (620 Gbps). Until service is restored, many carriers in Egypt and the Middle East must now route their European traffic around the globe, through South East Asia and across the Pacific and Atlantic oceans, or use satellite transport to some extent.

Global capacity executives are watching to see whether a new boost in undersea capacity on some routes across the Pacific will disrupt trans-Pacific pricing. Some also have expressed concern that new routes between Europe and India might have the same effect. The latest undersea cable disruption shows how important multiple and diverse routes have become, though.

What is Dell Planning?

If you go to the Dell Web site and try to buy a Dell Axim, a Windows Mobile-powered personal digital assistant, you can't. So maybe Dell simply is coming out with a new version of the device.

Still, 3GSM happens in February. And 3GSM is the place you'd want to be at if announcing anything important in the wireless space.

Of course, the Axim was a PDA, not a phone. But 3GSM is a phone show. And many of us stopped using our Palms some time ago when our smart phones provided all that functionality inside the phone itself.

If Dell were to introduce a mobile, 3GSM is where they'd want to do it.

Lower European Mobile Data, Texting Prices

Ofcom Chief Executive Ed Richards is lobbying European Commission telecom regulators to slash the allowed prices of international text messaging and mobile Internet access, says Jonathan Prynn, Evening Standard reporter. It appears Richards has in mind prices lower than currently offered by mobile operator O2. O2 charges £3 for one megabyte of data transferred.

So it appears Richards seeks prices significantly lower than the £4.11 per megabyte level that tends to be the average now. European mobile carriers probably will hope to stave off such regulation by voluntarily dropping their tariffs in time for an announcement at Mobile World Congress meeting in February.

The moves would be good for consumers, and obviously financially damaging for carriers. As always is the case, the lower tariffs also would make it harder for upstart competitors to grow their companies by undercutting the high tariffs.

Sprint WiMAX "Functional Separation"?

With new reports out that Sprint might try to resurrect its failed alliance with Clearwire, this time perhaps with new minority investors (Intel, Google and Best Buy), one wonders whether Sprint ought to do what wireless operators are doing elsewhere and create a separate transmission company from which it can buy wholesale capacity.

Functionally separating retail operations and network functions might make sense in this case, given the other pressing demands for capital Sprint also faces. It isn't clear that Sprint derives significant competitive advantage from retaining ownership of the transmission facilities.

Best Buy might also be more inclined to invest in the new WiMAX network if such wholesale access were built into the investment agreements, as Best Buy might want to brand its own services.

Google is more interested in fostering an open networks environment and might not be that interested in any sort of Google-branded service. But wholesale access might be interesting if Google wants to experiment with applications that require such access, and wants to do so in a "real world" environment.

Ethernet Keeps Growing

Ethernet continues to gain a more prominent role in networking capabilities being deployed by service providers in North America, Europe, and Asia Pacific, with most carriers reporting 90 to 100 percent increases in Ethernet traffic for the past two years, according to analysts at Infonetics Research. IP and MPLS traffic has grown 70 to 80 percent over the same period, Infonetics says.

A new optical transport layer also will emerge, Infonetics believes. This new layer will be a fused Ethernet-WDM packet transport with circuit-like capabilities via Ethernet transport tunnels, also known as COE, or connection oriented Ethernet. That means more adoption of T-MPLS and PBT, Infonetics believes.

There was a time when some argued that "connectionless" protocols such as IP would replace "connection oriented" protocols such as time division multiplex, SONET and asynchronous transfer mode. As it turns out, there's a reason why connection-oriented protocols, or at least protocols that emulate connections, are important. Some traffic types, especially video and voice, are susceptible to impairments that can arise when connectionless protocols are used.

Value-Based Pricing

Communications services in the past have been priced based on usage (minutes or distance, for example). These days, there's a greater range of retail pricing, including flat fee for buckets of usage, for example.

But with the advent of IP-delivered video services, service and application providers have a chance to price services in a more natural "value to me" basis. If one looks simply at retail pricing and "bandwidth consumed," text messages "cost" the most based on bandwidth consumed, with voice second. Video and Internet services "cost" very little on a "bandwidth consumed" basis.

But that isn't the point. Text, voice and other communications applications are valued one way; video entertainment or simple Web access another way. In other words, in the communications space, "cost" is not the same thing as "price."

Target and Wal-Mart sell some products as loss leaders to get traffic into the store, so people buy lots of other products with varying profit margins. Communications services aren't any different. Some have have margins for providers, others have slim margins. The key, though, is value to the end user, not "bandwidth consumed."

Text messages "cost" very little, as the network to enable sending and receiving them is a sunk cost. But cost isn't price. Users demonstrate by their behavior that they value text messaging highly, on a "bandwidth consumed" basis. If one letter of a text message requires one byte, then sending or receving 6,553 messages consumes about a megabyte of data.

So a 160-character or smaller message might "cost" 10 to 15 cents. So a megabyte worth of text messaging represents as much as $655 to $983 for domestic usage. International messages obviously "cost" more.

A month's unlimited usage of entertainment video might cost $50, consuming more than a megabyte in a single second of use.

The point is that the retail price of any particular message or service has little to do with the actual "cost" of providing it, any more than the "price" of perfume, luxury automobiles, shoes or applications.

"Price" for a video service has to be vastly lower, on a "bandwidth consumed" basis, than texting, instant messaging or voice. That has little to do with user-perceived value, though.

Nokia Gets Cross Platform Support

Nokia has acquired Trolltech, a development platform for applications that can run on the Internet, accessed from a PC or a mobile phone. That might mean support for applications that run across operating systems, for example. The acquisition illustrates a couple of trends.

Mobiles need to acquire the ability to run Web applications, and need to do so in ways that are similar to the use of those apps on a PC, so users don't have to relearn a behavior. Cross-platform support also means Nokia can benefit from the huge numbers of developers working in the C, Flash, Java and other environments, for example.

Sloooow 700 MHz Auction Pace

The high bid on the national 700 MHz spectrum block stood at about $3.4 billion on Tuesday. Bidding is proceeding slowly and about all we know is that it will go higher until the minimum to compell an open network framework is reached. Google has pledged to bid at least that much and we have no reason to think it will not. Another billion and some odd to go until that point is reached, though.

Competitive Cable Developing Too Slowly?

One year after the passage of a law designed to ease the entry into the cable market of competitive providers in Michigan, only 110 of 2,000 communities in the state have a choice of cable providers, according to Multichannel News.

That is to be expected. Cable choice requires construction of brand new networks, not just the granting of a franchise. That takes immense amounts of capital and time, as well. A single new network in a single community can take three years or more to build, if there are no competing demands on construction and installation resources.

And there is history to consider. New video service providers have been attempting to so just this sort of thing for several decades, using a variety of methods, of which the most successful so far has been the use of direct broadcast satellite. There have been scattered regional efforts to duplicate cable networks, but overbuilders have not been notably successful, in large part because it is difficult to justify building a network that gets less than 30 percent penetration, which is what overbuilders largely have been able to attain.

Voice and cable modem services have helped the business case, but overbuilding remains a challenging financial proposition, and few expect widespread new competition in the terrestrial space from any other than incumbent local telephone companies.

The point is that nobody should be surprised nothing much has happened in just a year. New ubiquitous broadband networks take time to build, as well as lots of capital. If it were easy, lots of people would be doing it.