Boucher Replaces Markey: Expect Changes

Congressman Edward Markey, a key proponent of net neutrality, will leave his position on the committee that deals with telecommunications regulation to chair the House Energy and Commerce Subcommittee on Energy and the Environment. He will be replaced by Congressman Rick Boucher, who takes on the chairmanship of the Communications, Technology and the Internet Subcommittee of the House Energy and Commerce Committee.

It is worth noting when key communications regulators change seats, since regulators are a primary force in the creation of permissible business models and the potential profitability of communications business models. If his past actions are any indication, "net neutrality" is going to get a lot less attention, rural broadband much more.

Boucher is likely to support plans to tie universal service support to broadband, not voice. That could have positive investment implications for rural telcos and even for some tier one providers. Qwest, for example, has large rural service areas where it might benefit from increased support for rural broadband.

"The indication right now is that the Obama administration will be thoughtful," says Qwest CEO Ed Mueller. So support programs for rural broadband could change. Qwest favors a bidding process for any new government support for building rural broadband facilities, a process it believes it can win. "But we think we'd get a decent return on that," Mueller says.

The other structural change that would help Qwest is if USF funds were awarded on a community-by-community basis, not on a statewide basis. The reason there is that Qwest operates in many states where it serves both urban communities and lots of smaller rural communities. Obviously, that formula restricts Qwest from getting USF support to serve a large number of rural communties .

"More broadband support would be good for Qwest," says Mueller. "We just want to bid on it."

Using "Password Manager"

I've been testing a password manager program, "Password Manager," created by Large Software (www.largesoftware.com), which earlier released PC Tune-Up. Now, some of you may not think a password manager is a useful thing, so you can skip to another post. Personally, I live on the Web for professional reasons, and there no longer is any easy way for me to remember all my user names and passwords.

Some of you may be diligent about storing all your user names and passwords someplace, but that gets to be a chore, not to mention a security risk. Those of us who travel need our identities with us on the road. Retrieving them from a secret location in our offices or homes is not a convenient option. Sticky notes are worse.

Password Manager encrypts each saved password and also protects the program by offering a master password, keeping all the information stored protected and secure. For obvious reasons I have not tested that particular feature. I also use fingerprint readers to protect access my machines, so the additional level of protection is comforting, I will say that.

Password Manager is built to automatically recognize when a user is returning to a site for a login. For new accounts, the system completes the user’s login information in order to eliminate cumbersome set-up forms. Keystrokes are concealed to avoid keyloggers or spyware from stealing sensitive information.

The application pretty much runs after you download it. I did experience a bit of wondering whether it was working at first, as I was using the Google Chrome browser. I figured out what was going on after I switched back to Mozilla Firefox. Password Manager also works on Internet Explorer, of course.

If you decide to change a password, the program gives you a prompt, asking if you want to proceed.

The login information and passwords are available only when the password storage database is unlocked by an authorized user. In my case, the fingerprint swipe seems to do the job, so I can't speak to whether one has to enter the master password to activate the vault.

Password Manager is said to protect users from keylogging (the unauthorized monitoring of your key strokes by a third party). Again, I believe this claim, though I haven't tried to verify it by hacking my own machines.

I recently spoke with a buddy who uses a different password manager and was unhappy with it. Except for the fact that I have to remember whether I am in Chrome or Firefox or Internet Explorer, I haven't had any problems at all. Add support for Chrome one of these days and I'll be even happier.

Each of you will have to decide whether it is worth $30 to automate your password entry chores. Speaking for the skin on my fingers, it is quite useful. I use fingerprint readers so it is important there be recognizable skin on those fingers!

By the way, I just ran a PC Tune-Up scan on a machine that hadn't been scanned before and the software found 266 problems, about half of the "high priority" sort and about half of the "medium priority" sort. I'm a dumb end user so I have no idea what all that stuff was, though they seem to be "invalid application paths."

Flat Consumer Electronics Revenue Growth: CEA Predicts

During the 2001 through 2004 period, when the U.S. economy went through, and then came out of, the "Internet and telecom bubble," household telephone expenditures held constant at 2.3 percent of all household expenditures, a rate constant from 1996 through 2004. Only in one year--2002--was spending different, and in that year, household expenditures rose to 2.4 percent.

That might be the sort of year 2009 is for the consumer electronics industry. Or at leaset, that appears to be what the Consumer Electronics Association believes will happen in 2009.

The consumer electronics industry is projected to generate $171 billion in U.S. shipment revenues in 2009, according to the semi-annual industry forecast released by the Consumer Electronics Association. That would be a decline of about $1 billion from the estimated $172 billion CEA estimates the industry earned in 2008.

“The CE industry is resilient but not immune from the business cycle," says CEA CEO Gary Shapiro. The essentially flat forecast would be something of a break with past history. Over the past 10 years, annual revenues have not slipped, according to iSuppli, but growth rates have slowed, as this chart shows.

As early as 2006, for example, iSuppli projected growth rate declines from the seven to nine percent range down to the three percent range, compared to the nine percent annual increases seen between 2001 and 2005. The essentially flat CEA forecast, should it materialize, would be something of a data point outlier. But then, CEA might be expecting a recession that has different characteristics than past recessions.

Flat growth would seem likely, if past measures of consumer spending on communications, for example, during a recession, remain true to form. There is no evidence that broadband or mobile growth went into reverse during the last time of turbulence, for example. Internet access penetration of homes actually accelerated from 1997 through 2003. Where Internet growth was 18.6 percent in 1997, it stood at 50.5 percent in 2001 and at 54.6 percent in 2003.

Actual household spending on telecommunications rose steadily from 1981 through 2004, the Federal Communications Commission reports, with one exception. In 2002, spending flattened, rather than growing.

Broadband penetration was 4.4 percent in 2000, 9.1 percent in 2001 and 19.9 percent in 2003.

Wireless presents a similar picture. In 1999 six-month mobile revenues stood at $19.4 billion. Revenue then grew to $24.6 billion in 2000, to $30.9 billion in 2001, to $36.7 billion in 2002, $41.4 billion in 2003 and $48.3 billion in 2004.

Between December 1999 and December 2004, the average monthly wireless bill climbed steadily, from $41.24 in 1999 to $50.64 in December 2004.

There is, however, evidence for "flat" growth during a recession. In 2002, household expenditures on communications overall did flatten, but only for a single year, and then only slightly, on the order of $1 a month in reduced spending.

The issue is whether this recession is structurally different from past recessions, though. Nobody knows, yet.

50% Mobile Broadband Penetration by 2013?

The actual extent of mobile broadband usage in five years time is quite a jump ball. The conventional wisdom--undoubtedly correct--is that mobile broadband is growing, even if we might be a bit ahead of the game to call it "mainstream" at the moment.

If one assumes a smartphone sale is farily linearly a predictor of the sale of a data plan, increasingly of the broadband sort, then at the moment sales volume in the U.S. market is something on the order of 20 million units a year, but scaling smartly.

Of course, though we normally assume the sale of a smartphone comes with an activated data plan, that might not always be the case, as some of the market is of the "replacement" sort. Also, smartphones are not the only driver of mobile broadband. Of late, PC cards have been substantial contributors.

So the big change in market receptivity is the expansion of mobile broadband from the "mobile email" and "mobile PC" to "mobile Web" user cases.

In 2008, there might have been 38 million mobile email users in the United States, a reasonable proxy for the smartphone part of the mobile broadband ("data plans") market. That, at least, is the market size researchers at Mpathix suggest was the case.

Nielsen Mobile estimated in August 2008 that there were 13 million mobile data cards in use in the United States, to give you some idea of the installed base.

At the end of 2006, out of the 225 million cellular subscribers in the United States, 15 million used a 3G-based mobile broadband service via cell phone, PDA More about PDAs, laptop or other device, researchers at Parks Associates estimated. Parks Associates also estimated there were 3.5 to 4 million data card service subscribers in the United States in mid-2007.

That clearly is changing now with the advent of mobile Web devices such as the Apple iPhone, to be sure. Still, 38 million is a significant increase from the 12.1 million mobile email users in 2005, MPathix says. It is an even bigger increase from the six million mobile email users Research in Motion estimated were part of the U.S. user base at the beginning of 2006.

Parks Associates now estimates that nearly 60 million smartphone units will be sold in 2013. Parks Associates also estimates that in 2013, U.S. consumers will purchase over five million connected cameras, over one million 3G-enabled MIDs (portable media players), and over two million 3G-enabled netbooks (mini-PCs). There arguably is a less-linear relationship between purchases of those sorts of devices and activation of mobile broadband service, though.

So Parks Associates estimate that, by 2013, there will be over 140 million U.S. consumers paying for mobile broadband, including services provided to every device capable of such communication, argues Kurt Scherf, Parks Associates VP. As there are now 263 million mobile accounts in service, the 140 million represents more than half of the total number of wireless accounts. True, wireless subscriptions continue to grow, though at a slowing rate as we near 90 percent pentration. Still, that is a rather breathtaking scenario.

Keep in mind that U.S. fixed broadband penetration is somewhere north of 55 percent, in a market where 20 to 25 percent of homes do not own PCs, and in a market where perhaps 10 percent of Internet users remain on dial-up services, and perhaps 60 percent of those users say they do not want to upgrade to broadband.

The 50-percent mobile broadband penetration would represent a more-extensive degree of penetration by far, as it represents penetration of people, not of dwellings.

A Bold Forecast for U.S. Mobile Broadband

“By 2013, there will be over 140 million U.S. consumers paying for mobile broadband, which will extend video, communication, networking, and support services to all sorts of devices,” said Kurt Scherf, vice president, principal analyst, Parks Associates.

That's a bold forecast. But not outlandish if "mobile Web" gets traction as "mobile email" and "mobile PC" segments did.

Global revenues from mobile data services are set to exceed $200 billion this year for the first time, according to Informa Telecoms & Media. Total mobile data revenues were approximately $157 billion in 2007.

Mobile operators now generate approximately one fifth of their revenue from data services.Informa Telecoms & Media estimates that non-SMS data contributed $17.48 billion of revenue in the first quarter of 2008, accounting for 35.6 percent of total data revenues.

Tech Support on Installing a Husband

Dear Tech Support, 

Last year I upgraded from Boyfriend 5.0 to Husband 1.0 and noticed a distinct slow down in overall system performance, particularly in the flower and jewelry applications, which operated flawlessly under Boyfriend 5.0. In addition, Husband 1.0 uninstalled many other valuable programs, such as: Romance 9.5 and Personal Attention 6.5, and then installed undesirable programs such as NBA 5.0, NFL 3.0 and Golf Clubs 4.1.

Also Conversation 8.0 no longer runs, and Housecleaning 2.6 simply crashes the system. Please note that I have tried running Nagging 5.3 to fix these problems, but to no avail. 

What can I do? 

Signed, Desperate. 

DEAR DESPERATE:

First, keep in mind, Boyfriend 5.0 is an Entertainment Package, while Husband 1.0 is an operating system. Please enter command: ithoughtyoulovedme.html and try to download Tears 6.2 and do not forget to install the Guilt 3.0 update. If that application works as designed, Husband 1.0 should then automatically run the applications Jewelry 2.0 and Flowers 3.5. 

However, remember, overuse of the above application can cause Husband 1.0  to default to Grumpy Silence 2..5 , Happy Hour 7.0 or Beer 6.1. Please note that Beer 6.1 is a very bad program that will download the Farting and Snoring Loudly Beta. Whatever you do, DO NOT under any circumstances install Mother-In-Law 1.0 (it runs a virus in the background that will eventually seize control of all your system resources.) 

In addition, please do not attempt to reinstall the Boyfriend 5.0 –program. These are unsupported applications and will crash Husband 1.0.

In summary, Husband 1.0 is a great program, but it does have limited memory and cannot learn new applications quickly. You might consider buying additional software to improve memory and performance. We recommend Cooking 3.0 and Hot Lingerie 7.7. 

Good Luck! Tech Support

Broadband: This Doesn't Look Like a Problem

There continues to be concern expressed about the "lack" of broadband adoption in the U.S. market in some quarters. This illustration of the current and expected state of affairs for a number of nations by Analysys Mason does not suggest there actually is a problem. 

The United States appears to be in the mainstream of penetration rates. 

The Next Big Thing in Wireless Packaging

In the U.S. mobile business, there have been at least two major marketing concepts with huge impact on consumer adoption: "Digital One Rate," which erased the distinction between "local" and "domestic long distance," and "family plans," which principally are responsible for extending mobile penetration to most members of a family. 

The next big innovation? At some point, "data one rate combined with a family plan." The reason? Mobile broadband growth will be retarded until the data access equivalent of a family plan can be bought. Sprint already has taken a step in this direction by offering an "Everything Data" plan supporting two lines with Web and e-mail connectivity plus 1,500 minutes of shared voice services for $130. 

In fact, it is likely one can carry the concept just a bit further and create "data one rate family plans" that simply allow some consumers to buy a single broadband plan that supports all family members, whether in mobile or fixed mode, for a single rate. Executives at AT&T have been talking conceptually about unifying wired and wireless broadband as well, but the company hasn't actually launched anything like that. 

In principle, the idea is a simple extension of family plans, buckets of minutes or text messaging plans already in widespread use. 

There simply is going to be high consumer resistance to buying separate broadband connections for every connected mobile device. 

Clearwire has been talking about casual use plans, which likewise is a step in the right direction AT&T might also be looking at some transaction-based billing scheme that would support multiple Internet-connected devices. There won't be a marketing "big bang" on the order of Digital One Rate or family plans until carriers decide to get just that serious about mass adoption of broadband services. 

More Enterprises Disconnect Locations

The number of enterprises disconnecting network locations reached its highest level in six years during 2008, according to new research by Vertical Systems Group. In a survey of U.S.-based enterprise network managers, 14 percent reported that they had eliminated one or more network locations without adding or moving others. This figure compares to only nine percent from a survey conducted a year ago.

For the most recent survey, 41percent of respondents reported both additions and eliminations, while 16percent added locations without any eliminations. About 29 percent reported no change.

"The pace of network site additions stalled in the second half of 2008, and a significant number of networks are shrinking as compared to a year ago," said Rick Malone, principal at Vertical Systems Group. "Economic uncertainty and business slowdowns are forcing unplanned network reconfigurations, particularly within hard-hit industries like retail and financial.

Location eliminations peaked during the fourth quarter, and we expect this trend to continue throughout the first half of 2009," says Malone.

More At-Work Video Viewing, Nielsen Says

Though some studies continue to suggest that most online video is viewed at home, there also is growing evidence that at-work viewing is up as well. Among online TV viewers, almost nine out of 10 watch online broadcasts at home, according to the Conference Board. 

But a new study by Nielsen Online suggests people spend more time streaming video during weekday working hours than do so on weekends or at home on workday evenings. About 96 percent of at-work Web visitors in October 2008 were using a broadband connection. 

Since most online video is viewed on a PC, and with many employees spending nearly eight hours a day at their computers, workdays are prime time for online video viewing, Nielsen suggests. Nielsen says that 65 percent of online video viewers stream content between 9am to 5pm Monday through Friday, compared to 51 percent of online video viewers who log on between 6am and  8pm on weekends, or 43 percent on workday evenings between 8 pm and 11 pm. 

BT to Get Universal Service Relief

In a major sign of the changing times, it appears Ofcom, the U.K. communications regulator, finally is ready to release BT, the former monopoly provider, from its universal service obligations, which now require BT to run a phone line to every home in the country, as well as provide payphones and other basic services available at a reasonable cost.

Office of Communications Minister Stephen Carter is expected to propose that the legal requirement for BT to provide a phone line to every UK home become a "shared" responsibility whose costs will be borne collectively by all wired or wireless service providers.

Under the proposed new rules, universal service support will be provided by virtually every provider, whether wireless or wireline, and the support will be for universal broadband service, rather than narrowband voice, as has been the case in the past.

Today, BT has sole responsibility for supplying a phone line to every U.K. home. Current estimates are that this costs BT between £57 million and £74 million a year. Under the new rules BT would no longer bear this cost alone.

Presumably the new rules would require wholesale customers of OpenReach to share in universal service obligations.

Though there is no automatic and linear way to apply regulatory formulas used in one country to any other, there is clear logic to redefining "broadband" as the service for which universal service rules apply, rather than "voice," and equal logic to "burden sharing" by wholesale customers using the BT network, given the U.K.'s functional separation regime, where broadband access widely is available as a wholesale service for other retail competitors.

The North American regulatory regime is quite different, so a brute force application might not be feasible in either the United States or Canada, neither of which have the same sort of wholesale regime.

In the U.S. market, only one provider in each market, typically the incumbent local exchange carrier, has a legal requirement to act as "carrier of last resort," providing voice service to all potential customers. But observers long have wondered how long that state of affairs could last as more communications shift to wireless and as incumbents lose market share. In at least a few U.S. markets, the incumbent telco is in fact no longer the biggest provider of wired voice services.

How to rationalize and update universal service support therefore has been, and will continue to be, a contentious issue for U.S. competitors.

Net-Connected TV Theme at CES

Net-connected HDTVs and applications look to be one of the more-prominent themes from this year's Consumer Electronics show. 

Samsung Electronics Co.and Yahoo! Inc. have announced a new Internet-based service to Samsung televisions available in the spring of 2009. Select models in Samsung’s 2009 flat-panel HDTV line-up will be powered by the Yahoo Widget Engine, which enables TV watchers to interact with " TV Widgets"  that bring Web-based content, information and community features to the TV.

Select models in Samsung’s 2009 flat-panel HDTV lines will support the new TV Widget service, called “Internet@TV - Content Service.” The service allows users to engage in a variety of experiences that traditionally could only be enjoyed on a PC. 

That includes functions such as tracking a stock portfolio, reading headline news, browsing through videos, sharing photos or communicating with friends. Users can access the service by connecting the HDTV to a home network via the built-in Ethernet port or using an optional Wi-Fi USB dongle.

The suite of TV Widgets range from Flickr, Yahoo! News, Yahoo! Weather and Yahoo! Finance, to third-party content from well-known brands, including USA Today, YouTube, eBay and Showtime Networks. The content and services offered will grow to include video streaming and other popular internet services over time. 

Developers will be able to develop and deploy TV Widgets for the television by using the open-platform Widget Development Kit. 

There has to be a Pony in Here Somewhere

As the old story goes, a kid was found whooping and hollaring in the stable when mucking out the stalls. When asked why, the child says “With all this **** around, there must be a pony in here somewhere.” 

One wonders if Internet service providers might just want to whoop and hollar at some point about net-connected TVs and online video in a broader sense, despite the obvious business model challenges the applications now provide. 

The number of online video viewers will grow from 563 million at the end of 2008 to 941 million by 2013, according to ABI Research. Ways to watch online video on standard TVs will be a key enabler of that growth, which explains why firms such as Cisco, not in the past associated with such consumer technology, will be entering the market for devices that allow watching of online video on standard TVs, rather than PC screens. 

While today’s consumer is most likely to watch online video on the PC screen, over time more and more consumers will watch over-the-top video delivered to the living room, ABI projects. That's one reason Netflix will be introducing a net-connected HDTV from LG Electronics at this year's Consumer Electronics Show. The device will connect directly to the Internet, without the need for a PC or other device, a Wi-Fi or other hard-wire connection from the PC or similar intermediary box to the TV. 

Netflix will tailor the TV to access the Netflix online service offers 12,000 movie and television titles. Yahoo  and Intel Corp. separately plan to announce support from several major consumer-electronics companies to sell TV sets that come with widgets that make it easier to call up Web content on TV sets using ordinary remote controls rather than computer keyboards. Yahoo's Widget Channel is an example of that. 

It seems unlikely such net-connected TVs will be a major mass market success any time soon, though. The additional hardware cost will be as much as $300 initially. And then there is the obvious challenge of user experience. Not many broadband connections will have the latency performance--nor assured bandwidth--to deliver large pictures on HDTV screens. 

On the other hand, such devices are a perfect example of an application that really would benefit from quality assurance of the sort ATM was designed to provide, and that traffic shaping, edge caching and other forms of assured content delivery also provide. 

Real-time services require traffic shaping and network management. Net-delivered video to HDTVs is going to prove the thesis. Right now, ISPs are mucking out the stalls. Someday, they will find the pony. 

Small Business: Big Segment

There are several reasons why small business customers are becoming more important to communications service providers of all types. For starters, there is more pressure in the consumer market, chiefly pressure on fixed voice lines and associated revenue-driving features. 

For many service providers, the small business segment is important for the same reason trans-national enterprises are more important for tier one providers.  As growth gets harder "in territory," providers must find new customers "outside of region." And costs being what they are, it is easier to expand out of region when serving business customers. And most of those potential customers are in the small business segment. 

Small business and mid-sized business customers are a key driver of growth strategies for incumbent and attacking providers alike. Smaller business customers have been the key segment for competitive local exchange carriers, value-added resellers, long distance resellers, many Internet service providers, managed service providers and Interconnect companies for decades, in some cases. 

Long Tail Doesn't Apply?

As observers have started to track sales of digital goods more closely, some apparently-contradictory evidence has started to appear about the "long tail" theory of sales in the digital domain. The concept: cheap digital distribution changes the retail sales function, allowing profitable sales of low-volume titles or items on a scale not possible in a physical distribution strategy. Most observers instinctively would agree. 

The key prediction has been that online distribution would allow niche businesses, content and goods to thrive in a digital distribution context impossible to sustain in a physical distribution context. As commonly understood, perhaps an additional 20 percent increase in volume should be feasible, as well as a change in "mass culture" that would fragment demand. 

But some sales data contradicts the notion. A new study by Will Page, chief economist of the MCPS-PRS Alliance, a music royalty collection organization, suggests that online sales success still relies on big hits. The study found that 80 per cent of all revenue came from around 52,000 tracks. For albums, of the 1.23 million available, only 173,000 were ever bought, meaning 85 per cent did not sell a single copy all year.

Frankly, the long tail now appears, in one sense, as the triumph of hope over experience. Many "wanted" online distribution to change purchasing patterns. The notion was that once huge variety was available, tastes would change. It isn't so clear why it is assumed "tastes" will change with different distribution. It is clear why fulfillment will change with cheaper distribution. But efficient, or better, distribution still should result in a "long tail" of demand that is the same as a distribution-induced "short tail" of demand. 

The reason derives from the theory itself. The idea behind the "long tail" is not actually new, and dates back to an Italian economist, Vilfredo Pareto, who in 1906 coined the Pareto Principle, popularly known as the 80-20 rule. Basically, the idea is that in much of life and nature,  roughly 80 percent of the effects come from 20 percent of the causes.

The same concept is known as Bradford's Law. 

As implied by the theory of the long tail, online distribution should allow retailers to sell small volumes of hard-to-find items, instead of selling a smaller number of highly-popular items. Most people can grasp that. What isn't so clear is why that expected distribution curve will be a "new" Pareto curve, instead of validating the existing Pareto curve. 

Under any normal set of circumstances, a Pareto distribution is what one would expect to see. Some have pointed to music sales at Rhapsody, an online music service. Of the 735,000 items for sale, 39,000 account for 78 percent of sales, while 796,000 titles represent 22 percent of sales. 

Likewise, Netflix data suggests 20 percent of total rentals are of "tail" or low-volume titles, while 80 percent of rentals are basically "hit movies" one would expect most people to be interested in. 

Is that confirmation of the operation of a Pareto distribution? Yes. Does it represent incremental sales of 22 percent that might not occur in a physical distribution scenario? Yes. Are the results unexpected? Not if one expects to see a Pareto distribution. 

Is the idea wrong, or useless? Not really. A Pareto distribution can assume a 70-30 pattern, for example, suggesting a bigger role for niche products than before. That represents an important shift of opportunity for providers of niche services and products because of online or Web distribution. 

But the long tail might not mean a revolution. Forrester Research, for example, estimates seven percent of retail sales in 2008 will have been made online, up from 3.2 percent in 2007. What does that mean? Most sales follow a Pareto curve: 97 percent of things sold still are sold the traditional way. There will be further shifts, of course.

But Pareto would suggest online sales will settle in at around 20 percent of total sales, at best, on a sustainable basis.