Wireless Reconnectors: Wireless-Only Has Downside

A recent survey conducted by Nielsen Mobile suggests wireless-only households now have reached about 17 percent penetration nationwide, and could well hit 20 percent penetration by the end of the year.

But Nielsen also found something else: 10 percent of U.S. households with landline phone service in the second quarter 2008 were previously wireless-only users, and had chosen to buy wired voice service again.

That is important for obvious reasons. Just as some users find wireless-only service to be attractive, 10 percent of users also have found wireless-only service to be unsatisfactory.

The issue is “why?” When we look at the landline tenure of these former wireless-only users, approximately one percent of wireless-only users may return in any given quarter, Nielsen Mobile says.

As it turns out, mobile coverage is sometimes perceived to be insufficient for would-be or former wireless-only users. Dropped calls and poor audio quality are reasons wireless-only users decide a landline service still makes sense.

Web 2.0 Bubble Burst: Been There, Done That

For some of us who were part of companies that cratered during the Internet bubble burst starting in 2001, past truly is prologue. Some companies will discover "zero" is their present valuation. Others will be gobbled up by the elephants in the room. Larger, better-capitalized firms are going to find attractive assets to buy, and buy them.

Media companies will move relatively early, even telcos might find it is the right time to "move up the stack" from layers one and two to the application layer, in broader ways.

Remember the last sea change? All of a sudden, "eyeballs" (reach) largely ceased to matter. Revenue did matter. But firms that already have scale and revenue might be able to reposition acquired assets that primarily represent "reach," and convert reach into revenue.

In the start-up business, 80 percent failure rates are the norm. All that will happen now is that failure rates will accelerate, as firms find they cannot get the next financing round. But the elephants will be dancing.

Typical Media-Buying Behavior Seen

Given that consumer spending has been generally sluggish all year, even before the recent liquidity crisis, it shouldn't be surprising that some discretionary purchases are showing sluggishness as well. 

Mid-summer research by Changewave Alliance, for example, has been showing slowing consumption of downloaded media. Compared to a year ago, ChangeWave's latest survey of 2,248 consumers shows entertainment downloading has actually slowed. 

Where in July 2007 about 48 percent of respondents reported downloading songs, in July 2008 just 43 percent said they currently were downloading songs. Likewise, where 14 percent of respondents in July 2007 reported downloading movies, just 11 percent said they had done so in July 2008. The same declines were seen in TV show downloading, computer games downloads, music or book downloads as well. 

Moreover, the percentage of our respondents saying they do not download entertainment has risen to 41 percent, about six points higher than in 2007. 

This sort of behavior might be likened to what one typically sees in times of economic stringency: people downgrade some forms of discretionary entertainment spending. People do not tend to disconnec their cable or wireless services. But they might downgrade a service package to eliminate premium channels like HBO or Showtime. 

Downloads of songs, movies or TV shows fall into that category. One can simply download fewer titles to save a little money, while keeping the basic subscription services (broadband stays, but fewer items are purchased). 

Xohm Latency Performance Stands Out

In recent tests conducted by Computerworld, Sprint's 4G Xohm network showed latency performance far superior to the AT&T "Broadband Connect" 3G network, with higher throughput as well. Where downloads ran at about 1.3 Mbps to 1.7 Mbps for Broadband Connect and 3.4 Mbps to 4.4 Mbps for Xohm, the more-important statistic might have been the latency figures.

Where the AT&T 3G network had a "ping" response of about 234 milliseconds, the 4G Xohm network had 97 millisecond pings. In layman's terms, Xohm-delivered applications responded faster to user requests. 

Low-latency performance--sometimes described as latency performance identical to a traditional wired network--has been a key design goal for the Xohm network, and has been deemed important for support of real-time applications. 

People Use Cloud Computing; They Just Don't Know

Whether one looks at how average consumers “compute,” or how industry segments “compete,” it now appears that cloud computing is poised to change the ways users interact with each other, use applications, communicate and compute. Some of the changes are obvious; others only now developing. 

Conceptually, there are several ways cloud computing already is used. Applications in the cloud is what almost everyone already has used in the form of Gmail, Yahoo mail, wordpress.com, Google apps, search engines, Wikipedia or virtually any Web-executable application.

Platforms in the cloud are used virtually exclusively by software developers and their clients. Developers write their applications to a open specification and then upload their code into the cloud where the app is run remotely.

Infrastructure in the cloud takes the software development process a step further. Developers use remote, network-based compute, storage, queueing, and other resources to create and run their applications.

“Cloud computing” sometimes is likened to grid or distributed computing, utility computing (computing as a service), software as a service, network computing, Internet-based applications, autonomic computing, peer-to-peer computing or remote processing. It typically is some combination of those things.

And as much attention as cloud computing gets in the enterprise information technology space, it already is making serious inroads in the consumer space.

Some 69 percent of online Americans use Web mail services, store data online, or use software programs such as word processing applications whose functionality is located on the Web, say researchers at the Pew Internet & American Life Project. They are, in other words, already users of “cloud computing,” an emerging topic in the enterprise computing space as well.

Some 56 percent of respondents say they have used a Web mail service such as Hotmail, Gmail, or Yahoo. About 34 percent say they have stored photos online. Some 29 percent say they have used online applications such as Google Docs or Adobe Photoshop Express, as well.

About seven percent say they store personal videos online, while five percent say they have a for-fee online storage service and another five percent say they use an online backup service.

About 51 percent of Internet users who have done a cloud computing activity say a major reason they do this is that it is easy and convenient. Some 41 percent of cloud users say a major reason they use these applications is that they like being able to access their data from whatever computer they are using, Pew researchers say.

Some 39 percent cite the ease of sharing information as a major reason they use applications hosted in the cloud, or store their data remotely.

As you might expect, users with mobile computer access are more likely to have done these activities. Among the 34 percent of online users who have used a WiFi connection on their laptop to go online, 79 percent have used at least one cloud computing activity above, and 52 percent have used at least two.

Release Window Opens; in South Korea

Warner Bros. Entertainment recently decided to release movies online before releasing them on DVD, at least in South Korea.  This reverses the long-established Hollywood distribution model and may open the door to a major increase in movie downloads. Why in South Korea? Film piracy.

Moving the more secure online system earlier in the release window is viewed as a way to keep pirated content out of the public domain a bit longer.

But researchers at MultiMedia Intelligence see the Warner Bros. initiative in Korea as being the start of a trend in implementing early release window content online. Already television studios are experimenting with online distribution windows that precede TV broadcast or DVD release windows. 

Make no mistake: it's all about the money. When content owners think they can make more money by giving online distribution a higher priority, they will do so. Today it is the DVD market which provides the highest profit and gross revenue, but not many expect that to remain the case forever. 

Mobile Enterprise Demand Grows

Enterprise information technology managers are badly underestimating the future demand for mobility devices and services in the enterprise arena, overlooking a new emerging class of mobile workers that rely on smart phones, where the traditional demand has been provided by traveling workers. 

On-the-road executives or managers, telecommuters or field service employees currently represent 20 percent of the workforce, says Forrester analyst Michele Pelino.

Call the workers driving the demand "mobile wannabes," if you like. Already, nearly a third of smart phone users expense all or some of their monthly bills for wireless voice services to their employers, while 40 percent expense the cost of their wireless data access to their company. Forrester Research estimates that by 2012, 73 percent of the workforce will be considered mobile.

This new class of workers represents just six percent of the present workforce, but Forrester estimates that they will grow to 25 percent of workers within the next four years. In fact, Forrester estimates 73 percent of the workforce will be considered some sort of mobile worker by 2012. 

Mobile wannabes include executive assistants, human resource workers and finance department employees who are generally at their desks most of the day but use smart phones to access email and other corporate applications while commuting to work or while away from their desks. Millennials, workers younger than 30 years of age also expect mobile support.

Most of this growing group of users buy their own devices, so the trick is to create new service plans that are affordable enough to encourage broader use of mobile data services, Forrester says.

IPhone Competitors Emerging

What percentage of the online iPhone researchers on AT&T's site were looking at other mobile devices in July and August? Quite a few, say reserarchers at Compete.

Sprint's Samsung Instinct seems to have been the iPhone's best competition so far, Compete says. About five percent of visitors checking out the iPhone also checked out the Instinct. In both July and August, it was the alternative most viewed by iPhone 3G researchers.

The AT&T Tilt and the LG Dare were viewed by more iPhone 3G researchers in August than they were in Julyn Compete says, getting three to four percent of iPhone investigators to take a look.

But the big question is, what makes a good iPhone alternative? So far, the touchscreen seems to be a key factor – the Instinct, Dare, and VU all have one – but there's clearly more to the appeal to the iPhone than that, Compete argues.

Nokia is answering the integration of music with the iPhone (via iTunes) with the "Comes with Music" feature.

The G1, offered by T-Mobile and featuring Android also should be a factor at some point, as should the new line of touch screen BlackBerrys, Compete argues. Google might be able to leverrage its open apps environment, while enterprise users hungry for a touch screen interface on their BlackBerries will drive adoption of those new devices.

The point is that Apple's iPhone has recast the device market.

Verizon Wireless to Start Charging for Messaging Fees

Effective November 1, 2008, Verizon Wireless is assessing a transaction fee of $0.03 for every commercial text message (terminated on a moble handset). The new rules do not apply to people sending text messages to each other, but rather to content firms that today pay fees to send or receive commercial text messages of one sort or another. The new fees also do not apply to text message applications, even if commercially-based, if they are free to the end user or are sent or received  by non-profit entities.

Interactive voting and text search or text alert applications most likely are covered by the new fees. 

Current commercial text messaging fees are said to cost the commercial sender anywhere from a fraction of a penny to a few cents, so the plan will have huge impact on use of such commercial text messaging apps. Predictably, commercial users will cry "foul." Perhaps Verizon should have, or still can, scale the increases in a more-gradual way, allowing their commercial customers time to adjust. 

In principle, though, we ought to expect similar sorts of moves on a rather broad range of fronts as broadband and mobile providers try to create new revenue models that involve some sort of revenue sharing between content providers and the carriers themselves. 

Commercial customers have sound financial reasons for objecting to the practice: free or cheap distribution is a better cost model for content providers than having to share revenue or pay fees for any number of conceivable services an ISP or access provider might provide. 

What is not contestable is that if the global service provider industry is in the midst of a fundamental business model evolution--where voice revenues in fact continue to decline as the industry revenue mainstay--then other revenue sources must be developed to replace virtually all of the lost voice revenue and margin. The actual cost of creating and operating a text message infrastructure is not the issue: lots of products are priced at retail in a way that is not strictly related to the cost of providing them. Sales and loss leaders are widespread retail practices, and products run a gamut: some are low-margin or negative margin, others are modest margin products and some are high-margin products. Production cost is only part of the retail price equation. 

The Verizon move is indicative of the seriousness of the revenue transformation. Voice is going away as the foundational revenue driver and must be replaced. Service providers have no choice in the matter.

Content providers won't like the change. But these and similar moves in other parts of the business are inevitable. If the future of communications network revenues cannot be based on voice or simple broadband, it must be based on something else. And if more content begins to be delivered using broadband networks of all sorts, some revenue-sharing model, where service providers are part of the revenue chain, must be created.

That doesn't mean content providers have to like the change. But in the absence of meaningful ways to sustain the networks on voice or broadband access revenues, service providers do not have a choice. So look for more "channel conflict" in the years to come. It is inevitable. 

There is no Free Lunch

Mobile providers in the Phillippines say they will have to raise text messaging prices if the government seizes half of text messaging revenues to fund  new health and education initiatives in the country. Under the proposed plan, the government will claim13.5 centavos of the 27 centavos currently charged. 

At the end of the day, consumers always bear the burden of all taxes, fees and charges. Businesses simply collect those fees and forward them to government agencies. What else would any manager do, given the need to make a profit margin of "X," on a cost structure of Y, when it is clear a cost structure now is "Y+N?" 

Rogers Drops 256 kbps Broadband Tier

Rogers Communications seems to be dropping support for a low-speed wireless broadband service, Broadband Reports says. Apparently Rogers has discontinued its "Portable Internet Basic" tier. That plan, costing $24.95 a month, supplied 256kbps downstream and 64 kbps upstream. The "Rogers Portable Internet High Speed" costs $49.95 a month and supplies 1.5 Mbps downstream and 256 kbps upstream. 

Both services have a 30 GByte monthly usage cap. Rogers apparently now wants to offer just a single tier of service, the  1.5Mbps version, though they've lowered the price to $44.95. 

At least some users will complain about the inability to buy the lower-speed tier. Personally, I think it is odd to offer a 256 kbps "broadband" tier in the first place, though Rogers might have considered a tier offering more bandwidth than 256 kbps and less than 1.5 Mbps. 

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.