Birch Communications Flips Switch on IP Network

Birch Communications a competitive local exchange carrier that serves small and medium-sized businesses in the North Texas market, has launched an Internet Protocol network to replace the company’s current digital network.

The objective of the launch, which utilizes MetaSwitch and Zhone Technologies equipment, is to provide customers with high-performing network services, Birch says.

Atlanta-based Birch serves clients in 31 states throughout the Southeast, Southwest and Midwest.

Clearwire Sued for Patent Infringement

A Dallas-based company has filed a lawsuit against Clearwire Corp. and Sprint Nextel Corp., alleging patent infringement related to the use of six patents held by Adaptix Inc., which has filed the lawsuit.

Adaptix says its patents on multi-carrier communications with group-based subcarrier-cluster allocation, adaptive subcarrier-cluster configuration and selected loading, medium access control for orthogonal frequency division multiple access, multi-carrier communications with adaptive cluster configuration and switching and adaptive subcarrier cluster configuration and selective loading are being infringed.

As is the case with such high-profile cases, it is doubtful the issue will result in a shutdown of the Clearwire network, though that cannot be discounted as a possibility if the parties cannot agree on a settlement.

Mediterranean Cable Cut Disrupts Europe-Asia Traffic

Internet and telephone communications between the Middle East and Europe were disrupted after three submarine cables between Italy and Egypt in the Mediterranean Sea were damaged, according to Bloomberg. France Telecom SA, which plans to send a maintenance boat to fix the problem, said the situation should be back to normal by Dec. 31.

Three cable systems carrying more than 75 percent of traffic between the Middle East, Europe and America have been damaged, according to the U.K.'s Interoute. The cables run from Alexandria in northern Egypt to Sicily in southern Italy. In January, an anchor severed the cables outside Alexandria after bad weather conditions forced ships to moor off the coast.

``The information we have is a bit sketchy, but chances are that it will have been an anchor again,'' Jonathan Wright, Interoute's director of wholesale products, said in a telephone interview. ``Close to 90 percent of all the data traffic between Europe and the Middle East is carried on these three cable systems,'' Wright said.

A January 2008 cable cut off Egypt brought down 70 percent of the Internet network in India and the Middle East.

Vodafone Group Plc's Egyptian unit is among service providers affected by the cable failure.

France Telecom's Orange mobile-phone unit said the cable failure ``greatly disturbed'' the traffic between Europe and parts of Asia. At one point as much as 55 percent of voice traffic in Saudi Arabia, 52 percent in Egypt and 82 percent in India was out of service, according to Orange.

Internet traffic from Mumbai to London now has been re-routed via Hong Kong which may lead to congestion and increased latency on this route,'' Reliance executives said.

The fault is affecting the SMW4 cable near the Alexandria cable station, the FLAG FEA cable and the SMW3 cable system.

Reliance Globalcom doesn't know exactly what happened, but there will be suspicions of an anchor snagging the cables.

The SMW4 cable, also known as SEA-ME-WE 4or South East Asia- Middle East-Western Europe 4 cable network, connects 12 countries: Pakistan, Indonesia, Singapore, Malaysia, Bangladesh, India, Sri Lanka, United Arab Emirates, Saudi Arabia, Egypt, Italy and France.

Downturn Changes "Build or Buy" Economics

SureWest Communications plans to pull back on the expansion of its fiber-to-the-home network next year in an effort to free up cash to buy other telecommunication companies, according to the Kansas City Business Journal. The possible change in growth strategy is a direct result of the decline in equity values that now makes it more affordable to buy assets rather than build new broadband access infrastructure. 

The economic downturn has lowered the stock values of many other telecommunications companies, while SureWest’s stock price has ticked upward. That happy prospect now makes possible acquisitions that some other firms might not be able to pull off. It’s at least temporarily become cheaper to buy telecom companies and networks than to build out a network, SureWest CEO Steve Oldham says. 

The company plans to cut its capital expenditures by about a third in 2009. In 2008, SureWest’s capital expenditures are expected to total about $86 million. Next year, SureWest plans to reduce its capital expenses to between $55 million and $60 million, with 17 percent dedicated to a network expansion. 

If acquisition opportunities don’t arise for SureWest in the coming months, the company would put more money back into adding more fiber connections on its existing network, Oldham says. 

One predictable outcome of the current recession, as always is the case, is a wave of mergers and acquisitions, and SureWest looks to be a buyer. 

2009 Business Comms Spending Probably Flat

Overall spending by all U.S. businesses on wired and cellular calling is forecast to reach nearly $140 billion by the close of 2009, says a new market research report from Insight Research. Insight doesn't make a specific forecast for how that will stack up against 2008 spending, but the company's other forecasts suggest slight growth in 2009. 

Wholesale trade; financial, insurance, and real  estate services; professional business services and communications verticals accounted for 70 percent of total  business telecom expenditures by the end of 2008. Add durable manufacturing and healthcare and these six verticals would account for over 80 percent of total business telecom expenditures.

The study predicts that cellular calling will account for just over 41 percent of the U.S. corporate phone bill for telecommunication services in 2009, and is the fastest growing  expense area. 

Insight Research estimates that businesses spent $81.4 billion on wireline services in 2008. Over the forecast period, an increasing percentage of the business revenue growth will come from enhanced services, often for vertical industries, as telecom providers seek to avoid damaging price competition by positioning their services as value-added solutions rather than commodities.

Insight estimates that the total U.S. telecom wireless market will reach $147.7 billion in 2008. The CAGR for the forecast period is 

estimated to be 15.2 percent. Thus, unlike the wireline market, the wireless market will continue to grow over the next five years, reaching $299 billion by 2013. 

In the fourth quarter of 2005, Verizon Wireless accounted for 40 percent of the company’s total revenue, as compared to the fourth quarter of 2004 in which wireless revenues accounted for 35 percent of the company’s total revenue. In terms of 2006 annual revenues, 

Verizon reported the following: Verizon Wireless contributed $38 billion to the bottom line; Verizon Telecom contributed $33.3 billion; and Verizon Business contributed $20.5 billion. For 2007, Verizon Wireless contributed $43.9 billion to the bottom line, up 15.3 percent from 

2006; Verizon Telecom contributed $31.9 billion, which was a drop from 2006; and Verizon Business contributed $21.2 billion.

All the data suggests that wireless will continue growing faster than all other segments.

 

Wireless service revenues are expected to grow at a compounded rate of nearly 16 percent annually from 2008 to 2013, while growth in wired services remains essentially flat.

Possible Increase in Wireless Substitution

If survey respondents act the way they say they might, we could see an acceleration of wireline voice substitution during the recession.  

Sprint sponsored a survey that found 32 percent of respondents are likely to eliminate their landline service and rely solely on a mobile phone in order to save money. About 18 percent of respondents already do not have landline phone service at their home.

When asked why they would give up their landline phone, 76 percent said they would disconnect in order to save money.

The findings are significant as all service providers are watching for signs of churn behavior, service downgrades and other actions consumers could take if they really are interested in saving money during the recession. 

Some 36 percent of respondents say "a mobile phone is the only phone they will ever need." 

The recession will end, of course. People will not have the same motivation to cut their landline service for financial reasons.  But there is one question we are not asking that will bear on demand for wireline voice service: if one argues there is a secular trend for people to abandon wired voice lines for wireless, one has to account for the reasons millions of consumers are keeping their voice lines, but moving them to cable providers. 

The question might more appropriately be asked: what value-price relationship is compelling enough for people to continue using wireline voice? At the moment, part of the answer seems to be that the service still is viewed as useful, when it does not cost as much. Certainly that would seem to be the cable digital voice customer profile. 

What nobody has had a chance to test on a wide scale is fixed broadband voice, delivered at a price so compelling the value-price relationship is changed. Someday we'll see such tests. 

Cbeyond Web Hosting Move Illustrates Trend

Cbeyond has announced a new "Enhanced Web Hosting" service for small businesses. The service package includes a design- it-yourself tool, marketing capabilities and an e-commerce solution.

The enhanced service is an example of an important trend: retailers of communication services to small and mid-sized businesses ultimately will be in the managed services businesses in a broader way than simply supplying voice and broadband access.

The math is simple enough: about 25 percent of SMB spend is for communications; about 75 percent for applications and hardware to support applications. To get more of the wallet, retailers of SMB services have to address applications, not just voice and broadband access.

Cbeyond's Enhanced Web Hosting package offers small businesses the essential tools to launch and manage their online Web presence. With this package, Cbeyond can host a company's website, configure their domain or transfer an existing domain to the company's Cbeyond account. Further, the design-it-yourself Web application available with this package enables small businesses to build and customize their own website by choosing from more than 200 pre-configured, easily customizable templates. The package also supports flash and video files to create a rich user experience.

International LD Gets More Mobile

At least where it comes to international long distance, sometime in 2009 it is conceivable that more calls will terminate on mobiles than on fixed lines, according to researchers at TeleGeography.

That doesn't mean most international calls will originate on mobiles, though. One of the dominant patterns will be landline origination, mobile termination.

The reason users and service providers will care about such trends is that retail prices and intercarrier compensation rates are based at least in part on what sort of network terminates a call. So changes in termination patterns directly will affect revenues that accrue to various providers of terminating service.

If You Build Will They Come?

Though it now is apparent communications service providers will have to become managed service providers over the long term, the way the need for viable applications is discovered, thrid party applications can be developed and sold remains a thorny problem. 

And the problem is measurably harder on the mobile side of the business, if only because applications have be tweaked for every handset the apps are supposed to run on. For this reason, some developers may well find it is easier to work with fixed line providers, as crazy as that might sound. 

Nor is it going to be especially easy for independent developers to get business deals done. "For two guys in a garage to make five different code applications, it's very hard," says Mark Kvamme, Sequoia Capital principal. 

The dream is to have any application run on any device and over any network. Ideally that allows developers to concentrate on what engages end users, instead of how to develop and deliver the apps. Platforms with large user  bases will help. The Apple iPhone is the best current example, though many have hopes for Google's Android OS as well. 

But business models remain a challenge as well, as it is doutbtful advertising will support most of the new apps developers expect to make available. That means subscriptions, which in turns means a really-compelling value proposition and serious willingness to pay. Few apps so far have that sort of status. 

For that reason along, a focus on business apps would seem to make sense, though the thought probably is unappetizing for many developers. 

All of which suggests the managed services business has a rather large opportunity before it, if some of these obstacles can be surmounted. Namely, make the process of aggregating demand, then authoring and delivering services--with huge scale--and simply. 

How Should VARs Sell Carrier Services?

Many solution providers these days would at least consider adding carrier sales to their product mix, providing the business case makes sense. But the actual sales model any particular solution provider should—or can—take will depend on several factors, say executives at Level 3 Communications, including:

• The current size of a solution provider’s customer base

• Rate of new customer growth

• Typical customer requirement for support at one or multiple locations

• Geographic scope of a solution provider’s operations

• Alignment to current solution provider strategy and focus

In broad outline, the “go to market” strategy will have smaller local VARs profiting from a “referral” or “assisted sale” fee arrangement. Some solution providers will consider becoming sub-agents. Solution providers serving multi-location enterprises will become carrier sales agencies

The new sales operations to sell carrier services can take several forms, Level 3 says.  If the agency route is selected, smaller organizations will train existing staff. Larger organizations may hire personnel with carrier sales experience. 

If a solution provider decides to take a less-extensive role, solution providers may choose simply to make referrals. In a more-substantial role, solution providers might become sub-agencies affiliated with a master agency.

There is no single business arrangement that makes equal sense for every solution provider. The typical smaller value added reseller with perhaps a dozen employees or less, working in a single metropolitan market, may not generally find that a feasible route, and might well opt for a referral fees model.

Broadband Stimulus Coming?

The Telecommunications Industry Association and Communications Workers of America have sent U.S. congressional leaders the outlines of a broadband deployment incentives program which they suggest be made part of any economic stimulus package passed by Congress early in the new year.

The proposal emphasizes tax incentives and direct grant. Specifically, the groups suggest allowing wireless broadband deployments to expense 75 percent of investments. Alternatively, the groups suggest a 15 percent investment tax credit for networks capable of 1.5 Mbps downstream/384 kbps upstream.

They suggest and 100 percent expensing or a 20 percent investment tax credit for new infrastructure capable of 3 Mbps downstream/1 Mbps upstream. the groups also recommend a 40 percent investment credit for a network providing 5 Mbps downstream/1 Mbps upstream.

For fixed broadband infrastructure, the groups suggest 50 percent expensing or a 10 percent investment tax credit for networks capable of 3 Mbps downstream/1 Mbps upstream, 75 percent expensing or a 15 percent tax credit for 25 Mbps downstream/5 Mbps upstream, or 100 percent expensing or a 20 percent tax credit for 50 Mbps downstream/20 Mbps upstream infrastructure.

They further propose a 40 percent investment tax credit for a network providing 100 Mbps downstream/20 Mbps upstream.

For satellite broadband infrastructure, which plays a special role in national broadband deployment, tax benefits associated with particular service capabilities remain to be determined, the groups now say.

The groups argue for investment in four segments: fixed broadband, wireless broadband, satellite broadband and broadband core and backbone transport.

The proposal also suggests “direct grants” for rural broadband deployments. TIA suggests a $25 billion grant program for deployment of broadband infrastructure in unserved areas.

Consumer Recession Behavior Still Consistent

In some ways, consumer behavior is similar to past behavior in recessions, a Parks Associates survey finds. What is similar is the greater--not lesser--reliance on multi-channel video services.

What is different is the bigger role for video on demand, especially of the "free" or "subscription" variety.

One suspects, though data is not yet available, that roughly the same sort of trend will be seen in the mobile and broadband access areas as well. People aren't going to disconnect. But they might shift buying a bit, delaying upgrades or purchases of advanced features and services.

Viral Works

Social media marketing might be more effective than just putting ads on social networks, according to SheSpeaks. The reason? Though women are active social networkers, a substantial percentage ignore ads or are annoyed by them. About 26 percent of respondents to a recent SheSpeaks-sponsored survey actively ignored most online ads and 20 percent were annoyed by ads on social networking sites.

For that reason, SheSpeaks argues that social media marketing—not just ads on social networks—could be especially effective among women for spreading word-of-mouth information.

About 46 percent of all women surveyed by SheSpeaks now use social networks. And since most observers note that Internet use and social networking are more common among younger users than older users, it probably is noteworthy tht more than 40 percent of women in their 40s have a social networking profile, and women with children seem to be active social networkers.

More than 70 percent of women with children ages 13 to 17 had talked about products on social networks, compared with 62 percent of all responding women.

“40-somethings are active users and members of online social networks,” says Aliza Freud, CEO of SheSpeaks, in a statement. “These women have started to use the Web and social networks in ways that mirror the rest of their lives—from finding out about a product to shopping or monitoring their children’s activities.”

Female Internet users ages 45 to 54 are a larger audience than male Internet users of the same age, according to comScore Media Metrix. There are also far more female Internet users ages 45 to 54 than there are ages 55 to 64.

When Bad People Use Good Technology

Technology now plays a key role in enabling terrorists, says New York Times reporter Jeremy Kahn. The attackers studied satellite images of the city online, navigated using the global positioning system, used a satellite phone and VoIP. In fact, VoIP was used during the Mumbai hotel attacks during the occupation of at least one hotel to keep terrorists aprised of security force movements, Kahn notes.

Indian security forces surrounding the buildings were able to monitor the terrorists’ outgoing calls by intercepting their cellphone signals. But Indian police officials said those directing the attacks, believed to be in Pakistan, were using a VoIP phone service that has complicated efforts to determine their whereabouts and identities.

In mid-October, a draft United States Army intelligence report highlighted the growing interest of Islamic militants in using VoIP, noting recent news reports of Taliban insurgents using Skype to communicate. 

Some people reflexively complain about electronic surveillance and privacy, which are reasonable concerns. Despite being unable to name a single instance when a a lawful U.S. citizen's use of technology has proven to be a problem, those same people would deny intelligence agencies the tools they need to prevent attacks or catch perpetrators. 

Several hundred innocent people are dead. A bit of balance would be nice. 

Recession ARPU Impact: This is Why

Alan Weinkrantz over at 3Screens.com makes a point that illustrates the likely impact of the current recession on retailers of voice, data an video services to consumer customers: average revenue per unit is going to be under pressure. Weinkrantz points out that he reduced his triple play billing from $164 to $94 per month by threatening to churn to another provider. 

"You just have to call 800-288-2020 and ask for a discount by telling them you are thinking of switching to your local cable or satellite provider," he says, saying that his U-verse Voice service pricing went from $35 to $25; U-verse 400 went from $99 to $59 and 

Broadband Elite went from $30 to $10. The discount is good for six months. 

"I told them to note it on my record that I was going to call back in May to ask for the same thing again," he says.