Verizon Launches Tech Support Services

Need more evidence that the historic demarcation between wide area networks and premises networks is gone? Verizon Communications has launched an "Expert Care" service plans that offer 24 by 7, in-depth technical support for computer software and hardware problems, as well as repair or replacement coverage for computers, TVs and telephone equipment.

Expert Care offers three types of service plans providing consumers a wide range of choices in coverage and support for low monthly or one-time fees that can be added to consumers' Verizon bills. The plans include device repair and replacement of multiple computers, TVs and telephones regardless of age, size or place of purchase. The plans range from $4.99 to $19.99 a month, depending on the equipment covered, and may also include repair or replacement of original equipment remote controls, keyboards, mice, monitors and backup batteries for Verizon's FiOS service.

A premium technical support plan, priced at $14.99 a month, includes telephone and online support for issues such as virus and spyware detection and removal, virtual private network problems, help with firewalls, problems with computer operating systems, gaming connectivity problems, and software and hardware help. Telephone and online technical support is available 24 hours a day, seven days a week.

Premium on-site support also is available, with the work provided in partnership with Circuit City's Firedog tech support operation. This plan includes on-site support ranging from operating system installations to full PC and home network setups, billed on a per-use basis. There are several offerings, tailored to specific needs and priced from $99.99 to $249.99.

AT&T also offers similar support for premises networks, equipment and software. The point is that the neat distinction between what "network service providers" do, and what value-added resellers, system integrators, interconnects or audio-video specialists do, is eroding.

With the advent of Internet Protocol services, it is necessary to support end user devices and applications to ensure proper functioning of applications and services.

Xohm: One Has to Start Somewhere

You have to start somewhere: Sprint's "Xohm"  business recently unveiled a number of co-marketing agreements with Lenovo and Acer that will have each of the PC vendors introducing a number of notebooks for enterprise and small business buyers. The ultimate goal, of course, is to have WiMAX capability embedded in new classes of devices such as cameras or MP-3 players. For the moment, though, Xohm seems to be positioning as a "metro-wide Wi-Fi" experience.

That means making it marginally easier for mobile PC users to buy what others might consider a "mobile broadband access" experience using dongles or PC cards. Xohm promises more bandwidth of course, and that is the key distinction for the moment, aside from the ability to buy service at lower prices and without contracts. Users who are mobile in many cities across the United States will have to make judgments about where they actually need wireless broadband access and whether Xohm will have coverage in those locations. 

Where Xohm is today is not where it would like to be in the future, of course, but for the moment it will have to rely on lower pricing and higher bandwidth as the differentiator with existing 3G mobile broadband offered by Sprint, Verizon and AT&T. In due course, more unusual options should be available, and the issues with nationwide roaming should clear up. 

Still, it must be said: as a user of mobile broadband service who is mobile beyond a single metro area, coverage trumps bandwidth or price. Lower prices are nice and higher speeds ultimately will be important. But coverage is king if one has to roam on a continental basis.

Not every use case has that requirement, though. Users who will not require roaming outside their home city will find $45 per month for a Xohm service, without a contract, and featuring 2 Mbps to 4 Mbps throughput, more attractive than $65 a month for 1 Mbps or less and a two-year contract. The issue is what percentage of the mobile PC access market is in the "national roaming" compared to the "metro roaming" category. 

I have used "metro" roaming broadband access, and it is useful as an alternative to Wi-Fi hot spots. It does not fare well when the use case is national roaming, though. 

Lenovo plans to offer five ThinkPad laptops with WiMax, while Acer will roll out two Aspire notebooks for small businesses that have the WiMax technology.

The Lenovo ThinkPad notebooks that offer Intel’s Centrino 2 platform with the optional WiMax technology include the new ThinkPad X301 as well as the ThinkPad W500, W700, SL400 and X200. A consumer notebook, the Lenovo IdeaPad Y530 laptop, is expected to follow later in 2008.

In addition to Lenovo, Acer is also preparing to roll out two notebooks – the Aspire 4930-6862 and the Aspire 6930-6771 – that offer the updated Intel Centrino 2 platform and the WiMax feature. While the Acer Aspire series is geared more toward consumers, these notebooks have found a place within the small business market.

The point is that one cannot yet assess how well WiMAX will fare in its intended markets. The footprint remains limited and device support is limited as well. But one has to start somewhere. 

Broadband: Rubber Meets Road

Comcast says it will have 20 percent of its markets upgraded with faster DOCSIS 3.0 50 Mbps speeds by the end of the year, and all customers will be upgraded by the end of 2010. Which will provide an interesting test of end user demand. Other service providers who provide speeds that fast have been reluctant in the extreme to say anything in public about take rates for services offering that sort of speed.

I think the clear implication is that really-fast broadband remains a bit of a niche. In Minneapolis/St. Paul users can buy a 50 Mbps downstream/5 Mbps upstream connection for $150 per month. What isn't so clear is how many customers are willing to do so.

What would seem obvious is that a good percentage of the potential market at this point is buyers who have some business justification for such bandwidth, either to support a home-based business or work-at-home operations with a fairly high video conferencing requirement. 

Verizon's 20 Mbps FiOS offering costs $52.99 a month when bundled with a Verizon phone service and $57.99 a month without, so that roughly sets expectations for market pricing. 

Verizon's 50 Mbps downstream, 20 Mbps upstream service costs $139.95 a month with phone service and $144.95 a month without a bundled phone line. 

That is worth keeping in mind as nominal speeds keep climbing. So far, it appears uptake for the highest-end offerings is relatively modest, whatever it may be worth as a marketing platform. 

What observers always seem to miss about the mass market is its price sensitivity. Consumers can become accustomed to services and features that once seemed to be luxuries--broadband access, cable TV, multiple PCs in a home and mobile service being prime examples. But it takes time for the value to be understood and the pricing to become acceptable for the value received. 

By some estimates it has taken the better part of a decade for the Internet access habit to be created and then to be recast as a "broadband" Internet access "need." It might take a similar amount of time before 50 Mbps access tiers are seen as the "typical" way to satisfy the access need.

People don't generally buy "technology'; they buy value. It will take some time to convince most people that 50 Mbps for such prices are valuable enough to pay for them. 

Consumers Say They Are Reducing Spending

The latest ChangeWave consumer survey, conducted in late September 2008, shows another major leg downward for U.S. consumer spending. At the same time, confidence in the economy has dropped to exceptionally low levels and looks to stay that way for three months, ChangeWave says. 

Of course, consumer spending has been trending lower for about 15 months. More than half of  4,067 respondents  (52 percent) now say they'll spend less money over the next 90 days, for example. About 18 percent say they'll spend more. 

More respondents say they are spending less because they are paying down debt (29 percent) or saving more (26 percent). Generally higher prices and higher energy costs get top blame for reduced spending. 

Liquidity Impact on Service Providers?

Just about the only thing most people seemed to want to talk about, at some meetings during the recent Comptel convention, heavy with providers of wholesale communications capacity and retail service providers, was the possible impact of the banking crisis on the telecom business. It's a fair enough question.

For the most part, it is not good news. In a capital-intensive business, capital stringency is never a good thing. Some acquisitions will not happen, which means some asset sellers and buyers will be unhappy. 

Embarq, the fourth-largest U.S. phone company, has been trying to sell itself for weeks, the Wall Street Journal reports. But those plans are tabled for now because potential partners haven't been able to raise capital for a deal. That probably is going to be an issue for any would-be buyers of Nextel as well. 

Some network expansions will be put on hold, while others will be slowed, the reason being that available cash has to be funneled to operations, debt service, dividend payments and other uses when borrowing and credit are not easy options. 

On the retail side of the market, one would have to expect some organizations will delay planned purchases of new phone or other premises equipment, delay opening new branches or take other "headcount-related" moves that typically spur the purchase of new communications services and equipment. There are, for example, some indications that wireless "phone replacement" services offered by MetroPCS and Cricket Communications gained ground in the third quarter of 2008. 

MetroPCS Communications "pre-announced" an 82 percent rise in third quarter 2008 profit on a 41 percent increase in total revenue. The company added 249,000 net subscribers in the third quarter, a development MetroPCS believes shows it is benefiting from customers cutting their land lines. 

Executives at firms supplying bandwidth products say it will be a quarter or two before it is possible to assess any economy-related impact on Ethernet or bandwidth products. Some particular markets, such as New York City, might see a drop-off from financial sector customers, for example. 

On the other hand, providers of core IP bandwidth should see a largely neutral environment as far as aggregate demand, though there could be some pricing pressure, as broadband mobile services and consumption of video continue to grow. 

Nobody is buying capacity "on spec," and nobody has done so since perhaps 2001, so there is not much potential damage on that front. The fundamental price-per-megabit trends seem intact, and consumption of bandwidth likewise seems still to be in line with recent years. Capacity providers, unlike most in the business, are used to steady, relatively predictable price declines and demand growth of roughly 60 percent a year. 

And then there are the inevitable winners: companies that can tap credit to remove competitors from the market, grow service footprints and product lines, acquire human and other resources they might not have been able to afford recently.  So far, though, there is little firm evidence one way or the other about the potential impact of the liquidity problem. 

iPhone Probably Worth 7 Share Points

About 30 percent of U.S. consumers who purchased Apple’s new iPhone 3G from June through August 2008 switched from other mobile carriers to join AT&T, a new study by NPD Group finds. About 23 percent of consumers, on average, switched carriers between June and August 2008.

By some measures, then, AT&T got a seven-percent share boost from the iPhone.

Nearly half (47 percent) of new AT&T iPhone customers that switched carriers switched from Verizon Wireless, another 24 percent switched from T-Mobile, and 19 percent switched from Sprint.

Before the launch of the iPhone 3G, iPhone sales represented 11 percent of the consumer market for smart phones (January through May 2008); however, after the launch of iPhone 3G, Apple commanded 17 percent of the smartphone market (January through August 2008).

The average price of a subsidized smart phone sold between June and August 2008 was $174, down 26 percent from $236 during the same period last year.

Cox Not Infringing Verizon VoIP Patents, Jury Finds

Verizon Communications has lost its VoIP patent infringement case against Cox Communications Inc, the Wall Street Journal reports. Verizon filed papers in Eastern District Court of Virginia on Jan. 11, 2008 alleging that Cox violated eight patents related to the technology used for completing IP voice calls. The lawsuit came after Verizon had successfully argued that Vonage was infringing its patents. 

Verizon included in the lawsuit claims of infringement of  four patents Vonage was found to have violated in an earlier case. Verizon was awarded $120 million in damages in that case. But the jury in the Eastern District of Virginia ruled that Cox Communications did not infringe on six Verizon patents.

In addtion to Cox Communications, other leading cable operators perhaps most relieved of all, as it might be hard to defend the notion that any of the leading cable providers were innocent, had Cox been found to be infringing. But other indpendent VoIP providers also have to be breathing a little easier as well. 

Had Cox been found to be infringing, it isn't so clear how any other cable company might have escaped litigation, cable or independent VoIP providers alike. 

Verizon apparently has recently reached a deal with Comcast in which both companies agreed not to sue each other over patent issues for five years. A Verizon lawsuit against Charter Communications for VoIP patent infringement is still pending.

Netflix Warns of Slowdown

Netflix says its third quarter revenue and earnings per share will fall within prior guidance but that subscriber numbers will fall “just below” the low end of guidance.

“Net subscriber growth in July was in line with expectations but August was unusually weak”, says CFO Barry McCarthy. 

There could be lots of reasons for a single-month slowdown. It is possible potential new subscribers were distracted by the Olympics or the Presidential election. But some quickly will jump to the conclusion that economic stringency is pinching Netflix the way some expect a sluggish performance for premium cable channels or perhaps video on demand. 

IP Transit Prices Fall

Median monthly IP transit prices for 1,000 Mbps Gigabit Ethernet (GigE) ports in major U.S. and European cities ranged from $10 to $14 per Mbps in the second quarter of 2008, report researchers at TeleGeography. 

IP transit prices in Asia remain far higher than in the United States and Europe, which explains the surge in undersea cable construction across the Pacific Ocean.

Long Tail of Social Networking

Nearly half (46%) of those who use social networks have also visited a social network through a mobile phone, according to ABI Research. Of these, nearly 70% have visited MySpace and another 67% had visited Facebook.

No other social networking site reached 15% adoption mobile adoption. That is what one would expect if the Pareto Principle (80/20 rule or "long tail") holds.

"As in the online social networking space, there is clearly a large gap between the big two (MySpace and Facebook) social networks and the others," says research director Michael Wolf.  "ABI Research believes this is because consumers do not want to recreate entirely new and separate social networks for mobile, but rather want to tap into their existing social network and have it go with them via the mobile phone. For most, this means MySpace, Facebook, or even both."

The biggest features consumers use when accessing a social network on their phone is checking for comments and messages from their friends, with both of these features registering above 50% for mobile social network users.

Posting status updates also has proven popular, with over 45% of mobile social users letting others what they are up to via their phone.

"The social network is increasingly becoming a central hub for communication across online and mobile domains for many consumers," says Wolf. "To a degree, it allows them to centralize messaging, communication and even digital media consumption through a centralized property on various screens."

That is something enterprise social networks might hope to replicate.

Apple Has Done It: 10 Million iPhones Sold

Apple has reached its goal of selling 10 million iPhones by the end of the year, says Seeking Alpha writer Andy Zaky.

Estimates for iPhone sales figures for Apple's fourth quarter (calendar quarter three) were called for sales of four million units. It now appears that Apple has sold at least 7 to 7.5 million iPhones in the quarter, nearly 80 percent above consensus.

Watch for Shift to Social and Digital Media

About 65 percent of chief marketing officers surveyed recently by Epsilon say their ad budgets will decrease because of the troubled economy, but more of their money will go toward digital/interactive marketing than before. About 63 percent of the 175 CMOs and marketing execs surveyed report that their spending on interactive and digital marketing has risen, while 59 percent report a decrease in traditional marketing spending.

Those attitudes typically have been important only for media and content providers in the past. These days, those attitudes are important for telcos and mobile providers as well as potentially millions of smaller content providers as well, since blogs and social marketing are at the top of the list of new media CMOs are shifting attention to. 

At the same time, 94 percent of those surveyed agreed with the statement, “A tough economic period is precisely the time when marketing plays a key role.”

To offset budget cuts, CMOs are shifting to more targeted and measurable marketing strategies. When asked how their firm determines target market for each channel, 50 percent said they use data-driven marketing techniques: 31 percent stated they use modeling tools to analyze existing customer data (behavioral, preference and demographic) and 19 percent said that they analyze past purchase behavior. In contrast, 28 percent said they made “rough estimates based on past experience.”

CMOs have been early adopters of new media with social computing and blogs receiving the most interest, and instant messaging and interactive TV ads least popular.

Social computing (including word of mouth, social networking sites, viral advertising and so forth.) was the most popular emerging channel with 42 percent of marketing executives expressing interest in adding it to their marketing mix.

Blogs were the second-most-popular emerging channel, with 35 percent of marketers expressing desire to use them and 19 percent already using them.

Almost a third of CMOs mentioned podcasting as an area of interest, with 31 percent interested in adding it to their marketing mix and 18 percent already having done so.

Some 29 percent are interested in Mobile Devices (phones/PDAs) and 22 percent have added them to their marketing mix.

About the survey: The survey was conducted in August 2008. Participants included 175 US CMOs and marketing executives of some of the largest brands in the nation. Some 27% of respondents work at companies with $10 billion or more in annual revenues last year.

27% of Wireless Users Say They Have Disconnected Landlines

More than one fourth of wireless phone customers have replaced their traditional landline connections at home and are now using wireless service exclusively to communicate on a daily basis, according to J.D. Power and Associates.

The study finds that among the 27 percent of current wireless customers who report replacing their traditional landline phone with wireless service, 61 percent have completely disconnected their home landline service. Additionally, 29 percent of wireless customers ages 18 to 24 report making this switch, compared with only 9 percent of subscribers 65 years or older. 

Customers who have used wireless longer are also more likely to switch exclusively to wireless service. In particular, customers who have used wireless service for three years or more report higher landline disconnection levels than those who have used wireless for less than 12 months (19 percent vs. 9 percent, respectively). 

“The user experience has steadily improved for wireless customers, and the number of features and applications available for cell phones has increased considerably during the past two years, so it is not unexpected to find that many wireless subscribers are choosing to replace their landline phone entirely with wireless service,” says Kirk Parsons, J.D. Power and Associates senior director. “Wireless service has truly improved to the point where quality and performance are no longer barriers in the decision-making process around switching to exclusive wireless service usage.”

AT&T Creates New Consumer Unit, Featuring "Everything"

AT&T is reorganizing its management, creating separate business units focused on customer segments rather than product lines, further illustrating the seriousness with which AT&T now views creating new kinds of services that transcend networks and devices. Part of the reason for creating a "consumer" services unit is that video, for example, now must be licensed, packaged and delivered across devices (TVs, PCs, mobile devices) and networks (wireless and wired). 

The reorganization should make easier the creation of new products that transcend network and device limitations, something AT&T is deadly serious about.

Wireless division CEO Ralph de la Vega now is in charge of all consumer offerings, including wireless, video in all its forms, broadband access and voice. Business services, infrastructure and diversified business are the other three major units.

The reason all of this ultimately will matter for virtually all contestants in the consumer space is that a company the size of AT&T, if successful, can reshape the consumer market and its expectations about what a "service" should be, how it should be packaged, what features such offers "should" feature, how much these features should cost and what payment methods and plans are part of the "new normal."

Local Loop Not a Natural Monopoly?

Fiber to the customer networks are not a natural monopoly, even though industry participants often think of it in those terms, says Vianney Hennes, permanent representative to European Institutions for Orange France Telecom Group.

So the ideal competitive environment in the age of fiber rollouts should be similar to the way mobile competition now occurs, says Hennes, according to CommsDay reporter Luke Coleman. Presumably that means multiple, facilities-based networks. 

It may not mean a call for complete duplication of all physical infrastructure in the local loop. Hennes probably is referring to shared access to ducts and other rights of way, primarily. It seems unlikely an employee of France Telecom would be calling for construction of multiple fully-duplicative local fiber networks by multiple contestants, if only because the economics are prohibitive on the face of it. 

Since most recent studies of fiber-to-customer infrastructure suggest a provider must get something on the order of 30 percent penetration of every high-penetration service to make a financial return, and if penetration of video, voice and broadband is assumed to be in the range of 60 to 80 percent of every household, it seems fairly clear that three head-to-head contestants will have a tough time getting to break even. If there are more than three contestants, most of the providers might fail. 

He said it was a “self-fulfilling prophecy” when operators say fiber-to-customer upgrades inherently are

monopolistic. “If you think there will be a monopoly somewhere, in the end, you will end up with a

monopoly," he says. 

Hennes said that regulatory conditions should be set to allow maximum infrastructure competition,

such as allowing for duct sharing and taking pains to reduce traditional bottlenecks. The industry can move to something that looks like a mobile model, he argues. 

How does that work to France Telecom's advantage? If duct sharing and rights of way are widely available, competitors must build their own active fiber networks, while France Telecom does not have to share access to its fiber network, it likely gains some strategic leverage. Not many contestants actually will conclude that building their own networks makes sense, of it if makes sense, it will occur only in some regions and locales, not all. 

Oddly enough, opening up more access to rights of way, but requiring contestants to lay their own fiber and active opto-electronics, might create almost as much of an entry barrier as not opening the ducts and rights of way. More openness on the physical layer front seems likely in Europe. But so does mandatory wholesale access to new optical fiber facilities. It is an interesting thought, the local loop not being an actual monopoly.

To some extent, it clearly isn't, as evidenced by the flourishing businesses already run by cable companies and telcos. We know there is room for at least two rival physical networks. What remains unclear is the long-term sustainability of three or more physically-diverse networks. We'll have to watch the overbuilder and municipal networks business to collect more data points. There remain few widescale instances where three broadband networks are widely available to customers.