Growth Anomalies: Trend or Blip?

It is way too early to determine an actual trend, but there have been some anomalies this quarter. Dish Network, Cogent Communications and Verizon experienced what appear to be "first ever" declines in traffic or customer additions. If market share shifts are all that is involved, that's one thing. If something else is going on, that might be more worrisome.

It's one thing for market share to shift among competitors in a given segment. It would be quite something else again if aggregate demand in a market is slowing. And that might be happening. It just is too early to say.

Cogent Communications, for example, experienced a first-time, three orders of magnitude shift in traffic growth for the months of April and May. Where Cogent traditionally has seen growth rates over the past five years of about 120 percent a quarter, it saw in the second quarter negative growth of one percent.

Cogent CEO Dave Schaeffer says the industry might now be at a point where traffic no longer can be driven by either broadband access penetration growth or even faster access speeds.

"We’ve seen a proliferation of broadband connectivity where we now have almost 80 percent broadband penetration in the Western world," says Dave Schaeffer, Cogent CEO. Line rates on those mass mile connections have increased to close to five megabits of download speed which is sufficient for most applications particularly video"

"You’re not going to get an uplift from more broadband penetration or greater download speed," he says. "What you need are more applications that consumers want to use more and more."

"Many applications that people point to could migrate to the Internet or increase and not materially move the needle because the base is large," he says. So what about video? Sure, video is driving traffic, he says.

There are applications that will drive growth and we’ve been pretty clear that this is really video we see that with a number of customers and we see that trend continuing. "But we have not seen the massive migration of video consumption over the Internet, he says.

"Today video is consumed about 4.5 minutes a day on the Internet and television, which is traditionally delivered by a broadcast satellite, cable or DVD, is consumed 4.5 hours a day," Schaeffer says. Until that viewership pattern changes, "we will see slower growth," he adds.

"The Internet is not going to decelerate, it’s not going to go away but it is going to be a bit lumpy in the way in which it reaccelerates," he says.

There were some anamolies in the data this quarter. It bears watching.

Email Outages: Gmail and Otherwise

What are the odds? On the same day that Gmail has a major outage, so does our company email server. For this particular problem, redundant and diverse access network connections, devices and carriers do not help. Hazards of connected life....

T-Mobile @Home Might be Getting Some Traction

T-Mobile's site for @Home, the dual-mode service allowing use of the home broadband access service as the connection for T-Mobile mobile service, was the fastest-growing Web site in the month of July, growing at a 4447 percent rate, according to Compete.

It looks like T-Mobile's @Home service is getting some interest.

More Wireless than Wired Broadband Accounts

Some observers think wireless broadband accounts will outnumber wired broadband accounts at some point.

If you assume a significant percentage of wireless subscriptions are of the broadband variety, that is possible. If there are about 350 million wired broadband lines, then about 19 percent of wired lines are of the broadband variety. If that ultimately grows to about half of all lines in service, then there might be a billion or so wired broadband lines in service.

If just 30 percent of the world's wireless accounts are broadband, then there will be more than 1.5 billion wireless broadband accounts in service at that point.

In 2007, third generation and fourth generation wireless network subscriptions grew 94 percent. By the end of 2012, 3G/4G subscriptions are expected to rise to 1.4 billion, say researchers at In-Stat.

CableVision Passes 25% Residential Voice Share

CableVision Systems Corp. now finds that more than 37 percent of its customers buy a voice product. If CableVision has 68 percent penetration of homes in its market, that means it has gotten more than 25 percent share of the voice market.

20 Mbps Services Get Traction in U.K.

Virgin Media's 20-Mbps U.K. broadband service seems to be seeing strong consumer interest. Over the last 12 months, Virgin Media has seen an 82 percent increase in the number of subscribers taking the 20 Mbps service, up to this point the fastest tier of service available, though Virgin Media now is adding a 50 Mbps service as well. About 9.3 percent of Virgin Media's broadband access subscribers buy the 20 Mbps service. Virgin Media also has found increasing numbers of customers upgrading from 2 Mbps to 10 Mbps levels of service.

Search Emerging as Internet's Second Killer App

The percentage of Internet users who use search engines on a typical day has been steadily rising from about one third of all users in 2002 to a new high of just under one half (49 percent), say researchers at the Pew Internet & American Life Project. To the extent that email has been the closest thing to an Internet killer app, search is emerging as the second.

The number of those using a search engine on a typical day is pulling ever closer to the 60 percent of Internet users who use email on a typical day. The percentage of internet users who search on a typical day grew 69 percent from January 2002 to May 2008.

During the same six-year time period, the use of email on a typical day rose from 52 percent to 60 percent, for a growth rate of just 15 percent.

3:1 Margin of Mobile to Fixed Lines Globally

There now are three times more mobile subscribers than access line subscribers worldwide in 2007 (3.3 billion vs. 1.1 billion), say researchers at Infonetics Research. The firm also expects continued strong growth in mobile subscribers, mainly driven by basic voice service needs in BRIC countries (Brazil, Russia, India, and China).

The number of mobile subscribers jumped 31 percent in 2007 over 2006, while access line subscribers declined five percent.

The number of worldwide mobile subscribers will reach 5.2 billion by 2011, Infonetics further suggest, while mobile broadband subscribers grow at a 104 percent compound annual growth rate from 2007 to 2011. At that point, there will be one cellular mobile broadband subscriber for every four wireline broadband subscribers.

Free Content Needed to Prime the Pump

Since consumers are not sold on mobile video services, mobile service providers should try offering users free content to prime demand, say researchers at Parks Associates.

While nearly one third of U.S. households have a video-capable mobile phone, operators are struggling to find an audience for their mobile video services, according to John Barrett, Parks Associates research director.

Most consumers with a video-capable mobile phone never have used the video features, Parks Associates finds. About 56 percent never have watched a video clip using a mobile phone, Barrett notes

“Buy before you try is always a tough sell,” says Barrett. "Many consumers are hesitant to pay for a new, unfamiliar service, but they will remain unfamiliar with the service until they or someone they know uses it.”

U.K. Broadband Saturating

In the U.K. market, as in the U.S. market, the number of likely new customers for broadband access services is dwindling. In the U.K., there now are about a million dial-up users left.

"The number of dial-up homes ripe for migration to broadband is rapidly dwindling, there are barely a million of them left now and they are an increasingly resistant minority," says Tim Johnson, Point Topic chief analyst.

There are about 16,735,000 broadband lines already in service, and it would be reasonable to expect a sharp deceleration in 2008. For the 12-month period from June 2006 to June 2007, nearly three million new subscribers were added. Between June 2007 and June 2008 about two million were added. With just about one million dial-up subscribers left to convert, it seems unlikely the gross additions will hit even a million between now and June 2009.

There are 9.6 million households without Internet access at all, but that includes homes with no PCs as well as homes with users who do not use the Internet. Point Topic estimates 58 pecent of U.K. households use broadband, about 4.5 percent use dial-up while 37 percent have no access.

Economic woes might be having some effect, but the primary issue is market saturation.

Netflix Users: 89% on "3 or fewer" Plans

Netflix has never given a breakdown on the number of subscribers in each type of rental plan, but using Feedflix, a site set up to allow Netflix users to track their usage of Netflix, some guesses can be made.

According to Netflix’s latest earnings report, they currently have 8.4 million subscribers. By extrapolating Feedflix’s breakdown of Netflix service plans to the larger subscriber base, we get the following estimates on where customers are spending their money, according to an investment advisor who goes by the pen name of Davis Freeberg.

1 at a time - 2.1 million subscribers
2 at a time - 2.4 million subscribers
3 at a time - 3.1 million subscribers
4 at a time - 500K subscribers
5 at a time - 168K subscribers
6 at a time - 84K subscribers

Since heavier users cost Netflix more (more postage, more DVD rentals, more handling), one would assume the profit is generated by the lighter users who rent less (less postage, fewer rentals, less handling cost).

VoIP 40% of French Market Traffic

VoIP now represents close to 30 percent of all telephone subscriptions in France, according to French regulatory authority ARCEP, and is growing by about one million subscriptions every quarter.

IP calls now represent 40.5 percent of traffic originating on fixed phones(compared with less than 27 percent a year earlier) and 59 percent of traffic for international calls. VoIP traffic now represents 42 percent of in-France calling and 18 percent of traffic to mobiles.

VoIP services are generally used more intensively (5 hours and 34 minutes) than “traditional” telephone service (3 hours and 16 minutes) per subscriber, per month in the first quarter of 2008.

Most fixed lines (66 percent) in service represent a single “traditional” telephone subscription on the PSTN, dropping by three percentage points each quarter. The reduction primarily is caused by customers substituting VoIP services.

Some 15 percent of lines in service at the end of the first quarter 2008 support both VoIP and legacy telecom.

Text Still Will Dominate Mobile Data in 2011

Text messaging is now, and will still be, the top revenue-generating mobile data application in 2011, say researchers at Informa. Video is the application that will have the fastest growth rate between now and 2011, though.

AT&T to Clarify DSL Speed Expectations

AT&T expects to modify the way it packages its broadband Internet service, offering more precise levels of service that promise minimum and maximum transmission rates.

AT&T Senior Vice President Robert Quinn told the Federal Communications Commission the company would offer "non-overlapping tiers" of broadband service, rather than its current offerings which go "up to" varying speeds of data transmission.

"When we provide broadband services based on speed, we will do so in discrete tiers that are disclosed to our end-user customers," Quinn said.

Quinn said the changes were among "clarifications and improvements" AT&T plans to make to its customer disclosure policies, which the company hopes to roll out later this year.

"If we find that we are 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," Quinn said.

Comet Resurrects "Push"

If Web-based applications are to have a true shot at displacing apps run off local hard disk drives, response time issues must be solved. As is typical for Web apps, though, new tools may help solve that problem. Comet (or Reverse AJAX), for example, is a significant departure from the “click-and-wait” interaction we traditionally associate with Web applications.

In fact, as with so many innovations--recall "push" technology or "application service providers"--timing is everything. Some applications that simply were too cumbersome 10 years ago now are possible with the spread of broadband, faster broadband, caching, peer-to-peer and software such as Comet.

Being right often is less "good" than being timely.

Comet is said by its supporters to resurrect push capabilities with better IP communications.

Simply put, push communications like Comet remove the requirement for an end user to explicitly click on a link or button to request information from a server.

Instead, the server is free to send messages to clients anytime a server-side event occurs. Therefore, content no longer needs the tried and true “click” to reach you. Web pages from hereon out will simply update as new data is made available, finally laying to rest the refresh button on your browser.

That has implications for bandwidth usage profiles, bandwidth intensity and usefulness of interactive or social applications.

Comet makes it possible to build any application that requires real-time updates, enabling true desktop-like functionality to be delivered over the Internet. That has implications for the effectiveness of chat applications, social networking, online games; news updates and online collaboration, for example.