AT&T Wireless Data Revenues up 52%

AT&T wireless data revenues grew 52 percent compared to the same quarter last year, to $2.5 billion. If the U.S. market is anything like the European market, a large portion of that growth now comes from sales of wireless data cards for PCs, though no doubt the iPhone has kicked mobile Internet and mobile email revenues into a higher orbit as well.

Wireless Internet access revenues more than doubled in the latest quarter, compared to the same quarter of 2007. Mobile email and messaging delivered greater than 50 percent revenue growth, while text messaging volumes tripled, compared to the same quarter last year.

Multimedia message volumes increased more than 170 percent.

At the end of the second quarter, 18 percent of AT&T’s postpaid wireless subscribers had smart phones, up from eight percent one year earlier. These subscribers have average revenue per user metrics roughly double the typical level.

In the mobility segment, wireless data revenue growth now is the key, as IPTV and video are on the wired access side of the business.

Web TV for FiOS?

Verizon currently is currently beta testing Web video on their set-top boxes, using content provided by Veoh, Blip.tv, Break.com, and YouTube.

Sites are indexed on a regular basis and when a video is selected from the DVR, the PC software automatically transcodes and streams content on the fly. Media Manager software also makes possible transmission of any video podcast to a user DVR as well.

In principle, Verizon ought to be able to add Real Simple Syndication feeds to its DVR.

These features will be offered as part of Verizon’s top tier DVR package, perhaps later this year or early in 2009. That package also is likely to include PC photo sharing and multi-room DVR playback.

Consumers Don't Might Ads, If Content is Professional

Ipsos MediaCT says most consumers would find it “reasonable” for advertising to be included in the free digital distribution of full-length TV shows and movies, while around two-thirds say the inclusion of advertising would be reasonable with free access to music videos, short news or sports clips.

There are some major exceptions, however. “As might be expected, digital video consumers generally find it more acceptable to have advertising included within longer, professionally produced video offerings such as full-length movies or TV shows, should this content be available for free online," says Adam Wright, Director at Ipsos MediaCT.

"Fewer are ready to accept this ‘price of admission’ for shorter-form content or less-professional polished content," he adds.

Still, for most video content types, the majority of these consumers find the trade-off between free video content with advertising to be a fair value proposition.”

The one content type that may be the exception is amateur video content. Just over half (52 percent) of consumers age 12+ who have downloaded or streamed a video online say they would find it “not reasonable” to have advertising embedded within free amateur or homemade video offerings online.

Gen Y First Native Online Generation

Forrester Research says Gen Xers use technology when it supports a lifestyle need, while technology is so deeply embedded into everything Gen Yers do that they are truly the first native online population.

"Gen Y is the audience that most companies are struggling to understand right now because it's key to their future revenue growth," says Charles Golvin, principal analyst at Forrester Research.

Although Gen Y,18- to 28-year-olds, represent only 38 million U.S. adults, it sets the pace for technology adoption. Nine in 10 Gen Yers own a PC, and 82 percent own a mobile phone. But it's technology use that sets this generation apart: Gen Y spends more time online — for leisure or work — than watching TV.

Seventy-two percent of Gen Y mobile phone owners send or receive text messages, and 42 percent of online Gen Yers watch Internet video at least monthly.

In contrast, Gen X, which is comprised of 29- to 42-year-olds — 63 million US adults — uses technology when it intersects with a personal need or fulfills a desire. For example, 32 percent of Gen X households own an HDTV, and 29 percent have a DVR.

In the past three months, 69 percent of online Gen Xers shopped online, and 65 percent banked online, higher percentages than any other generation. Gen X is also ramping up its Internet and mobile activities, including reading blogs (21 percent of online Gen Xers do it at least monthly, up from 15 percent in 2007) and texting (61 percent of Gen X mobile subscribers do it today, up from 49 percent in 2007).

Most of the Money Still is in Legacy Media

PricewaterhouseCoopers reported in its Global Entertainment and Media Outlook that as of 2007, digital and mobile distribution made up only five percent of total spending on entertainment and media.

PWC projected that this percentage will increase to 11 percent by 2012. No doubt, digital media is growing, in some cases, growing fast.

But even with momentum, 11 percent is still a small percentage of the $2.2 trillion annual spending on media and entertainment, especially when market share is held by a wildly fragmented cast of contenders.

Sometimes, it makes sense for large providers to place bets on "legacy" video even when everybody acknowledges that the market is changing. That doesn't mean wisdom is not found in spreading a number of bets on legacy and emerging media. It does mean that a rational investor with the ability to attack the existing revenue streams would be rational to do so.

A small percentage of a big number is a big number. A small percentage of a small number is, well, a smallish number. Large companies do not have the luxury of chasing small number markets. Small companies can, and do.

If recent AT&T quarterly results are an indication, it will ultimately prove to have been wise to invest heavily in "legacy" video, despite the coming shift of much video to alternate delivery methods. The issue right now is that the emerging markets still represent small amounts of revenue.

That will change over time as revenue at stake shifts and the scale economics emerge. At that point, one would have to expect consolidation of the market to create some large distributors able to capitalize on the scale economics.

That does not mean that, in the interim, large returns from legacy services should be ignored.

Vonage U.K. Launches Lower-Cost Plans for North America Calling

Vonage U.K. has launched two new "value" call packages for consumers concerned about their phone bills, as well as a new £6.99 plandesigned for the high percentage of Vonage consumers who call North America. The two new call plans offer Vonage’s lowest ever tariffs and are priced at £5.99 per month for unlimited calls to the U.K. and £6.99 per month for unlimited calls to the U.K., United States and Canada.

The £6.99 plan also includes an option that for £1 extra a month providing unlimited calls to mobile phones in the United States and Canada.

Vonage’s £7.99, £14.99 and £18.99 plans incorporating up to 45 countries remain unchanged.

Wireless Powers AT&T Results

As expected, AT&T wireless services revenues excluding handset and accessory sales, were up 14.5 percent to $10.9 billion for the quarter. Total wireless revenues were up 15.8 percent to $12 billion.

The company also continued to grow its AT&T U-verse TV subscriptions. AT&T had a second-quarter net gain of 170,000 customers for a total of 549,000 subscriptions in service. AT&T has a goal of connecting more than 1 million subscribers by year’s end.

Text Messaging Still Dominates Mobile Data Use

Voice continues to be the dominant application most mobile customers use on a daily basis. Text messaging remains the dominant data application, according to researchers at the Yankee Group.

Teenagers, as you would expect, are the one demographic that uses text just a bit more than voice. About 63 percent of teen users surveyed say they use text on a daily basis, while voice is used daily by 61 percent of users in that age group.

Growth rates for mobile Internet access, mobile video and mobile email are strong, but are growing from a relatively smaller base of users.

Mobile email use grew 71 percent between 2006 and 2007, for example, while mobile Internet use grew 57 percent.

Satellite Broadband Penetration Now a Bit over 10%

Satellite broadband now is the growth focus for providers such as Hughes Network Systems and WildBlue, and the stated opportunity often is said to be rural users as well as residents of suburban or urban areas not yet wired either for digital subscriber line or cable modem services.

According to data from the Pew Internet & American Life Project, that might not be completely correct. Though 16 percent of respondents to a recent Pew survey reported they have satellite broadband, so did 10 percent of urban users as well as 10 percent of suburban users.

The usual assumption is that the remaining urban and suburban areas ultimately will be wired, with potential loss of nearly all the urban and suburban users, depending on the definition of "suburban" one uses.

In the separate video entertainment business, one can make a reasonable argument that availability of the wired alternatives is less an issue, as the satellite providers compete not only on "availability" but on image quality and program diversity.

Satellite broadband providers do not have that opportunity, as satellite generally offers speeds slower than DSL and cable modem services, for slightly to meaningfully higher prices. Satellite services clearly win when there is no other alternative but dial-up service.

Nor does satellite fare as well on price in wired areas. Both cable modem and DSL prices have dropped since 2004, Pew reports. The price drops arguably have been highest for "value" priced packages, as new "premium" services featuring more speed continually have been added at the high end.

Still, Pew researchers report that 62 percent of surveyed dial-up users say they "do not want" broadband. Overall, the remaining pool of dial-up users iucludes just about 36 percent of users who say they are willing to switch to broadband. One expects the base of resisters will continue to dwindle over time.

AT&T to Change Broadband Marketing Language

At the Federal Communications Commission Pittsburgh broadband hearing, AT&T Senior Federal Regulatory Vice President Robert Quinn is reported by Broadband Reports to have said the company would in the future stop advertising speeds "up to" a specified rate, and would instead "strive to provide service within the speed tier purchased by the customer."

When AT&T finds it is not providing service within the ordered speed tier, AT&T will take action either to bring the customer's service within the ordered tier or give the customer an option to move to a different tier," he said.

Today, customers can order service "up to 7Mbps" tier, while plant conditions limit them to lower real-world bandwidth. Under the new scheme, customers will be offered the expected speed the plant supports, and then supplied with the higher speeds actually possible on their chosen plans.

AT&T also says it will supply customers information about how much bandwidth various applications consume, so they can choose the right plans. To Broadband Reports, that sounds like a precursor to some form of usage-based billing. It may well be. AT&T has been pretty clear that usage will play a bigger role in future access plans. That is an issue many will argue about.

But giving users a better understanding of their bandwidth requirements is a good thing, as is the policy of selling actual service that matches the marketing claims.

Expect Continued Line Losses as Telcos Report Earnings

In the 12-month period between March 2007 and March 2008 U.S. telcos lost 8,647,000 access lines while cable companies added 4,508,400. That suggests the balance of lost telco lines either wound up in the "wireless" category, taken by independent VoIP providers or were part of business line contraction made possible, on the user side, by IP and broadband technologies that provide voice services over a broadband connection of some sort.

It is quite hard to avoid the conclusion that the lost lines taken by cable companies were solely due to "lower price," since cable digital voice normally has no new IP features, is provisioned in a "whole house" manner that mimics POTS, and differs mostly in its price, not its quality.

The drivers might be more complicated in the other cases. VoIP customers sometimes buy based on price, at other times because of the new IP features. Enterprise or business customers often simply substitute voice services delivered over broadband for "voice grade equivalents."

Make no mistake, telcos are behaving deliberately. They simply seem to conclude that losing lines is preferable to across-the-board price reductions. It wouldn't be the first time industry participants have decided that harvesting a declining business is the best course of action.

So long as that continues to be the case, there seems little prospect that the line losses will abate. That being the case, the metrics to watch for are how well broadband-based revenue streams are building. Wireless still will be a bright spot, of course. But telco wired network performance is all about broadband revenues.

Voice simply is being harvested.

Google Maps Adds Walking Directions

Starting today, July 22, 2008, you can tell Google Maps that you want walking directions, and Google will try to find you a route that's direct, flat, and uses pedestrian pathways when we know about them, says the Google Lat Long blog. Just get directions as you normally would, for distances of 10 km or less.

As is usual for a "perpetual beta," there are some refinements Google wants to make. Right now, walking directions work well for short trips in urban areas, but Google says it does not presently always know if a street has a sidewalk, or if there's actually a special pedestrian bridge for crossing a busy street. Or for those of you navigating certain parts of Chicago's downtown loop, whether there are elevated roadways in your path that have to be navigated.

Google says it is working on ways to improve those sorts of features. Very useful, though, for those of you who travel and will be walking to a destination instead of driving.

Where Enterprises Buy Internet Access

Enterprises buy Internet access where you would expect: mostly from larger service providers. About half of all buying is from the former Regional Bell Operating Companies and Sprint.

Level 3 Communications, TW Telecom and Savvis have notable shares as well. About 37 percent of ISP access services are bought from a variety of other service providers, say reseachers at BackChannel.

More Use of Open Source Mobile Web Browsers

It might not be the case that control of a mobile browser necessarily means control of the applications environment. It might, though, mean substantial upside in terms of software customization and enhancement of user experience. So mobile device manufacturers seem to be focusing on use of open-source browser platforms as a way to leverage creation of other applications that can lead to differentiation of user experience.

As consumers increasingly surf the Web on their mobile phones, handset vendors are looking toward open-source browsers such as WebKit – the browser engine at the heart of the iPhone’s Safari browser – as a way to bring it to them. However, despite growing interest in WebKit and Gecko (the engine for the Mozilla Corporation Firefox browser), commercial browser vendors such as Opera and ACCESS continue to see growth in their businesses.

According to ABI Research, overall growth in the mobile browser category will lead to a total pre-installed revenue of $492 million by 2013, driven by the trends of more complex HTML-based browser integration.

“Device manufacturers are interested in open-source solutions where there is a desire for increased control of their software footprint, and where they can bring internal programming resources to bear,” says research director Michael Wolf. “

Open-source offerings such as WebKit are experiencing adoption by vendors such as Apple, Nokia, and others. Google made WebKit its core browser and Web-rendering engine for the Android platform; and application framework vendors such as Trolltech have integrated WebKit into their development framework. Mozilla also continues to develop its version of mobile Firefox, and Nokia has integrated a Gecko-based browser on its N800 Internet tablet.

More Evidence of Cloud Computing, SaaS Trends

Coghead, which provides a platform for authoring applications that are "mashups" added to other existing business apps, now is selling its services on a usage-based basis, in addition to a per-user basis, Clint Boulton, eWeek staff writer, notes. That change allowsCoghead to price in a way more attractive for lighter users, and using a model similar to Salesforce.com, the popular application sold as a service.

Coghead CEO Paul McNamara saysCoghead, to date, has charged per user—$49 per month for five users as a base plan—regardless of how much users were using its applications. That worked well for active users but not so well for infrequent users.

Coghead will continue to offer per-user pricing plans for full access to Coghead applications.

Coghead hopes the new pricing will help keep its current customers from jumping ship to Salesforce.com, Bungee Labs or Google App Engine, while luring new users with the flexibility options.

The changes illustrate the growing importance of business-oriented software sold as a service and the simultaneous use of utility computing "in the cloud" to create and deliver the services.