iPhone Penetration Broadening Sharply

The trend can't be identified with any precision yet, but some end users might be adopting a new form of "substitutional" behavior of the sort mobility seems to be causing to wired phone lines.

Since June 2008 3G iPhone use rose 48 percent among those earning between $25,000 and $50,000 per year and by 46 percent among those earning between $25,000 and $75,000.

These growth rates are three times that of those earning more than $100,000 per year, the original "early adopter" population.

The reason it is not clear whether a new trend is emerging or not is that some of these users, perhaps most, are buying $200 subsidized phones, which puts the devices into a range many might be able and willing to pay for some other sort of smart phone.

And while the cost of a stand-alone, single-device and single-user account might be fairly hefty for users in the fast-growing income ranges, it is conceivable that many are on family or group plans of some sort that do not represent new monthly charges as much as $70 a month.

Still, there is a suggestion here that some users might be choosing to use use a single device for a music player, email device, voice and Internet access platform, possibly cannibalizing some amount of broadband access and wireline voice service in the process.

Mobile Usage Up

Over 54 percent of those surveyed said their mobile phone usage had increased by more than 25 percent over the last two years, and one in five respondents said it had increased by more than 50 percent, says Azuki Systems, Inc.
About 62 percent of respondents say they either own or will own a smart phone in the next 12 months.

ABI Lowers Mobile Handset Sales Forecast

ABI Research has revised its expectations for fourth quarter 2008 mobile handset sales to 7.5 percent growth from the 10.4 percent it earlier expected.

Call that the expected impact of tougher economic conditions.

Year over year annual growth is therefore likely to be between 10.5 percent and 11 percent, to close out the year at around 1.27 billion.

Handset sales grew 8.2 percent during the third quarter, year over year.

Expect to see aggressive marketing and promotional activities from operators and vendors alike as they strive to lure end-users to upgrade their handsets before the year’s end, ABI predicts.

Orange Gets 72% TV Growth

France Telecom has grown subscriber take-up by 72 percent over the last 12 months As of September 30, 2008 the Orange-branded service had 1.746 million subscribers compared with 1.017 million just 12 months earlier. 211,000 customers were signed in the third quarter of 2008.

Stats like that are one reason executives at Comcast see AT&T and Verizon as their primary competitors.

Negative Growth in Third Quarter, Commerce Dept. Reports

The Commerce Department has released its preliminary estimate of U.S. third quarter gross domestic product, showing a decline to -0.3 percent. If the fourth quarter follows suit, we will be safe in saying we officially have entered a recession.

Consumer spending fell by -3.1 percent. Business investment fell by -1.0 percent, final sales were down by -0.8 percent. Disposable income came in at -8.7 percent.

The odd thing is that despite the generally-tough tone since perhaps the summer of 2007, growth has been positive through the second quarter of 2008.

Hulu Finds Less is More

Hulu, the online video site, finds that when it comes to advertising, less is more. In contrast to the multiple-ad format used by broadcast TV, only one ad is shown during each segment break on Hulu.

In a customer survey commissioned by Hulu and conducted in July and August, 76 percent of nearly 18,000 respondents said that the site had the right amount of ads given the "no incremental cost to view" format, according to the New York Times.

Just over 17 percent said there was less advertising than they expected. The survey also found a 22 percent increase in advertiser message association and a 28 percent increase in intent to purchase among users.

There might be some "novelty" element driving the findings, so everyone will have to wait and see whether ad effectiveness of this sort continues, on Hulu and other sites that may choose the same format.

Only one finding remains consistently true: consumers tend to say they "hate ads." They also prefer getting free content and will tolerate ads if that is the price of getting the content at no additional charge.

Hulu has another advantage, however. The ads are short, and there is no way to zip past them, as would be the case if viewing on a digital video recorder.

$3 Trillion Global Service Provider Revenue is Forecast

Between now and 2013, a time when global communications service provider revenue will climb from $2 trillion to about $3 trillion, wireless is going to be a key factor.

Whatever else happens, mobility services in developing regions are going to play a big part in that growth.

In developed regions, pressure on landline voice revenues will be the challenge. In developed regions, service providers will have to create new services based on wireless and broadband, especially services that combine formerly-separate experiences such as voice, image, video, audio, text, presence, location independence and devices.

Nothing is certain, in that regard. History suggests that service providers, even those deemed to the most slow-moving, can replace their revenue mainstays. Wired telephone services providers, generally considered the slowest-moving contestants, already have twice done so.

They made a transition from "dial tone" to "long distance" as the revenue mainstay. Then they made a transition from "long distance to wireless." The next transition will be to replace wireless, as inconceivable that might seem. IP services are part of the answer. Video and content are parts of the answer. Software and information technology services are part of the answer. Personal broadband is part of the answer.

It remains unclear whether, in the next iteration of industry business models, there will be a single revenue source that clearly underpins all the others, even though this has been the classic model. The only thing that is clear is that, as important as wireless is, it also will someday fade as the key industry revenue driver.

Global Telecom Capex to Fall in 2009, Accelerate in 2011

Global telecom capital spending will decline in 2009,compared to 2008 levels, say researchers at Insight Research.

Spending will accelerate in 2011, driven in part by wireless and broadband spending in developing regions such as India and China, Insight Research predicts.

Between 2008 and 2013, those investments will drive global revenue from the current $2 trillion level to more than $3 trillion, the company projects.

MDU Developers Turn to Broadband

New research from Parks Associates indicates high-tech amenities like broadband, security, and energy controls positively influence the sale and rental of multifamily properties.

Researchers found nearly 50 percent of multiple-dwelling unit developers are seeking new electronic products and services that will differentiate their properties in an increasingly competitive market.

In particular, in-unit broadband service is becoming a “must-have” feature, with 60 percent of multi-family units offering some form of high-speed Internet. Security systems and monitoring services, electronic locks, and energy/utility management systems are also becoming more common in order to increase the speed of sale or rental of an MDU property.

No Wireless Data Dip

Wireless analyst Chetan Sharma sees no sign yet of any weakening of mobile data revenues from the AT&T and Verizon wireless reporting of the third quarter.

Since the fourth quarter is seasonally strong, we might not see any slowdown in the fourth quarter, either, he suggests. In all likelihood, we'll have to wait for first-quarter 2009 results to see whether economic stringency has negatively affected mobile data.

Personally, I would bet against a dip.

Where is Telco Capex Going?

As global carriers are in the midst of capital planning exercises for 2009, one key question their suppliers must grapple with is what changes might be forthcoming. Analysts at ABI Research perhaps optimistically think global carrier capex will dip just about 1.3 percent from 2008 levels, when capex grew a bit more about eight percent.

Ovum believes the most likely scenario is a generally mild impact on the telecoms industry, with growth and spending slowing but not declining. The scenarios are described in the October edition of Ovum’s Straight Talk Monthly communication to clients.

Researchers at Ovum say they aren't yet sure, but offer three possible scenarios. In the optimistic forecast, 2009 capex will be at the level of 2007, reflecting a slower 2008 spending pattern.

The most-likely outcome is slower spending through 2009, though. In a worst-case scenario,
capex could fall as much as 28 percent, a level somewhat consistent with the "nuclear winter" years after the Internet and telecom bubble just after the turn of the century.

Cox to Launch Mobility Services

Cox Communications plans to launch mobile phone service in the second half of 2009, using Sprint network facilities. But Cox also owns its own spectrum and plans to build its own third-generation wireless network, although it also says it will test Long Term Evolution as an eventual 4G platform.

Cox executives say the management and delivery of converged content is at the core of the company's wireless strategy. "Cox customers will be able to use their mobile phone to access television favorites, program their DVR, access content saved on their home computer and simplify their lives with enhanced voice features," the company says.

A reasonable way forward would be for Cox to rely on Sprint for typical wireless voice, text messaging and mobile broadband services, while using its own network for applications more focused on content services related to what it currently delivers using its wired networks.

All Cox phones will include a network address book that automatically synchronizes with home PCs, the company says.

Cox also says that subscribers will be able to watch TV shows, and possibly full-time channels, on their handsets.

The move into mobility is hardly unprecedented. Cox joined with Comcast and Tele-Communications Inc. as equity owners in Sprint PCS in 1994.

Online Video Goes Mainstream

Online video services have gotten positively mainstream over just the last six months, according to Ipsos MediaCT.

The percentage of female Internet users ages 12 and older that have streamed a video online in the past 30 days has grown from 45 percent to 54 percent, an all-time high for this demographic and nearly equal to the percentage of men (58 percent) whom have recently streamed video content online.

Moreover, the percentage of adults aged 35 to 54 that have recently streamed video online has also shot up since December 2007, rising from 49 percent to 60 percent in that time span.

In the past, such behavior disproportionately was a younger male activity.

Skype Puts Up Numbers Most Would Envy

In the third quarter this year, and for the year, eBay's Skype has posted numbers most companies would love to have. Use of Skype-out minutes increased 54 percent, which drove revenue growth of 46 percent for the quarter. 

Revenue over the past year came in at $ 521 million compared to $332 million for the comparable prior year, an annual revenue growth rate of  56.9 percent.

Registered users increased 51 percent over the prior year and Skype-to-Skype minutes increased 63 percent to 16 billion minutes. 

Also, growth seems to be accelerating. Skype recently achieved its fastest growth rate of user activity in its history, by one measure, with an additional one million more concurrent users in just 35 days. Skype tends to measure usage by the numbe of concurrent sessions occurring. 

Skype saw 63 percent annual growth rate of minutes. Not so important, you might think, since lots of Skype usage is of the free sort. But use of paid minutes (2.2 billion SkypeOut minutes) increased 54 percent. 

Skype had third quarter 2008 revenue of $143 million and is on track to reach 2008 revenue of $570 million. In a sort of worst case scenario--if a global economic sluggishness decreases Skype use, about the opposite of what some of us think will happen--and Skype revenue growth slows, it should neverthless continue to grow annual revenue above the expected 2008 level (negative growth is hard to imagine). 

The Difference Between Voice and Video Bandwidth

In a recent conversation with a financial analyst, the matter of Internet video bandwidth came up. The simple observation was that video consumes an order of magnitude (10 times) to two orders of magnitude (100 times) more bandwidth than voice does.

The implication, of course, is that if online video consumption becomes popular, it represents a network engineering and challenge potentially 10 to 100 times more complicated than was the case for access networks built for voice. 

That isn't to say costs scale precisely that way, but it suggests the dimensions of the cost problem for any network services provider charged with adding that much bandwidth. 

The cost of deploying a fiber-to-the-cabinet (fiber to the neighborhood) network in the United Kingdom, for example, has been estimated at £5.1 billion. The cost of a fiber-to-the-home network is estimated at £28.8 billion, according to the Broadband Stakeholder Group. 

The immediate difference in potential bandwidth might not be an order of magnitude. But the potential bandwidth difference ranges from an order of magnitude and up.