Wi-Fi Plus Bluetooth Coming in 2009

A new standard will allow Bluetooth devices to switch to Wi-Fi for file transfers if Wi-Fi is available, according to Michael Foley, director of the Bluetooth Special Interest Group. The new features should be available in 2009.

Bluetooth also is compatible with ultra-wideband technology, but Wi-Fi now is seen as important as well. It is expected that chip vendors will start putting both Wi-Fi and Bluetooth functions onto a single chip, instead of the separate approach now popular.

The combination devices will use the regular low-power Bluetooth radios to recognize each other and establish connections. If they need to transfer a large file, they will be able to turn on their Wi-Fi radios, then turn them off to save power after finishing the transfer, Foley says.

It's just one more detail for consumers to track.

More Trouble for Cable?

Once upon a time, the cable TV industry was a struggling insurgent industry, long on hope, short on finding, basically a rural market service retransmitting urban market off-air signals to areas that couldn't receive them.

All that changed during the 1980s when major metro markets were wired, channel capacities grew into scores and independent programmers changed the business from "remote channel importation" to an "add choice" model.

By the 1990s cable gradually captured 70 percent of homes. Over the last 19 years, as video penetration saturated, cable modem and voice services emerged as the growth drivers. But cable now is an incumbent. Like the telephone companies, it faces negative growth in its legacy business, partly from satellite providers but increasingly from at&t and Verizon.

As a result, cable stocks have dropped about 35 percent since last summer. UBS analyst John Hodluk thinks more pain is coming, as consumer spending slows, broadband access additions decelerate and the telcos start to make themselves felt in video service.

Hodulik says the two telcos will double the reach of their video services this year to about 18 percent of homes passed, and will double again by the end of 2010. As a result, cable basic sub losses could triple in 2008.

On the other hand, Qwest Communications might lose nearly 10 percent of its consumer lines this year as well.

The good news for most telcos is that revenue sources have diversified quite a lot over the past decade. Consider Cincinnati Bell, an independent telco.

About 83 percent of its service revenue in 2007 was earned from areas other than the traditional consumer wireline voice traffic. In 2006, Cincinnati Bell earned about 80 percent of its total revenue from sources other than consumer landlines.

Business market revenue is part of the reason. Revenue from data center managed services increased 43 percent in 2007, for example. Wireless service revenue from business customers grew by 17 percent and business access lines were actually up almost two percent. As a reflection of this growth business markets revenue represent a 57 percent of total 2007 revenue compared with 55 percent in 2006.

Which is largely what the Federal Communications Commission forecast would happen when it decided the basic competitive framework for the U.S. market would be to encourage the telcos and cable companies to have at it. That hasn't been helpful for other would-be competitors, including competitive local exchange carriers and independent VoIP providers.

But there's reason to believe the framework is working, at least to a significant extent. A great deal of the credit, though, is because of the contributions made by Internet-based application providers. That payoff seems clearer every day.

Writers Strike Encourages YouTube Sampling

There often are unanticipated consequences in life, and it appears that the U.S. entertainment industry writers strike has given people an opportunity to sample more online video clips than ever before, comScore suggests.

Its December 2007 report suggests U.S. Internet users watched more than 10 billion videos online during the month, representing the single heaviest month for online video consumption since comScore initiated its tracking service. Google saw substantial growth and extended its video market share gains, now accounting for nearly one out of every three videos viewed online.

The issue isn't so much that online videos are a replacement for network TV shows. The issue is that online video viewing is a substitute use of time and attention. Ultimately, that is crucial for any media segment and the contestants within any segment.

Essentially, the writers strike has encouraged users to sample a new product. And sampling typically is one of the best ways to encourage users to adopt a new behavior. One of the unanticipated effects of the writers strike may be that a new group of online video viewers has been added, with a permanent change in at least some of their entertainment video habits.

“December represented a considerably strong month for online video viewing,” says Erin Hunter, comScore EVP. “With the writer’s strike keeping new TV episodes from reaching the airwaves, viewers have been seeking alternatives for fresh content. It appears that online video is stepping in to help fill that void.”

Online viewers watched an average of 3.4 hours (203 minutes) of online video during the month, representing a 34 percent gain since the beginning of 2007.

The average online video duration was 2.8 minutes and the average online video viewer consumed 72 videos.

More VoIP Patent Trouble

Verizon now is suing Charter Communications as well as Cox Communications for infringing eight VoIP patents. Included are the three patents Vonage was found guilty of infringing last year, plus several that relate to maintaining quality of service. In principle, it is not clear why every major cable company in the U.S. market is not guilty of infringement if Cox is found to be infringing, as virtually all the cable operators use the PacketCable framework.

United Online: Harvesting Cash Flow

With the latest fourth quarter and year-end reports now out from United Online, AOL and EarthLink, the expected trends continue. Dial-up Internet access, like stand-alone long distance before it, throws off cash flow, but less every year. All three leading independent Internet access providers are in the midst of transformation projects, with United Online succeeding most clearly, though it failed to pull off an initial public offering of its Classmates.com unit.

All three ISPs essentially are managing their dial-up bases to harvest cash flow and control costs, the standard prescription for managing a declining business, while seeking a new path to growth. That's the same path the independent long distance industry took as well.

Perhaps the best historical analogy is not long distance but paging. Basically, mobile phones replaced pagers, as broadband is supplanting narrowband access. But paging remains a business. It simply isn't as large a business as it once was, and is the province of specialists. That's the ultimate future for dial-up services in the medium term as well.

As this data from the Canadian Radio-television and Telecommunications Commission indicates, paging use and revenues have been declining steadily since 1998. Dial-up will be around for a while, but as a small niche within the broader range of access services.

VoIP Inc. Gets Out

VoIP, Inc. has gotten out of the independent VoIP business as a provider of services that replace standard phone line service. It has decided instead to recast itself as a provider of "click-to-call" applications. The Company therefore has suspended all of its telecommunications network operations including all current revenue generating operations.

The company also reduced its workforce by 25 persons, eliminating most of its network operations and software engineering staff.

Some participants in the U.S. VoIP marketplace think the next two years will see the demise of most of the independent U.S. providers who do not own their own access networks. The average revenue per user is simply too low, the profit margin too thin and the volumes too low.

Hoping is not a business plan.

Content, TV Display Key to Online Success

The most-important things online movie download services can do to succeed is offer a broad selection of content and make it possible to view that content on TVs, which is the expectation users now have for movie content. That's because the single most important ingredient for success for any video offering is the content.

That isn't to say content pitched to mobiles or PCs can't find a niche. It is to say that the broad mass market for online-delivered movie viewing won't become a mass phenomenon until user behavior is consistent with what consumers expect today.

"When it comes to movie rentals and purchases, the quality of content matters," say analysts at The Diffusion Group. The second crucial element is that "getting video downloads to the TV is absolutely imperative."

The ability to view movie downloads on any TV in the home is of critical importance, both to those that have used online movie download services and those likely to do so soon, The Diffusion Group says.

The use of mobile phones for video viewing is not considered sufficiently desirable to justify using an online movie download service, Diffusion Group researchers find. "As such, cell phone video viewing will not in-and-of-itself be a compelling attribute for an online movie download service, especially of full-length movies.

And there's a difference between users and proponents. Proponents emphasize the interactive capabilities online content enables. But users don't seem especially enamored of those sorts of features, as fond of them as interactive proponents are.

Adult broadband users don't agree. "Only 28 percent rank this attribute positively and 42.3 percent rank it unimportant," Diffusion Group researchers say.

Price Per Megabit: Japan and France Lead

When observers talk about places where broadband access is both fast and affordable, Japan is certain to come up. Maybe they should talk about France. As this chart created by the Wall Street Journal shows, French users can buy broadband at prices per megabit that are quite close to what users in Japan are able to do.

Also, despite all the whining about how far behind the rest of the world the U.S. providers are, it doesn't really appear such sentiments necessarily are based in fact. Over the last year, cable and telephone companies have been boosting capacity while holding prices steady. And that provides a much better "price per megabit" relationship.

Wireless Overtakes Wireline This Summer

Mobile voice volume will overtake fixed in Western Europe by mid-year, researchers at Analysys now predict. The proportion of call minutes made from mobiles has increased by 1.4 percentage points each quarter over the last year.

In the United Kingdom, where patterns of consumption are close to the European average, mobile voice usage should overtake fixed voice in the second quarter of 2008.

In France, mobile voice usage has already surpassed that of fixed voice, and keeps growing despite the widespread availability of practically free voice over broadband.

On the other hand, mobile voice is not expected to overtake fixed voice in the Italian market until the first quarter of 2009. The German market will not experience this phenomenon for about two years.

Portugal, having the lowest voice consumption in Western Europe, was the first country in which mobile overtook fixed, while Sweden, which has one of the highest, will be among the last to change, Analysys researchers say.

For mobile providers, price is the trick. Once wireless calling costs are low enough, users seem well able to act on the relative value-price perceptions wired voice and wireless represent. In many cases, those users show a strong preference for mobility.

Cell Phone Recycling: 10 to 34%

During the fourth quarter of 2007, U.S. consumers buying new mobile handsets recycled their old phones at double the rate that they did in the third quarter. Still, that's just 9.4 percent of devices, says iSuppli Corp.

But recycling behavior might be higher than that, if all sources of reuse are considered, and if respondents are being truthful. Considering phones given to friends or family members, donated to a charity or returned to a phone retailer, about 39 percent of phones are recycled or reused.

The easiest way to recycle a phone is simply to take it to your provider's retail store. In most cases they'll supply you with a postage-paid mailing envelope, which you then drop in a postal box. Some Best Buy outlets have permanent recycling bins for PC batteries, ink cartridges and mobile devices (phones or personal digital assistants).

About 36.8 percent of respondents polled by iSuppli simply stick the old phones in a closet or drawer. That presumably means the devices later are tossed into the trash, which is where they shouldn't be.

About 15.5 percent of U.S. consumers gave away their old mobile handsets to a family member or friend. Another 8.5 percent of consumers donated their handsets to charities.

About 5.7 percent said they returned their old phones to the retailers where they originally bought them. Some 3.1 percent sold their old phones.

The U.S. Environmental Protection Agency (EPA) estimates Americans discard 125 million phones each year, creating 65,000 tons of waste.

So Maybe Verizon is Bidding Against Itself

After round 40 of the Federal Communications Commission's auction of 700 MHz airwaves, Verizon might be bidding against itself, in a sense. Observers say it is possible for Verizon to bid directly on each of the eight regional allocations that make up the national C block. And if any contestant has the highest bid in a region, it wins the spectrum even if some other entity has the highest overall bid for the entire C block.

In this scenario Verizon would simply have to ensure that its regional bids were high enough to top the amount any other player submitted for the entire national spectrum. Clever.

FCC Auction: Who's Bidding on C Block?

At the end of round 39 of the Federal Communications Commission's auction of the national C block of 700 MHz spectrum, it appears at least two entities continue to bid.

The top bid now is a bit over $4.83 billion, up from the prior high of $4.7 billion at the end of round 38. Some of us think Google has halted its bidding, and most of us think Verizon Communications intends to win the C block. So if all that is true, at least one other company continues to bid against Verizon. Curious.

It's hard to picture at&t bidding for C block spectrum, as observers have predicted it would focus on filling in holes in its 700 MHz spectrum by bidding on local chunks of the B block.

AOL to Cleave Access from Ads

So it looks as though AOL will be split, separating out the Internet access business from the emerging advertising business. The thinking is that it will be easier to do something with each of the assets that isn't so easy right now. Presumably a buyer such as Google might want to pick up AOL's portal for the ad business.

But what can be done with the access assets? Even though AOL lost 3.8 million subscribers in 2007, it still has something on the order of 9.3 million U.S. subscribers.

EarthLink has something of a similar problem. It has a declining customer base but still has 4.2 million access customers.

The issue is what sort of buyer might exist for the Internet access customers AOL and EarthLink now are serving. Most of them are dial-up customers and are likely prospects for broadband upgrades. But the customer base is scattered all over the U.S. market.

So any potential acquirer would want a ubiquitous broadband access footprint (cable modem, wireless or Digital Subscriber Line). Only the leading wireless providers have any real shot at national coverage. Verizon, at&t or Comcast would have immediate coverage issues. Smaller ISPs might want to buy, but can't raise the money.

Does anybody have a rational business plan for rolling up the EarthLink and AOL access bases? Not one we've heard so far, even assuming all the other assets are cleanly separated.

at&t to Add 80 Cities to 3G Network

at&t Wireless will extend its third-generation (3G) wireless broadband network to more than 80 additional cities in the United States this year. About 270 communities already have 3G service available.

Most major metro areas already are covered, but you'd be surprised at the number of suburban communities even around the major markets that only have the slower EDGE data network. That's one reason, aside from battery life, that the Apple iPhone initially was available only in an EDGE network version.

By the end of the year, nearly 350 leading U.S. markets will be served by the 3G network, including all of the top 100 U.S. cities. The 3G initiative requires the building of more than 1,500 additional cell sites.

The at&t 3G network now delivers typical downlink speeds ranging between 600 and 1,400 kilobits per second, as well as uplink speeds ranging from 500 and 800 kilobits per second, though the network is not yet completely equipped for the higher upstream capacity at all sites.

People often underestimate how long it takes for a national network to be created, even if it is a wireless network. Back in the regulated days of telecom, for example, a sizable telecom company would expect to upgrade or replace only about 10 percent of total plant in any single year.

So access plant changed slowest, though switch replacements could occur more quickly. And it isn't just "physical" networks that have to be built. A large carrier might operate 50 to 100 "logical" networks, as each separate service often required its own hardware, software, provisioning and billing systems.

Likewise, consider that Verizon Wireless has invested $300 million in 2007 to enhance its networks in Maryland, Washington, D.C., and Virginia alone, largely related to broadband upgrades, spending $6.5 billion investment nationwide.

"Reliable wireless networks are not built overnight," says Tami Erwin, Verizon Wireless regional president.

From an at&t Wireless perspective, it will take a year to light 80 communities, using 1,500 towers, to create a 3G network in those areas. And there will be more work next year.

Verizon, at&t Take Different Approaches to Bandwidth Caps

For an industry that in decades past has tended to move in lockstep, it is refreshing to see an ever-increasing divergence in strategies and marketing positions. Consider the matter of bandwidth caps and content filtering.

at&t has decided to filter non-authorized content on its broadband access networks. The move is an attempt to reduce the peer-to-peer bandwidth load on its networks.

Verizon, on the other hand, doesn't want to do so and says it will not. Many policy advocates will cheer that stance.

One might credit Verizon's decision to move to a fiber-to-home network for that laudable move. Simply, Verizon has a lot more headroom than at&t will to support today's heavy users, and ultimately, heavier use by nearly all users as more video moves to Internet delivery.

Beyond the policy stance differences, and the customer goodwill Verizon will garner, the notable difference stems from fundamental decisions each carrier has made. Verizon made a risky bet in the face of nearly-universal investor opposition. at&t took a less-risky path that was rewarded by investors.

But each of those decisions now has repercussions in other areas where technology now conditions the marketing decisions each company can make. I've said it before and will say it again: Verizon did the right thing sticking to its FiOS program, in the face of intense financial community pressure.

In the years to come, that technology and financial decision is going to give Verizon many options other contestants may not have.