iProvo Sells Network to Broadweave Networks

Provo, Utah's citywide fiberoptic network has been sold to Broadweave Networks, a local company that hopes to make a business out of triple-play services where Provo had not been able to do so. The network, called iProvo, was the largest municipally-owned fiber-to-the-premises network in the United States, reaching all 36,000 residences and businesses within the city.

Up to this point, Broadweave has served the Traverse Mountain planned community of 8,000 homes and 4.5 million square feet of office and retail space across 3,000 acres in Utah's technology belt. So the acquisition gives Broadweave about four times more homes passed than it currently has access to.

Broadweave will purchase the fiberoptic network for $40.6 million, which is enough to retire outstanding bonds incurred by Provo to build the system.

Under the terms of the deal, which is subject to municipal council approval, the city retains a license to use the network to connect city buildings, schools, and power infrastructure. Broadweave will operate as a retail provider, rather than as a wholesale provider of transport to third parties and says it will put more emphasis on services aimed at business customers.

One might draw several conclusions from iProvo's experience so far. Some will argue that overbuilders are going to have a tough time competing against both cable and telephone companies offering triple play services.

Others will say the sale shows municipalities really should not be running communication networks. Some will point to other fiber access networks in the Salt Lake City and Provo regions and argue that neither wholesale nor retail strategies have worked well.

The issue is what Broadweave's new management thinks it really can do to improve financial performance. One of the salient features of most networks serving entire communities is that there is an 80/20 rule for revenue. A small number of neighborhoods actually produce most of the revenue.

In fact, some studies suggest that as few as five to seven percent of neighborhoods of 500 homes or so produce half the revenue created by an entire citywide network. And the same sort of thing is true for business revenue as well. So it might not be so easy to boost revenues.

Broadweave will gain some scale benefits, though the difference between 8,000 and 44,000 might not be as large as you might think. Programming contracts won't be noticeably affected. There might still be a need for two headends. Installers can only do so many jobs a day. Some marketing and other overhead can be spread over a wider base of customers, of course.

Still, operating cost savings are unlikely to change the financial picture all that much. Only significant new sales volume is going to change the current iProvo financial model.

$10 Billion Annual Mobile Enterprise App Spending

More than 90 percent of enterprise mobile applications spending is now focused on mobile email and messaging, but the percentage of spending on mobilizing other critical enterprise applications -- many of them broadband-optimized -- will increase rapidly over the next five years, according to Pike & Fischer. The research house projects 2012 spending on mobilizing such applications as customer-relations management and sales-force automation will exceed $10 billion annually.

Add Jangl to the Dead Company List

Jangl, the Internet phone company is being closed down, after efforts to find a buyer failed. Most of the team are joining Jajah.

What Cable, Google Get from Clearwire, Sprint

Google and several cable operators got some goodies in addition to equity in the new Clearwire national WiMAX network. And the advantages do not come from WiMAX, but from the Sprint 3G network.

Briefly, Google apps (YouTube, Google Maps, Gmail) get premiere placement on some Sprint devices, while Google Web, local search and location information become the default options for Sprint data customers.

The cable operators become resellers of Sprint 3G services, including voice. So now the three operators will be able to construct quadruple play services. That is the more important development, as interesting as the Clearwire resale agreement is. In the near term, cable operators need a viable mobile voice option more than they need a future mobile broadband option.

To be sure, Google and the new cable investors will become resellers of the WiMAX network as well.

Google will partner with the new Clearwire in the development of Internet services, advertising services and applications for mobile WiMAX devices. In addition, Google will be the search provider and a preferred provider of other applications for the new Clearwire’s retail product. As an open network, anybody can "partner" with Clearwire to develop applications or supply devices. But Google is a "preferred" and "default" provider, which historically has real value in the mobile arena.

The new Clearwire will support Google’s Android operating system software in its future voice and data devices that it provides to its retail customers.

But Sprint and Google have also entered into an agreement whereby Google will become the default provider of web and local search services, both of which will be enabled with location information, for Sprint, as well.

Sprint will also preload several Google services, including Google Maps for mobile, Gmail and YouTube, on select mobile phones and provide easier access to other Google services.

Comcast, Time Warner Cable, and Bright House Networks will be resellers of Clearwire’s mobile WiMAX service. More important, over the near term, all three cable operators now will become wholesale retailers of all Sprint 3G services, including voice services.

Clearwire is getting the attention. But Sprint 3G will be where the action is.

Qwest 12 Mbps, 20 Mbps is Resonating

Of the 90,000 the net additions Qwest had for high-speed access in the most recent quarter, 13,000 (14 percent) of them were related to the new fiber-to-the-node build-out. You might think, "so what?"

Those customers were gotten in just 30 days, in the last month of the quarter, so it appears there is strong demand for a higher-speed (12 Mbps or 20 Mbps) product.

Qwest also appears to be readying an "over the top" video on demand service in conjunction with DirecTV, which already supplies Qwest linear entertainment video services. That would make perfect sense for both companies. DirecTV needs more bandwidth on the ground to serve up an effective VOD service, and Qwest has the bandwidth.

Qwest also has been an effective retail partner for DirecTV services, so the any new offer would make sense to consumers who already buy DirecTV from Qwest.

"We are hopeful to take advantage of video on demand with our DirecTV," Mueller says. Qwest is "preparing for the natural synergies between their video on demand product to launch this year and our investment in broadband capabilities."

And high-speed access prices will rise. "We will do price increases, that is our plan," says CEO Ed Mueller. The logical path is to create higher-speed tiers and then charge more for them. People understand that sort of packaging.

Qwest Report "Steady" Results

Under the current challenging circumstances, "typical" or "normal" performance is a good thing. And Qwest Communications International reported "steady operating results" for the first quarter of 2008. Adjusted EBITDA totaled $1.14 billion with adjusted EBITDA margins of 33.6 percent as data, Internet and video revenue grew by nine percent compared to the first quarter of 2007.

Broadband subscriptions were up 17 percent year-over-year while video subscribers were up 42 percent, year over year. Total data, Internet and video services revenue now represents nearly 40 percent of operating revenue.

The business market segment reported revenue of $995 million in the first quarter, up 3.1 percent year over year as data and Internet revenue grew 6.9 percent. Data and Internet revenue grew 29 percent over the same period a year ago.

Mass markets revenue was $1.48 billion in the quarter, a 0.7 percent decline compared to the prior year. Data, Internet and video revenue growth of 20.7 percent was offset by declines in both voice and wireless services.

Consumer average revenue per unit increased 7.8 percent to $55 from $51 a year ago. Qwest Broadband subscribers increased 90,000 in the quarter to reach 2.7 million, up 17.2 percent from a year ago.

Wholesale Markets reported revenue of $841 million in the quarter, down seven percent year over year largely due to long-distance revenue pricing and supplier consolidation. Data and Internet revenue was up three percent year over year.

Vodafone U.K. Lowers Data Barriers

Vodafone UK has created a new plan that aims to remove the barrier to use of mobile email and mobile Web access, allowing 500 megabytes of data use each month on plans costing GBP 25 or more.

Postpaid customers who take a GBP 40 or higher package also will be offered a choice of unlimited text messages, unlimited landline calls or unlimited Vodafone to Vodafone calls, as well.
This move essentially sweeps away the last remaining cost barriers to entry for both mobile email and the mobile Internet, helping Vodafone UK to make mobile data more applicable to the mass market, says Emma Mohr-McClune, Current Analysis principal analyst.

The new plan will encourage more users to experiment with the mobile Internet. For customers who do not want the mobile data feature, Vodafone allows a monthly discount of GBP 5.

Standalone mobile data pricing currently runs about GBP 7.50 a month, Mohr-McClune says. "This is the first time" that a U.K. operator has offered bundled mobile Web access and email across its entire pay monthly portfolio, starting at GBP 25 per month.

French Broadband at 94% of Internet Users

One of the enduring claims observers make about the state of U.S. broadband is how woeful it is compared to other nations around the world. Consider France, which deregulated its telecommunications market in 2004, leading to heavy competition. In fact, broadband now is nearly synonymous with Internet use.

In March 2008, 93.5 percent of at-home Internet users in France enjoyed a broadband connection to the Internet, down slightly from the 94.2 percent who did so in the previous year. That's significant. The primary reason consumers buy broadband access is to use the Internet. Someday that will change, but right now broadband really is a way PCs can connect to the Internet.

So 94 percent of all home users of the Internet use broadband to do so. That's serious penetration. So note that about 52.4 percent of French homes had a broadband connection in 2007. That's a bit higher than U.S. broadband penetration, which is just about at 50 percent.

The point is that France has been highly successful at getting broadband adopted by Internet users. Fully 94 percent of all Internet users have broadband.

But note that household penetration is about 52 percent. There seem to be more dial-up users in the U.S. market than in France. But the point is worth noting: household penetration might not be the best way to measure penetration.

A household that doesn't use the Internet is hardly a candidate for broadband aimed at Internet users. The more relevant measure is how far broadband has penetrated homes where the Internet actually is used.

Apple iPhone Sales to Blow Through Roof?

As reported by Silicon Alley Insider, RBC analyst Mark Abramsky thinks Apple will sell 14 million phones this year, up 40 percent from his previous prediction of 10 million and more than eight times the 1.7 million phones the company sold in the first three months of the year. He also thinks Apple will sell 24 million iPhones in 2009.

The 3G model will help. So will new carrier deals in Europe and Asia, broader consumer interest thanks to Apple's forthcoming apps platform, and broader corporate interest.

He also thinks Apple might drop or reduce exclusivity requirements in some markets. This would let people buy iPhones without being forced to use Apple's hand-picked carrier partner.

He also thinks Apple will allow carriers to subsidize pricing, and also will allow sales of unlocked phones.

T-Mobile FINALLY Launches 3G

T-Mobile USA has taken the first commercial step in the roll-out of its third-generation (3G) wireless network, launching its UMTS/HSDPA network in New York City. Also, contrary to some early reports suggesting only voice service might be available immediately, the network will be data-enabled from the start.

T-Mobile plans to continue the rollout of its 3G network across major metropolitan markets through the year. By year's end, T-Mobile expects its high-speed data network will be available in those cities where a majority of its subscribers currently use data services.

Yay!

Femtocells: Technology or Business?

ABI Research projects that 100,000 femtocell units wll ship in 2008. Volume deployments won't begin until 2010, when $100 price points will be possible, in volume. The other issue is whether femtocells are embedded in other widely-used consumer gear, such as Wi-Fi routers.

The really critical issue will be whether initial carrier deployments are supported by robust business models and service plans that extend beyond pure fixed-mobile substitution goals,” says ABI Research vice president and research director Stuart Carlaw.

The issue there is that some innovations are very useful and widely deployed, but don't necessarily create a business model. Wi-Fi is the best example of that. So one has to wonder whether femtocells will wind up being a very-useful technology--reducing service provider investment in macrocells, for example--or whether a new revenue stream of some sort can be created.

The most obvious example would be enhanced ability fo wireless providers to compete effectively in the wireline substitution business, where the new revenue stream is cannibalization of fixed line subscriptions. The other obvious issue is ability to sell voice-optimized fixed line broadband subscriptions.

Enterprise Mashups Coming

Mashup tools have so far been used mostly for simple enterprise applications like adding geographical information--typically Google Maps--to corporate data. But that's changing. IBM, for example, has introduced two offerings for building mashups that pull together data from multiple data bases and applications.

One of the tools is aimed at non-technical users while the other development is a mashup environment. WebSphere sMash supports dynamic scripting languages and widget-development tools. IBM Mashup Center allows business users to drag and drop components from local, enterprise and Web sources to create new applications.

JackBe Corp. and Kapow Technologies also have added support for Excel to existing mashup tools.

JackBe uses a plug-in is connected to a spreadsheet so that whenever data is changed, the Presto server updates the data, allowing the most-current version to be consumed by other applications.

Kapow sells an on-demand enterprise mashup service that allows companies to incorporate data from various Web sites and services directly into Excel spreadsheets.

Same DRM for Windows, Adobe, Silverlight: Widevine

Widevine Technologies has announced immediate availability of Widevine Cypher to protect content delivered to Microsoft Windows Media Player versions 9, 10, 11 and Silverlight versions 1 and 2.

The new capability means content now can be securely delivered in Windows Media, Silverlight and Adobe Flash environments using a single content protection solution. The innovation is an example of lots of the important "wrap around" features that will be necessary if digital content businesses are to be built with any scale.

Internet Use Now Totally Mainstream

More than a third of U.S. consumers born before 1946 (seniors) use the Internet, according to Pew Internet and American Life Project. Pew also said that more than half of the younger members of this group (ages 62 to 71) are online.

Older users also use the Internet for the same reasons younger users do: to stay in touch with other people. Nearly six out of 10 U.S. Internet users 62 and older use search engines. Among other activities, almost one quarter of the group banks or pays bills online and one fifth are video gamers.

Multichannel video, PCs, game consoles, mobile voice and use of the Internet now are totally mainstream.

Use of digital video recorders is nearing that point, as are text messaging and MP3 players.

But there's still a ways to go with other innovations such as VoIP and mobile broadband. Unified communications is no where close to being mainstream. It typically takes three to seven years for a successful mass market digital innovation to reach 50 percent penetration of households.

The big exception is high definition television, which will reach--and surpass--that status virtually overnight as a result of government mandate in February 2009.

As for the thousands of other bleeding-edge applications, most will fail to gain widespread mass market adoption. That's always the case for digital consumer electronics.

67% Growth in VoIP Server Licenses

Whatever instability may be coming in some parts of the U.S. VoIP market, global growth--especially in Europe--is robust. The most recent analysis by iLocus shows 67 percent annual growth in VoIP server licenses sold globally, with traffic up 35 percent.

For the second consecutive year, Europe outpaced rest of the world in VoIP penetration. All major European operators--whether wireline or wireless--have a VoIP offering in place and have announced that they will be deploying IMS platforms.

The difference between deployments in the U.S. and European markets is the attitude and actions of incumbents. In the U.S. market, incumbents have not yet decided to make a major effort to sell VoIP; in Europe that already has happened. Because of carrier reluctance, challengers, especially the cable companies, have made significant market share gains.

What happened in Europe will happen in the U.S. market, however. At some point, AT&T and Verizon will decide to push VoIP aggressively, and the dynamics of the market will shift as much as they have in the fdial-up and broadband access markets, which initially were dominated by independent providers.

But fixed line replacement isn't the only place to watch for change. VoIP as a mobility and Web or enterprise application is early in its development right now. Though it might seem inconceivable, revenues from those sorts of applications will one day be significant. If that is not apparent it is simply because applications and business models in the mobility and Web and software spaces are seminal. Even Skype, as popular as it is, only represents two percent or so of global long-distance traffic, for example. So it will take some time before anybody notices.

Still, note that nearly 25 percent of mobile virtual network operators--wireless providers that do not own their own networks--already offering or testing mobile VoIP. By 2010 more than two thirds say they will have a mobile VoIP offering in place.