Consumer Sentiment Shift?

The important thing about the recession is to look for signs of change, for evidence of a bottoming, as the recession now has been formally working its way through the economy for 14 months. Though it is not definitive by any means, a shift in consumer sentiment already might be occurring. 

According to the latest ChangeWave survey of U.S. consumers, conducted January 5-9, there were signs that consumer spending may finally be stabilizing.  While overall spending still looks terrible, ChangeWave notes, the 90-day outlook is not quite as "horrible" as it was in the December 2008 survey. 

Fifty-seven percent of U.S. respondents said they'll spend less during the next 90 days than they did a year ago, but that's three points better than in the December survey. Another 13 percent said they'll spend more -- two points better than previously. 

Respondents were also queried on their current impressions of the economy and, once again, while things look bad, they don't appear quite as awful as they did in December. About 12 percent said they think the economy will improve in the next 90 days, three points better than in December. About 56 percent said they think the economy will worsen during the next 90 days, but a significant 10 points better than the December low.

Other sentiment indicators also show some improvement, according to the study.

Some five percent said they are very satisfied with the current state of their personal finances, up one point from the record low in December, while another 39 percent said they're somewhat satisfied, up eight points.

Twenty-six percent said they are now more confident in the U.S. stock market than they were 90 days ago, 13 points better than previously. Only 31 percent said they're less confident, a 25-point improvement 

The new data is important because the first step in the recovery is for a bottom to be reached. Changing sentiment is one such sign. In past recessions, peak unemployment claims have been an indicator as well, as significant layoffs are a lagging metric. Often, if not typically, the "bottom" is reached about 30 days after a month where "peak" layoffs occur. 

AT&T Wireline Revenue Now Led by Video

Here's what some might consider the key take-away from AT&T's fourth quarter results: "Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress for our company," says Randall Stephenson, AT&T chairman and chief executive officer.

There are other noteworthy take-aways, though. The video business now is leading wireline revenue growth at AT&T. It doesn't appear AT&T is doing as well as Verizon is in the broadband access area, though one must infer that from the "non-reporting" of digital subscriber line customer performance. 

Revenue growth was driven by 13.2 percent wireless gains and a 14.2 percent increase in wireline IP data, which include AT&T U-verse services and business offerings such as VPNs and managed Internet services.

Verizon can say the same, as it reported record growth in video and data services. Verizon added 303,000 net new FiOS TV customers and 282,000 net new FiOS Internet customers, the highest ever for the company.

It also posted a 14.3 percent increase in consumer ARPU in legacy telecom markets and  8.4 percent increase in revenues from business services. 

U-Verse digital TV growth accelerated. AT&T signed up 264,000 new U-Verse TV subscribers, its highest ever. Combined with Verizon's 303,000 new FiOS subscribers, it seems like the telcos took solid share from cable and satellite last quarter.

U-verse network deployment now reaches 17 million living units. 

AT&T added 2.1 million net wireless subscribers, down from 2.7 million in the fourth quarter of 2007. Verizon, added 1.2 million net subscribers during the fourth quarter.

Data = 44% of Verizon Wireline Revenues

The most-interesting tidbit from Verizon's fourth-quarter earnings was the news that wireline data revenues now are 43.6 percent of total wireline revenues. That of course is significant because Verizon and other telcos are working to replace slipping wireline voice revenues as their revenue mainstay.

And though wireless obviously is important, the landline results show the contributions broadband services can make for wireline providers, exclusive of wireless services. 

Wireline data revenues of $5.2 billion in the fourth quarter 2008 represented an increase of 10.9 percent compared with the fourth quarter 2007.  

Total broadband connections were 8.7 million, a net increase of 214,000 over the third quarter 2008.  This includes a decrease of 68,000 DSL-based Verizon High Speed Internet connections, which was more than offset by the increase in FiOS Internet customers.  The 8.7 million is an increase of 8.2 percent year over year. 

Broadband and TV products now account for more than 31 percent of consumer ARPU in legacy markets, compared with 22.7 percent in the fourth quarter 2007.  The ARPU among FiOS customers continues to grow and is more than $133 per month. 

Verizon: Strong 4th Quarter

Observers watching intently for some sign of how the recession is affecting communications services have a major new data point. Verizon Communications has reported what happened in its fourth quarter, and revenue growth accelerated.  There is lots more data required, but so far, the recession has not had a negative effect on Verizon. 

In fact, Verizon Communications continued to grow sales of broadband, wireless and strategic business services in the fourth quarter 2008. Verizon's total operating revenues grew 3.4 percent in the fourth quarter 2008, increasing to $24.6 billion from $23.8 billion in the fourth quarter 2007.  

After adjusting for the spinoff of non-strategic local exchange and related wireline business assets early in 2008, this represents an increase of 4.6 percent. 

Wireless organic growth totaled 1.4 million net customer additions. Verizon Wireless also continued to have low churn of 1.35 percent churn among all customers, and 1.05 percent among the company's retail post-paid customers. 

Average monthly revenue per customer increased for the 11th consecutive quarter.  Total service ARPU of $51.72 was up 1.4 percent year over year, reflecting strong growth in total data ARPU, which was up 27.9 percent over the same period. 

Verizon added 303,000 net new FiOS TV customers, compared with 226,000 in the fourth quarter 2007. 

FiOS TV sales penetration (sales as a percentage of potential customers) increased to 20.8 percent, compared with 16.0 percent in the fourth quarter 2007. FiOS TV service was available for sale to 9.2 million premises by year-end 2008.  This represented a 57 percent increase in the availability of FiOS TV - and, by extension, of "triple play" bundles of FiOS TV, Internet and voice services - since year-end 2007. 

Verizon added 282,000 net new FiOS Internet customers, compared with 244,000 in the fourth quarter 2007.

FiOS Internet sales penetration increased to 24.9 percent, compared with 20.7 percent in the fourth quarter 2007. FiOS Internet was available for sale to nearly 10 million premises by year-end 2008. 

Broadband and video revenues from consumer customers totaled nearly $1.2 billion in the fourth quarter 2008, representing year-over-year quarterly growth of 42.0 percent. 

Growing revenue from broadband and video services drove consumer ARPU in legacy Verizon wireline markets (which excludes consumer markets served by the former MCI) to $68.46 for the fourth quarter 2008, a 14.3 percent increase compared with the fourth quarter 2007. 

Verizon Telecom, which serves domestic consumer and small-business customers, and Verizon Business, which serves large-business and government customers worldwide, each had 2.3 percent year-over-year quarterly revenue declines, continuing the secular trend of voice line loss  This was the smallest decrease in 12 quarters, however. 

Total broadband connections were 8.7 million, a net increase of 214,000 over the third quarter 2008.  This includes a decrease of 68,000 DSL-based Verizon High Speed Internet connections, which was more than offset by the increase in FiOS Internet customers.  The 8.7 million is an increase of 8.2 percent year over year. 

Broadband and TV products now account for more than 31 percent of consumer ARPU in legacy markets, compared with 22.7 percent in the fourth quarter 2007.  The ARPU among FiOS customers continues to grow and is more than $133 per month. 

Wireline data revenues, which represented 43.6 percent of total wireline revenues, were $5.2 billion in the fourth quarter 2008, an increase of 10.9 percent compared with the fourth quarter 2007.  

That might one of the more-important developments. Where its wireless business had been anchored by voice, Verizon now has grown data to nearly 44 percent of total. 

Conferencing Apps Lead UC Deployments?

Conferencing applications seem to be lead unified communications applications, according to a survey of IT professionals surveyed on behalf of CDW Corp. 

CDW's poll found rich media conferencing strategies are emerging as a dominant approach to UC. Some 39 percent of respondents report their organizations are choosing that approach over telephony-centric approaches (32 percent), email-centric (18 percent) and instant messaging and presence approaches (11 percent). 

While the survey found that only six percent of organizations report their UC deployments are complete, it also uncovered gathering momentum for UC adoption, with 20 percent of organizations actively implementing UC and 33 percent actively planning for implementation. 

Seventy percent of organizations currently in the UC planning and implementation phases expect to complete their adoption within two years. 

Sixty-one percent of respondents identified increased productivity and 56 percent identified operating cost reductions as the most important benefits. Other benefits cited included more reliable communication (48 percent), improved cross-functional communication (44 percent) and more effective use of remote or mobile workers (41 percent).

Wireless Substitution, Cable Digital Voice Cost U.S. Telcos $23 Billion a Year

In-Stat researchers estimate North American cable operator digital voice service revenues will hit just under $10 billion during 2009, from an installed base of 23 million cable telephony households.

Cable telephony subscriber growth continues to be strong, with almost eight million new subscribers added around the world in 2008, says In-Stat. Growth in North America has been particularly strong.

Globally, cable telephony service revenues represented about $12.6 billion in 2008, up from $10.7 billion in 2007.

Total worldwide cable telephony subscribers reached 37 million by the end of 2008, and will rise to over 64 million by 2012, In-Stat projects.

So something on the order of $9 billion in annual revenue seems to be earned by U.S. cable operators in voice revenues that used to be provided by U.S. telcos. In fact, the revenue loss for telcos is greater, since most customers switch to cable for the lower prices.

If one assumes a 20-percent average discount, that's a loss of nearly $11 billion in lost U.S. telco voice revenue.

Assume there are 20 million U.S. households that have gone wireless-only, with a former average monthly bill of $30. That is about $7.2 billion in "lost" or "shifted" revenues. If one assumes a more-likely monthly bill of $50 a month, the lost revenue amounts to $12 billion.

In that case, wireless substitution and losses to cable operators are about equal contributors to telco voice line losses.

Rethinking Communications, in 7 Parts

Stealth and Partners Not Seeing Downturn

House Broadband Stimulus Bill Fails to Define "Open Access"

As sometimes happens, some lawmakers have proposed legislation possibly specifying policies they cannot define. In approving $2.9 billion for network build-outs in rural and underserved areas, the House Energy and Commerce Committee insisted that the funding comply with the Federal Communications Commission's statement of "Internet Freedoms" contained in FCC 05-151.

The House bill also calls for grant awards to be made for broadband networks using "an open access" framework that complies with the FCC 05-151 principles. The term ‘‘open access’’ is to be defined by the Federal Communications Commission not later than 45 days after the date of enactment of the law.

Those principles include the right of consumers to access the lawful Internet content of their choice and run applications and use services of their choice, subject to the needs of law enforcement.

Consumers are entitled to connect their choice of legal devices that do not harm the network and

are further entitled to competition among network providers, application and service providers, and content providers.  

Those "Internet freedoms" are not exactly the same thing as "network neutrality," though many observers seem to think they are identical.

Still, the Senate also has to approve the bill, so it remains unclear whether the language will be retained, in any case.

Some observers interpret this as calling for some form of network neutrality, though the term itself is a muddle whose meaning nobody can seem to agree on.

The House version of the bill panel calls for funneling new funds to the existing grant programs operated by the National Telecommunications and Information Administration. The House version calls for 25 percent of the $2.9 billion to be spent on areas of the country with no broadband access with the remaining 75 percent poured into "underserved" areas.

The other half of the $6 billion dedicated to broadband build out in the House stimulus package calls for $2.9 billion in grants and loans to administered by the Rural Utilities Service of the U.S. Department of Agriculture.

If the language survives in the Senate or any reconciled bill, presumably, any service provider that accepts the funding will have to comply with whatever the FCC defines as "open access" for all customers and services on that network.

One wonders whether content delivery services ultimately will be allowed, in that case, as CDNs must, by definition, employ packet discrimination to make their features work.

More Surprising News on Small Business IT Spending in 2009

Though it is possible decision-makers have changed their minds since late November, as of that period, nearly a third of 2,000 U.S. IT decision-makers in businesses of all sizes said they expected their 2009 budgets would increase over 2008 levels, according to research from Compass Intelligence. 

If respondents follow through with their stated intentions, U.S. IT spending will grow more than four percent by the end of 2009, with growth rising through 2013, Compass Intelligence says.

Growth will tend to stem from small and mid-sized companies and less from enterprise businesses. While the total U.S. IT market will grow 4.1 percent in 2009, enterprise spending will account for just 2.8 percent of spending growth.

About a third of respondents expect to spend more, about a third expect to spend the same amounts as in 2008 while a third expect budgets to shrink. We might add that this is not an atypical finding. 

However, 2009 ICT revenues will not come easy and are likely to be earned after the first quarter of this year because IT decision-makers also indicated they will cautiously plan their investments in the first couple of months.

"This isn't the first time that we've seen a recession in the last decade, and most ICT decision-makers have been in troubled times like this before - so have the line-of-business managers influencing them," says Kneko Burney, Compass Intelligence president. "Most IT & Business decision-makers are planning to spend through this slow-down."

Key areas of spending priority for 2009 are computer systems, wireless applications and services, business Web sites or Web infrastructure and business networks according to the IT decision-makers surveyed.  The order of key priorities varies among size of business, but the top four priorities are, for the most part the same, regardless of business size, Burney notes.

63% of Mobile Subs Are On Family Plans

Family Plans, offering a shared bucket of usage that multiples devices can share, have to  be judged one of the more important marketing innovations yet devised by the mobile industry.

About 63 percent of respondents to a recent survey conducted on behalf of Sprint Nextel said they were on such plans. Another 15 percent said they would consider joining such a plan. About 22 percent said they were not interested. 

Among the 22 percent of users are single people, who, by defintion, do not have family members to share buckets of usage with. 

Aside from that innovation, only the abolition of the difference between "local" and "long distance" calling rates had comparable impact on subscribership. 

33% of Wireless Users Say Mobile is "Only Phone I Need"

About a third of mobile users surveyed by Sprint Nextel say a mobile is the only phone they will ever need. About 76 percent say they would consider going "mobile only" because it is "more cost effective." 

Presumably that translates more or less directly with the notion that cutting a landline reduces cost. Still, there are indications that unified communications could be a problem solver as well.

About 36 percent say it is more convenient to receive calls on one line. About 33 percent of respondents say it more convenient to manage a single voice mail account. 

15% or 40%? WiMAX Share Could Hinge on Capital Markets

Whether WiMAX winds up being a 15-percent share or a 40-percent share of market might hinge on developments in the credit markets, in particular as it affects the fortunes of smaller and independent providers, says Paul Obsitnik, BridgeWave SVP.

Most observers think Clearwire is going to get the funding it requires, one way or the other. But “if credit markets stay frozen for 18 to 24 months,” it could be another matter. Of course, we might all agree that if that happens, we are all going to have problems bigger than WiMAX availability.

“If I had to bet, I’d say LTE will be the market share leader,” says Obsitnik, a prediction just about anybody would admit is the likely outcome, given the embrace Long Term Evolution has gotten by the global GSM mobile industry and even users of CDMA platforms.

“But WiMAX will have a good chunk of the fourth-generation business,” Obsitnik says.
“On WiMAX side, the big challenge is that it is difficult to build that much infrastructure very fast.”

But Obstinik says mobile broadband is a huge opportunity. “Every operator I’ve talked to sees a big usage explosion when unlimited plans are instituted,” he says. Some report that their demand is growing 100 percent every six to eight weeks.

The obvious challenge is to monetize that usage. “With full mobile broadband, all you can eat is an issue,” he notes. In a sense, Clearwire is unfettered because it is not cannibalizing a big installed voice base or existing mobile data revenue streams, he says.

That will make it easier to market plans where multiple devices can use a single bucket of usage, as voice and text messaging now are offered as part of family plans.

“We add value by providing ability to assist the scaling of networks more effectively,” Obsitnik says. TDM and SONET operations are an issue for cellular operators, who need to be careful about cutting over networks to IP. That’s why BridgeWave allows mobile operators to run both TDM and IP simultaneously, and then gradually shift, when LTE is a real-world commercial issue, he says.

I do think mobile side of the house is following the fixed line pattern, Obsitnik says. “First voice drives the model, then email, then Web, then video,” he says.

Truphone Now Available for Android G1

"Truphone Anywhere," an application for Android-enabled mobile handsets, is available now as a download on the Android Market in the U.K. and the U.S. markets.

A German version of Truphone Anywhere for Android is available and will be the first native language multi-communications application in the Android Market in Germany and Austria when it launches in March.

"Truphone Anywhere for Android" allows customers to take advantage of Truphone’s low international call rates, in addition to the cost of a local call.

Truphone customers can also easily instant-message their friends across a variety of networks including MSN, Yahoo!, Google Talk and Twitter from within one Android application. Customers can also call friends anywhere in the world on Google Talk for the price of a local call, and similarly will soon will be able to instant-message and call their friends on Skype.

Truphone is now available on Android, the Apple iPhone, the Apple iPod touch, Blackberry and Nokia devices.

Truphone Anywhere works in 33 countries around the world and reduces international call costs to as little as six cents a minute.

Unlike a calling card, Truphone Anywhere doesn’t require a user to remember what to do. Whenever an international number is dialled Truphone Anywhere simply asks whether the user wants to make a Truphone call. The user simply accepts, and Truphone connects the call.

Excel Offers Roadmap for Communications Service Providers, says Jaduka

Commodity voice now is part of a broader communications environment more focused on voice and communications as an attribute of many other experiences and applications, says Jaduka CEO Pete Pattullo. 

In part, that means creating the ability for direct integration of communications into business processes, even though stand-alone versions of voice will continue to be important. One example is how voice can be used to improve the efficiency of package deliveries. 

"We have a customer that delivers packages for which there must be a signature," says Pattullo. "So the company calls ahead, just before a delivery, to make sure packages can be delivered the first time, without return visits."

Application providers have to step up and create easy ways to "drag and drop" voice and communications features into existing applications. But app providers cannot do all the work, he says. The analogy is Microsoft Excel, where a tool allows end users to create their own custom spreadsheets.

Creating application program interfaces is a start, but the APIs are not, in themselves, a business model, Pattullo says. Service providers need more awareness of the actual business problems their customers have, to be able to create lots of applications using voice and communications features that are germane to users.