Sky Dayton Leaves Helio

Given that Sky Dayton now has resigned as chief executive of Helio, the wireless joint venture between SK Telecom and Earthlink, one has to conclude that Dayton, at least, thinks the end is near. Shutting Helio down is a possibility, though not the only possibility. Earthlink itself is for sale and it is possible Dayton sees the larger transaction coming.

Earthlink clearly wants out of the Helio venture, but SK Telecom clearly believes in the business, hoping only to replicate the success it has had in its home market. The issue rests with SK Telecom, as the Korean firm recently invested $70 million in Helio and now has voting control of the venture.

Maybe Earthlink executives have found a way to reorganize the firm in a self-sustaining way. If so, it almost certainly would have concluded that it must stop investing in the muni Wi-Fi and Helio ventures.

Another Cable Cut in Persian Gulf

What are the odds four undersea cables are cut in a single week? Whatever those odds, it has happened. First two cables snap off Egypt. Then a separate cable in the Persian Gulf, and now yet another Middle East cable.

In the latest incident, an undersea telecoms cable linking Qatar to the United Arab Emirates was damaged, disrupting services, telecommunications provider Qtel has reported.
The cable was damaged between the Qatari island of Haloul and the UAE island of Das. The cause of the damage is not yet known.

Qtel's loss of capacity seems to be disrupting voice capacity more than Internet services. Qtel says it was operating at 40 percent over the weekend because alternative cables exist. Nevertheless, disruption to Internet and telephone services in the Gulf state is likely to continue for 10 another days or so.

Not since the December 2006 earthquake off Taiwan have so many cables been taken out of service almost at once.

Google: Microsoft "Troubling Questions"

Google is doing what it can to annoy Microsoft. Reportedly it has contacted Yahoo about potential help fending off a Microsoft takeover bid. And it certainly is going to raise antitrust and other competitive issues it hopes will be addressed by regulatory bodies.

"Microsoft's hostile bid for Yahoo! raises troubling questions," says David Drummond, SVP and Chief Legal Officer. "Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?"

"Could the acquisition of Yahoo! allow Microsoft, despite its legacy of serious legal and regulatory offenses, to extend unfair practices from browsers and operating systems to the Internet?" he asks.

"Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services?"

Mobile IS Voice

Enterprises and consumers still spend lots of money on voice services delivered over some sort of wired connection, including "plain old telephone service" as well as newer replacement services such as cable-provided "digital voice" (voice over IP) or hosted business phone services.

But wireless is where the action is moving. And while lots of different approaches to integrating wireless and wireline access are being tested and deployed, it's hard to escape the conclusion that wireless increasingly is the dominant way people "do voice," even when some amount of talking shifts to PC-to-PC format.

There will be lots more integration of features and call delivery between wireless and wired modes, to be sure. But there will be an equally large amount of wireless substitution as well, even in the enterprise customer segments.

France is Leading W. Europe VoIP

The three largest VoIP providers in Western Europe are French: Orange, Neuf Cegetel and Free. According to InfoCom's most recent report on IP-based voice, Orange also is active in the Netherlands, Spain and the United Kingdom.

All in all Orange had 3.57 million VoIP customers in these four countries at the end of June 2007 and was the largest provider of IP voice services that are a replacement for analog telephone service, with a 14 percent market share. Neuf Cegetel and Free (Iliad group) follow. BT ranks fourth while and United Internet ranks fifth.

Skype leads for PC-to-PC VoIP share, though MSN or Yahoo! each get significant usage as well. Generally speaking, consumers do not use Skype, Google or MSN VoIP services as their main phone line in place of their traditional telephone line, InfoCom analysts say.

Cable Cuts Highlight Opportunity

Several recent undersea cable cuts that interfered with Internet connections in India and the Middle East might ultimately focus attention on other ways to get call center and business process outsourcing handled. By some reports 20 to 25 percent of outsourced call centers initially were unable to do any work at all while many had only 50 percent of capacity once restoration work began and traffic was rerouted.

At some point, at least some providers and some customers will conclude that if the price is equivalent, it makes more sense to base call centers and other business process outsourcing operations on shore. The issue is how to operate them more efficiently.

Perhaps there is a role here for IP voice interconnections. Though other costs are less malleable, it ought to be possible to create highly-distributed call overflow mechanisms using "voice over private network" IP connections in ways that allow economical call center operations in lots of rural areas that are more protected from cable cuts.

Will Yahoo Get Another Offer?

Will a Yahoo white knight emerge? Financial blogger Henry Blodget thinks it is possible. Now that Microsoft's bid has put Yahoo into play, there's speculation that Yahoo will try to escape Microsoft's clutches by turning to a private equity firm. Observers recently have doubted that any public company would be able to justify buying Yahoo. Apparently the growing size of private equity deals now makes even a private buyout conceivable. Look for more Yahoo layoffs if that happens.

Yahoo still gets lots of traffic, but is not growing revenue as fast as Google, as this data from 2007 illustrates.

Enterprise Software: Negative 1st Quarter

If you buy enterprise software, you most likely will be spending less, or no more, than you did last year. For what it says is the first time in years, a ChangeWave member survey shows negative growth for enterprise software spending for the first quarter of 2008.

Better than 22 percent of members polled now say their company will spend less for software over the next 90 days compared to the previous 90 days.

For the time being, that will put some discretionary buying plans on hold, while some providers might do better by touting lower upfront cost or lower recurring cost or both. That ought to be good for providers of Web-based software as a service providers.

Does iPhone Hurt BlackBerry?

If Changewave Alliance members are an accurate reflection of broader market trends, sales of Apple iPhones do not hurt sales of Research in Motion BlackBerries, Curves and Pearls. Since January 2007, it appears the percentages of new phone buyers who plan to buy either an iPhone or RIM device have increased fairly steadily, with Apple retaining a slight edge in buying intention.

Of course, things could change once poll respondents actually go to the retail outlet to buy. But the poll suggests that the iPhone is not hurting RIM's handset sales. Instead, sales of smart phones seem to get a boost. Among brands, it most likely it is Motorola devices that are taking a hit.

FLAG Telecom Loses Undersea Cable

As a reminder of how important undersea cable redundancy is, FLAG Telecom has lost a cable of its own in Persian Gulf. FLAG, a wholly-owned subsidiary of India's number two mobile operator Reliance Communications, says its Falcon cable was reported cut at 0559 GMT, 56 kms (35 miles) from Dubai on a segment between the United Arab Emirates and Oman.

Tata Restores Service

Tata Communications (VSNL) has restored a majority of its IP connectivity into the Middle East and North Africa region within 24 hours of the Egypt cable breakdown on Jan. 30, when the SEA-ME-WE 4 and other undersea cables were severed off the coast of Alexandria, Egypt.

These cables serve as the principal Internet connections between the Middle East and westward on to Europe and North America. They also connect the Indian subcontinent and South East Asia.

"VSNL is proud of the team effort that united the company’s network and operations teams across three continents to execute an ambitious recovery plan in 24 hours," says Radwan Mousalli, Tata managing director. "Our cable layout and design allowed us to survive a double cable failure as well as develop enough capacity eastward across the Pacific for the internet to reach North America and Europe."

Indian Company Slashes Voice Rates

India's State-run communications company MTNL has slashed international call rates to one Rupee per minute (about three cents) for its Voice Over Internet Protocol customers to about 100 countries such as Saudi Arabia, Pakistan, Japan, Malaysia and Kuwait.

The call rates to the United States, the United Kingdom, Canada, Australia, Singapore and Hong Kong are already stand at one Rupee (3 cents) a minute. For countries to which the calling rates were at Rs 6 (18 cents), 8 (24 cents) and 12 (36 cents) have now been reduced to Rs 4 (12 cents), 6 (18 cents) and Rs 8 (24 cents) per minute respectively.

For countries where call rates were Rs 2 (6 cents) and Rs 3 (9 cents) per minute, the rates have been reduced to one Re (3 cents) per minute.

The issue now is how market forces will work to lower mobile-initiated or terminated calls, as that's where the future lies in India, China and other markets.

Search, Social Networking Both Slow

Retailers are fond of blaming sales slowness on "the weather." It might have been too warm when they were trying to sell coats, or too cold when they were trying to sell swim suits.

Sometimes the sluggishness is more protracted and worrisome, as some suspect might be behind Google's fourth-quarter revenue growth figures.

To be sure, growth has been decelerating for some time, as the law of large numbers kicks in: it just is mathematically harder to sustain high percentage growth off a large base, compared to a small base.

But some observers also detect a slowing of use by established social networkers as well as a slowing of new adherents. In part, that might be the law of large numbers starting to kick in as well. The other issue is how soon saturation is reached for the current generation of social networking sites.

Users with high interest joined early. Later users presumably have less intense interest. Something else might be happening as well. People discover over time which tools are really useful and which are less useful. As users experiment with the various sites, they probably are settling in to more established patterns of use. Instead of meandering among a number of sites, users will discover over time that one or two sites make the most sense, and will gradually cease using the others.

Saturation is an issue in every market.

How Microsoft-Yahoo Stacks Up with Google

Erick Schonfeld, TechCrunch do-editor, lays out the revamped Microsoft this way, back of the envelope: Google stacks up at $15.6 billion in annual revenue, compared to $65 billion annual for Microsoft combined with Yahoo. Microsoft winds up earning a $38.3 billion annual gross profit, compared to Google's $9.9 billion. Still, ask yourself who you'd rather be: Google or Microsoft-Yahoo?

Why Microsoft Wants to Buy Yahoo

Putting the assets together boosts combined search market share to 36 percent, compared to Google's 53 percent, giving Microsoft-Yahoo a fighting chance to compete in a market that will not support any other serious contenders for leadership.
,
Roughly the same logic holds for other Internet applications where the three companies compete, or might like to. Microsoft is a contestant in the MP3 music player business and never has been able to challenge Apple. Maybe the Yahoo assets somehow can help Microsoft do better in the music or video download markets.

As you would expect, Microsoft argues there are significant benefits of scale in advertising platform economics, capital costs for search index build-out and in research and development that it will benefit from.

True, though part of the broader problem is the sheer range of competencies the companies require, the markets they participate in, the media types they support and the ecosystems each has to find a way to fit into. The problem is that the places Microsoft might potentially have to compete are so diverse.

There's ad placement, blogging platforms, collaboration, software development, mapping, location services, mobility, peer-to-peer distribution, photo sharing, social networking, communications, video, enterprise applications and analytics, for example.

Search is the obvious place Microsoft gains mass. One cannot yet forecast how well the Yahoo assets will help in all the other areas.

There's danger of another sort here for Microsoft as well. Never before as Microsoft made such a large organization. And there's a cultural issue as well. Though it never is easy to integrate two or more companies, there's an additional problem here. Yahoo has become a lehargic company that can't seem to innovate, and can't seem to move fast even when it knows where it wants to go.

Microsoft, on the other hand, no longer is a fast-moving company, either. In the Web services area, it has shown no ability to seize market share and momentum sufficient to wrest leadership from Apple or Google or Amazon, for example. In fact, it is precisely frustration with Microsoft's inability to seize leadership that prompts the "buy share" strategy.

Putting two slow moving or arguably ineffective companies together does not seem a recipe for reinvigorating innovation within either of the two former companies. Sure, it buys Microsoft market share in the search market. Whether Microsoft will be able to do anything with its new assets is the question.

Microsoft's desktop and office productivity software businesses remain formidable. It simply isn't clear whether those assets help Microsoft so much in the ad-driven search business.