Mobile Walled Garden? No Way

Mobile phone owners already are partially outside mobile operator content walled gardens, a new survey by ABI Research suggests. And there is no reason to believe this trend is not a permanent feature of the mobile content and applications business.

The 14 percent of respondents who said they use their phone to watch video was split nearly evenly between those who watch video from websites such as YouTube (35 percent), from their own carrier’s video offering (31 percent), and from video they sideload onto their mobile devices (28 percent).

The leading source of music files on a mobile phone was ripped CDs and sideloading onto the phone (48 percent of mobile-music listening respondents), while over one third of music-listening respondents (35 percent) purchased music through their carriers.

As an example, today’s mobile consumer is more likely to watch a video from YouTube on his or her phone than a video from the carrier’s own service, but is more than twice as likely to get ringtones from the carrier than from any other source.

“Perhaps more with the mobile phone than any other consumer electronics device, content is obtained from a variety of sources,” says research director Michael Wolf. “This shows that despite the strong control most carriers retain over the network, their control over the mobile content ecosystem remains limited. The consumer will see more and more options for obtaining rich media in the future.”

In the mobile business, as in the video, music, voice and Internet businesses, closed and walled garden business models are learning to live side by side with the open models of the Web. It isn't clear whether, in the future, all content will flow "over the top."

At some point, if it is possible for consumers to grab the content they want, when they want it--and business relationships with content owners are just as important as physical bandwidth in that regard--then we will see a serious test of the dominance of "packaged" distribution such as cable TV, broadcast TV or telco voice.

Email Overload?

Are business users drowning in unwanted email or not? Some observers argue they are, and also say the overload is harming productivity. A typical analysis might be that a half hour a day is wasted when people have to deal with unwanted email. Over an eight-hour working day, that's 1/16 of total time at work. For a person earning $100,000, that's an annual loss of $6,250.

The countervailing view is that managing email is no more a "time waster" than socializing around the office, and might have positive value to the extent that all business is social, and that relationship building and maintenance of those relationships.

Granted, email can be chore if a user feels compelled to respond to every message. But there's no reason to respond to most messages, some would argue. Instead, email is part of a flow of communications and information that streams past a person, providing context on what other people one works with think is important.

Recognizing the pattern is the key thing, not "responding" to all messages in the flow. It's a little like "Twitter" streams, Real Simple Syndication feeds or Facebook updates. One doesn't have to respond to the updates. But the updates can have value.

The issue is whether "information overload" is a problem or an opportunity. Providers of unified communications capabilities obviously see the management of message streams as an opportunity; a chance to solve the inefficiency of missed, delayed or repeated communication attempts.

Where a company's cost structure or revenue streams are involved, "inefficient" communications are a problem. In other cases, maybe not. When information is a stream of messages about the state of one's environment, maybe not. The "problem" exists to a large extent only in compulsive response, or inordinate attention to, the flow of data.

The same might be said of other "interruptions" of one's work. To a point, pings from co-workers do "interrupt" the specific tasks any particular person has. On the other hand, to the extent that organizations are social, "interruptions" are part of the collaboration process. To the extent that business value grows from collaboration, "interruptions" simply are part of the collaborative process. So is collaboration wasted time? Hardly.

Online Content Use Up, Across All Age Groups

Online content is getting more attention from users in every age category, says Burst Media.

Overall, 59.6 percent of respondents to a recent survey report they are visiting more Web sites in a typical week than they were one year ago, say researchers at Burst Media. And the trend holds in all age segments.

In fact, 62.8 percent of respondents 55 years and older say they are visiting more sites today in a typical week of web surfing than they were one year ago.

Local and national news is the most popular content consumed online with half of respondents regularly seeking it out. Still, there are differences in the types of content consumed by age segments.

Among respondents 18 to 34 years of age, entertainment information (44.7 percent) is the most regularly sought online content, followed by: local or national news (40.1percent), online games (38.1 percent), shopping or product information (36.1 percent) information for work (35.0 percent), and online communities such as social networks, forums and blogs (31.4 percent).

Local or national news (54.2 percent) is the most popular online content for respondents 35 to 54 years of age. Other types of online content sought by respondents 35 to 54 years of age include shopping or product information (44.8%), information for work (42.7 percent), health information (37.1 percent), entertainment information (37 percent), and travel information (33.7 percent).

Local or national news is by far the most popular online content for respondents 55 years and older. About 56 percent of respondents in this segment saying they regularly seek such information online.

Shopping and product information (44 percent) is the second most popular type of content sought and is closely followed by health information (42.5 percent).

Other types of content sought include: international news (38.9 percent), travel information (38.2 percent), and food information/recipes (34.1 percent).

Two-thirds (67.7 percent) of respondents say their daily routine would be disrupted if their Internet access was taken away and not available for one week.

About 43 percent say such a loss would be "significantly" disruptive.

And Web access is disruptive for every age group. In fact, among respondents 55 years and older, 44 percent say their daily life would be significantly disrupted if they were unable to access the Internet.

Internet access now has become an essential service, it appears, like voice, text and video entertainment.

Opera Mini for Helio Ocean

Opera's Opera Mini mobile browser now is available for the first time in the U.S.market as a mobile service provider on-deck option. Helio users can surf the Web with Opera Mini on their Ocean devices using Opera Mini that has been specially-tailored for the Ocean handset.

Available as a downloadable application from Helio's Web portal, Opera Mini is touted as providing a desktop-like experience with fast response.

Apple Seeks "Free Access to iTunes"

Apple is in discussions with leading music companies about giving customers free access to its entire iTunes music library in exchange for premium pricing of its iPod and iPhone devices, reports Andrew Edgecliffe-Johnson of the Financial Times.

The “all you can eat” model, a replica of Nokia’s “comes with music” deal with Universal Music last December. Nokia reportedly will offer $80 or so to music industry partners, in exchange for the use of music assets.

Apple is said to have offered $20 per device, and also is said to be examining a subscription plan for iPhone users, as that device obviously comes with a billing arrangement.

The subscription model might allow users to keep up to 40 or 50 tracks a year, even if they later cancelled a subscription or changed devices.

As the old adage goes: "With all this ---- lying around, there has to be a horse here somewhere." In other words, there are new business models to be discovered that provide direct benefits to content owners, device manufacturers and access providers.

Over the long term, the only way viable business models will be constructed that support the building of fiber-to-home and mobile broadband networks, is when all the key value chain members also participate in the revenue chain. An uneasy relationship it will remain. But the relationships and models have to be created.

Otherwise, we won't get ubiquitous and capacious broadband upon which services and applications can be run.

U.S. 700 MHz Auction Now is Ended

No further details at the moment.

Consumer Electronics Spending Decelerates

The ChangeWave Alliance's latest survey shows a" sudden huge" pullback in consumer retail purchasing on electronics by U.S. consumers, the largest one since ChangeWave began measuring spending trends back in 2002.

The February 18-25 survey of 4,427 consumers looked at a range of popular gadgets in the consumer electronics industry, including digital cameras, iPods and video game consoles.

Only 19 percent of survey respondents say they'll spend more on electronics over the next 90 days compared to 33 percent who will spend less, an unprecedented sign of weakness in the consumer electronics space.

Broadband Users Generally Satisfied

U.S. consumers generally seem to be aware of the importance of bandwidth as a determinant of their Internet experiences, says Mike Paxton, In-Stat analyst. For the most part, they also seem satisfied with their current access speeds.

Anecdotal evidence suggests many consumers are aware there is a difference between theoretical bandwidth and the actual bandwidth they get when lots of other users are on the network at the same time.

For that reason, consumers increasingly are receptive to higher-bandwidth offers, In-Stat argues. Most consumers probably are not aware that, at peak load, the average bandwidth they may be able to use is as much as an order of magnitude less than the theoretical bandwidth.

That said, more than 83 percent of respondents to a recent In-Stat consumer survey, which included a speed measurement, said they either were "very satisfied" or "somewhat satisfied" with their current connection.

In large part, that finding is testament to generally enhanced access speed offerings by virtually all suppliers.

The survey of 700 users found an average downstream speed of 3.8 Mbps, while the average upstream speed is 980 kbps.

The average downstream fiber-to-home speed was 8.8 Mbps, while cable modem connections averaged 4.9 Mbps and DSL averaged 2.1 Mbps, In-Stat says. Those findings are generally congruent with research published by the Communications Workers of America in 2007.

The average monthly price for broadband service is a bit over $38.

High Latent Mobile Web Demand?

If iPhone users, and a recent study of smart phone users, are any indication, there is clear and vast potential for mobile Web applications, devices and services.

And that is despite the relatively low usage of mobile Web services at the moment. "It is amazing how unaware consumers are of what is, and what is not available" in mobile, Web and other forms of communications, says Elaine Warner, Compete.com analyst.

On the other hand, there is clear potential. “We asked smart phone users what was important to them and 68 percent said Web access was really important,” says Warner. Considering that just seven percent of respondents to the Pew study say they do so on a typical day, Compete’s findings suggest there is vast untapped potential.

One of the biggest struggles the mobile industry has is getting the user experience right, though Warner says the iPhone was a breakthrough.

“We did a study about iPhone and found the two things people want is surfing the Web and checking their personal email,” says Warner. “They still feel they can't do that easily.”

Along the way, application and service providers will have to adapt the context of mobile Web use. “You don't search for the same things you do on a PC as you do from a mobile handset,” says Warner.

“You don't want a Wikipedia page to be the top listing when you enter a search term, she says. “That’s not likely to be what you want.

More typically a user will want to find a place to get to, or something to buy.

Though “voice in your pocket or purse” was the initial “killer app,” sizable demand now exists in the “email in your pocket or purse, “music in your pocket or purse” and to a lesser extent “Web in your pocket or purse” user segments.

That few people have used the mobile Web up to this point is understandable. It has been a difficult experience, for the most part. And it may turn out that early iPhone users are particularly avid users of the Web.

But if Compete’s survey findings are any indication, there is pent-up demand for mobile Web access.

How Many Lines or VoIP Accounts?

Suppliers shipped an estimated 9.8 million VoIP subscriber feature server licenses for deployment in service provider networks, according to analysts at iLocus. Those licenses generated $177.4 million in revenue, and grew
34 percent, quarter over quarter.

The growth is due to high voice over broadband activity in Europe and among cable operators in North America. In Asia-Pacific VoBB growth is still confined to Japan mostly.

Of the 9.8 million VoIP subscriber licenses sold during 4Q07, licenses for hosted business phone system (hosted PBX or hosted Centrex or key system) lines account for about 1.2 million.

The remaining 8.6 million were mainly deployed for residential VoIP or switch replacement, iLocus says.

That suggests, at least for the short term, a belief that 12 percent of overall VoIP sales by service providers are of the hosted phone system sort.

Keep in mind that such data is not so granular as we might hope. In fact, even the reported penetration of landlines is less granular than one might think. If one looks at reported landline phone penetration, for example, there is a period between 2005 and 2007 where the installed base appears to oscillate wildly.

It appears that changes in the survey instrument are partly the reason. Government researchers now ask whether "any" phone service is available, specifying that mobiles count, where they used to ask whether a phone line was available. The government now makes a distinction between phones "in the living unit" and "available in the building" as well.

So it is likely we simply have reporting error in recent data. Over time that should correct. But the point is that even the official Federal Communications Commission data now have to be interpreted.

It's just another reminder that all our survey data should be considered indicative of trends rather than firm descriptions of physical reality.

Google IS Online Advertising

Though total U.S. ad revenue at 17 public companies increased nine percent in 2007, online revenues grew 28 percent, says Henry Blodget, Silicon Alley Insider author. Total ad revenue for the 17 firms was $58 billion, while online revenues were $18 billion.

Offline revenue grew about $1 billion while online grew $4 billion. Google got $2.7 billion of that total, while online ad revenue at Yahoo, Microsoft, and AOL grew $1.3 billion. In other words, says Blodget, Google captured twice as much revenue as its closest three competitors combined.

Google.com's U.S. revenue growth was more than twice as much the growth of ad revenue in all of the 13 offline media companies Blodget tracked.

More Online Video, More Managed P2P

Online video sites have delivered promising stats recently, says Compete.com analyst Aniya Zaozerskaya. Netflix’s WatchNow, which allows subscribers to any Netflix plan to watch full-length movies and TV episodes online from their collection, had 69 percent more people using the service this quarter as compared to last quarter.

Veoh.com, which allows users to view and share short YouTube-like videos as well as stream full-length TV show episodes, has grown from just under 1.5 million unique visitors one year ago to over six million in February 2008.

Hulu.com, a newer site offering both full-length movies and TV shows, including the most recent in-season episodes, also is gaining traction, she says.

Assuming peer-to-peer applications are deemed lawful, and therefore not to be blocked--and that seems a certainty--managed P2P services would seem to be poised for growth.

One reason P2P chews up so much bandwidth on service provider backbones is the unmanaged way P2P traditionally operates. Bits of content might be fetched from long distances when the same material actually resides on a user hard drive someplace local.

So far, it appears, managing P2P streams can reduce overall backbone network traffic by 60 percent or more, executives at Pando Networks and Verizon Communications say.

Network-aware versions of P2P that can fetch data from local sources rather than reaching far across the network, can help,in that regard.

103 Million HDTV Households

Analysts at Pike & Fischer predict that up to 103 million U.S. households will be paying their multichannel video provider for some form of HD service or rental equipment by the end of 2012. And while most analyst forecasts wind up being overly-aggressive, this projection is about as grounded as a forecast could be. Since more than 90 percent of U.S. households subscribe to cable, telco or satellite-delivered television service, and since the U.S. broadcasting system is moving to an all-HDTV format in 2009, it only makes sense that most people are going to be watching at least some HDTV from the moment of transition.

And while analog tiers of service will be offered for several years after the broadcast transition, most viewers are going to switch, fairly quickly. Cable operators, of course, now are saying they will voluntarily continue to simulcast analog local station feeds until 2012.

Keep in mind that the total number of television households in the U.S. market, including Alaska and Hawaii, is 111.4 million, according to Nielsen Media Research. So in predicting that 103 million U.S. homes will be paying for some form of HDTV, three years after the transition date, Pike & Fischer is making a simple observation that 93 percent of households will be on an HDTV-capable tier of some sort by the time U.S. cable operators will have switched off their off-air analog feeds in favor of the HDTV feeds provided by local broadcasters.

So there may still be some hold-outs in 2012. But, by and large, Pike & Fischer simply makes the point that most people will continue to buy a multichannel video service, and that by 2012, virtually all those providers will be selling HDTV programming widely available on the basic service tier.

Again, most analyst projections err on the side of excessive optimism. This isn't one of those cases.

FTTH is inevitable

No matter what posturing now occurs, cable operators and at&t someday will switch access platforms and adopt fiber-to-home as the standard wired access approach. For the sake of pleasing investors, who seem to hate investments in FTTH that are the only long-term hope for any wired access provider, lots of companies insist they do not presently need to do so, and they arguably are correct.

Other small independent providers in very-rural areas likewise will insist they cannot afford FTTH. That ultimately will be resolved either by new forms of rural or high-cost area subsidies, or by some new hybrid delivery platform using fixed wireless as the tail circuit.

None of that is relevant. Demand continues to increase, and at some point, the only sane choice for a fixed network that has to deliver a minimum of 100 Mbps worth of data bandwidth, not to mention video, is FTTH.

We might be four to eight years away from that point. The precise timing, though, isn't so important. No matter what executives may now believe, they ultimately will have to scrap hybrid fiber coax and fiber to the node, for competitive reasons. When wireless broadband starts to offer anything close to that sort of bandwidth, no wired network is going to be able to avoid upgrading.

That doesn't mean it is sound business practice to deploy platforms of such bandwidth today, in the mass market. The ramp up frankly is best handled on a gradual basis, as local competitive conditions dictate, to conserve capital for a time when the move is unavoidable, under conditions where there is little incremental revenue to be gotten.

But that won't always be the case. One way or another, service providers are going to discover and then create funding mechanisms that make FTTH a rational choice. Just because we can't predict in precise detail what those mechanisms will be is not the issue. Neither could cable industry executives have rationally explained in detail what all the new demand for video choices would be if capacity were upgraded.

Nor could wireless executives, 10 years ago, have presented a clear and compelling line of argument about why text messaging, email or ringtones or music would be generating significant or growing amounts of revenue.

Though there now is an investor revulsion to financing "build it and they will come schemes," in fact that precisely is the history of innovation in the communications and entertainment business. When given choices, developers have responded and consumers have bought.

That doesn't mean every new application, or even most, are going to succeed in the mass market. The point is that we never are very good at figuring out what developers will dream up, and what consumers will flock to.

It is clear that supply creates its own demand, ultimately.

Nearly-Ubiquitous Broadband

Nearly 33 million US households will have broadband services with speeds of 10 Mbps or higher by 2012, up from 5.7 million at the end of 2007, according to Parks Associates. That's not the most important prediction, though.

Parks Associates also forecasts that 32.5 million U.S. consumers will have at least 10 Mbps broadband access service by 2012. Even that is not the most important prediction Parks makes.

No, the most significant prediction is that 75 percent of U.S. households will subscribe to broadband services by 2012. And that is significant because it will make broadband a fundamental service purchased by U.S. households, on the order of cable TV or the place once held by wired voice services.

It is worth noting that very few services ever have reached that level of penetration. Cable TV, mobile phones and wired phones alone could have claimed such distinction. By 2012, if Parks Associates is correct, only for the fourth time in history will any service have achieved such near-ubiquitous penetration.

Some day, and probably not by 2012, we might be able to make a similar claim about wireless broadband as well. For the moment, though, it is noteworthy that broadband seems destined to reach such broad penetration. Lots of services exist, or have existed, without ever getting nearly universal acceptance.

Compared to that level of acceptance, the subsidiary question--how fast is fast enough--while not trivial, is not fundamental. Access speeds have been increasing on a fairly steady basis, much as storage capacity on PCs, mobile devices and other devices has been increasing, and much as cable TV or satellite networks steadily have increased capacity and channels over time.

The average download speed of a US broadband connection is currently 3.8 Mbps, while the average upload speed is 980 Kbps, according to In-Stat researchers. But there was a time when a typical cable TV network delivered just three channels. Then capacity went to 12 channels; then to 25; 40; 60; then 66; then more than 80; then 115; then, with digital, hundreds of channels. Ad-free formats, then pay-per-view, then on-demand programming developed. Music services also were introduced in the 1980s, though not to notable success.

Over time, mobile services have added text, Web access, email, audio and video services. And there have been continual improvements on the value side as well, as costs for calling have dropped dramatically. Even legacy wired voice services have been upgraded in important ways.

Party lines were replaced by private lines, and enhanced services expanded particularly when digital switches were substituted for analog switches. Now, using VoIP, all sorts of enhancements beyond what are known as CLASS features are possible.

The point is that penetration matters. Given high penetration, continual evolution of features and value almost are inevitable.