Volume Discounts Wrong for Social Software?

Volume-discount pricing structures are the norm in the computer and most other businesses. 

But Julien le Nestour, an adviser, investor, and manager at Schlumberger, argues that for some "products" such as social networking, value grows as users grow ("network effects"), making the value of an application with 70-percent use much more valuable than an application with 10-percent usage.

But under typical volume-pricing practices, buyers pay more for the less-efficient than for the highly-efficient "product." So pricing should invert. Discounts should be offered for low-penetration use, and rising prices for high-penetration use. 

If customers extract more value (higher returns) per user as the number of users increases, yet pay an ever-decreasing price per user (which is VD pricing), value and price have diverged. 

41% of U.S. Internet Users are "Social"

Researchers at eMarketer estimate that in 2008 nearly 80 million people, 41 percent of the U.S. Internet user population, visited social network sites at least once a month, an 11 percent increase from 2007.

By 2013, an estimated 52 percent of Internet users will be regular social network visitors, according to eMarketer.

80% of Broadband Users Prefer Traditional Video Viewing

Parks Associates research finds 80 percent of broadband users in key European markets prefer traditional video viewing to online viewing. Depending on how you want to spin it, that is a glass half empty or half full. 

“Broadband has transformed video viewing habits in Western Europe, where over 20 percent of broadband households have watched a film or TV program online in the past six months,” say researchers at Parks Associates. 

European consumers are adopting online viewing habits with some reluctance, however, Parks Associates says. For all the countries surveyed, the U.K., Germany, Spain, Italy, and France, over 80 percent of broadband households prefer a more traditional option for viewing video, including going to the cinema or watching a DVD. 

Many consumers are watching video online only because of the availability of free content, both legitimate and illegitimate, the researchers note. 

Broadband to the Farm?

About 57 percent of U.S. farms had Internet access in 2007, up about seven percentage points since 2002, and 58 percent of U.S. farms using the Internet in 2007 bought high-speed Internet access, according to the U.S. Department of Agriculture. 

In 2002, the Census found that half the farms in the country were connected to the Internet in some way, using either broadband or dial-up services. 

So 33 percent of farms in 2007 purchased broadband connections.  Penetration likely is higher now, though most observers think rural broadband, to say nothing of use by rural farmers, remains lower than usage by urban or suburban customers. 

Researchers at the Pew Internet & American Life Project say 55 percent of homes now buy broadband access, up eight percentage points since 2007. If rural use grew at a comparable pace, farm use of broadband could now stand at 41 percent. 

The other angle is that farmers in the West have the better access than the rest of the nation to high-speed Internet, the Department of Agriculture indicates. Nationally, 31.3 percent of farms in rural counties had broadband connections. In urban counties, by way of contrast, the survey showed almost 40 percent of farm operators had high speed Internet connections.

The rural West led the nation with 38 percent of farms reporting access to high-speed Internet. Of the states in the Rockies, Colorado had the highest percentage of farms with broadband access with 47.9 percent, about 45.4 percent higher than the national average. 

New Mexico was the only state in the West (including Hawaii, California and Alaska) that had rural farm broadband penetrationlower than the national average.  

Statewide, 43.2 percent of farmers had access to broadband, 10.4 percent below the national average. 

Nationally, 31.3 percent of farms in rural counties purchased broadband connections. In urban counties, nearly 40 percent of farm operators had high speed Internet connections.

Smart Pipes, Smart Move

BBC, mBlox and Vodafone Group, working with the Mobile Entertainment Forum, have launched "Smart Pipe Enabler Services," a way mobile operators can offer third-party content and app providers a variety of services including age verification, location, identity authentication, reliable phone applications, specific tariffs to consumers and delivery with specific quality of service.

Enabled by these services, content providers can offer the consumer a better user experience, a key objective for much of MEF’s work.

The move is a major step towards creating an entirely new revenue source: business partner revenue streams, while improving end user experience and moving beyond any notion of access networks as "dumb pipe."

At the moment, of the $32 billion worth of revenues in the mobile entertainment industry, about half is based off-portal. The new "smart pipe" approach is aimed at offering those providers the option of features now available primarily to operator-provided services.

Among those features are bulk SMS capabilities, premium billing, short code rental and location look-ups.

Enabling services operators can offer include handset features, user presence information, age verification, "sender-pays" data, user demographic profile, handset application control, electronic wallet, credit status and location.

ITU Issues Views on Recession Impact on Telecom

At a high level, nobody is completely sure consumer behavior in this recession will match behavior in past recessions, for any number of painfully obvious reasons. There also is some thinking that as broadband had not attained mass adoption status during the last recession, this will be the first test of demand elasticity for fixed broadband.

And nobody seems to believe that wireline voice will in any way be helped. There is probably less consensus on what will happen in the wireless business, but wireless service providers likely are among the best-placed industry segments during the recession, in part because of greater "flexibility in their cost structure and capex and fixed-mobile substitution," a new report by the International Telecommunications Union says.

And though broadband access demand is believed to be relatively inelastic, that almost certainly will not be the case for fixed voice.

"Telecom services are likely to come under further price pressure, as operators will fight for a more cost-focused customer, resulting in further erosion of margins," the ITU suggests. And that is going to favor mobile operators as well.

"The more flexible cost structure of mobile networks means that mobile operators are winning more of the lower usage end of the fixed services customer base," the ITU says. "This has happened in voice, and 2008 has demonstrated that mobile broadband can substitute for light-usage DSL."

For countries where data services are popular, data revenues could be adversely impacted by a reduction in consumers’ real incomes, ITU says. Also, more consumers are likely to opt for prepaid and flat-rate packages for telecom services to try and control their expenditure.

Unemployment may accelerate fixed-mobile substitution, with consumers preferring to switch
fully to mobile services. Young people may delay decisions to adopt a fixed broadband or voice line in addition to mobile service.

Unemployment will accelerate households’ decisions to give up fixed services, either because they are unaffordable, or because a mobile alternative is cheaper.

"In terms of practical pricing strategy, the economic slowdown will increase pressure on operators to reduce prices," the ITU says. Operators will find it harder to promote value-added services and the adoption of new services such as mobile TV will be affected, ITU believes.

$200 Million More in Videoconferencing Service Revenue This Year?

An Association of Corporate Travel Executives survey shows that 71 percent of its member companies plan to spend less on travel this year than in 2008.

According to the trade group, that’s a huge and unprecedented shift in corporate travel mangers’ plans from just five months ago.

ACTE’s new survey shows most companies are seeking to spend 10 percent to 20 percent less on travel than they reported in September of 2008.

Using the most conservative figures for estimating the dollar impact of such cuts, ACTE suggests that the 176 member companies responding to the survey will spend about $880 million less on travel this year than they had planned. If the same estimate is applied to the ACTE’s full membership of 2,400 companies, the impact would be more than $2 billion.

That should lead to opportunities for Web and other conferencing services and applications to get more traction, undoubtedly including many users and companies that have not historically relied on conferencing services, especially those with a video component.

Assume just 10 percent of the avoided $2 billion is spent on video-enabled conferencing services. That's a gain of $200 million in service provider revenues.

Enterprise IP Telephony Slows, In-Stat Says

The struggling economy will slow the growth of enterprise IP telephony adoption, In-Stat researchers suggest. Some 32 percent of enterprise-size businesses say the economic situation has slowed their VoIP deployment plans.

Broadband IP telephony remains the most common carrier-based business VoIP solution with revenues exceeding $1.1 billion in 2008, compared to $857 million for hosted IP Centrex service within the United States, In-Stat says. 

Adoption varies significantly by size of business, with enterprise-sized businesses preferring a partial deployment, while small office and home office users are more likely to go IP-only.

About 13 percent of U.S. businesses use both carrier-based and premises-based IP solutions. 

Slightly more than one in three US businesses that have deployed VoIP use it exclusively, In-Stat says.  Many more businesses use VoIP as a partial voice solution. U.S. businesses are also beginning to embrace voice-enabled IM capabilities, particularly among younger workers. 

Mobile Backhaul = 30% of Opex

Mobile backhaul now represents more than 30 percent of mobile service provider operating costs, says Juniper Networks. If one looks at opex and adds depreciation, backhaul can represent 70 percent of on-going costs.

Up to this point, most of the mobile backhaul has been provided by T-1 lines or DS-3 connections, in some cases.

But deployment of 2.5G and 3G technology has lead to an increased backhaul requirement, to say nothing of coming 4G requirements. So where base stations that previously required one or two T1/E1’s for backhaul now need four to six T1/E1’s. The result has been a 200 percent to 400 percent increase in required backhaul capacity and its associated increase in operating expense costs.

Mobile Backhaul Services $15 Billion in 2011

Telcordia analysts predict there will be a $15 billion wholesale transport revenue opportunity in the mobile tower backhaul market by 2011, based on new needs to get broadband backhaul to more than 200,000 wireless network cell sites in the United States. 

Satellite Pioneer Andy Werth Dies

Andrew (Andy) Werth, a satellite industry pioneer, died January 28.  He was 74 and lived in Washington, D.C. 

He co-founded a digital satellite communications company that eventually became Hughes Network Systems. Mr. Werth later became president of the company’s international division.

Andy was an avid cyclist, finishing one place short of qualifying for the U.S. cycling team in the 1952 Olympics, though he won numerous other events in his youth, including the New York State Junior Championship and the Tour of Somerville. A victory in a nine-day cycling event in Canada earned him enough prize money to pay for his first semester of college. He resumed cycling later in life, and won the Masters National Track Championship in 2000, 2003 and 2004. Until slowed by illness, he was an active member of DC Velo, a Washington-based cycling club.

Beyond that, what many of us always will remember is his mentoring and teaching, born, no doubt, of his genial and caring nature. Thanks, Andy. 

Mr. Werth was born in Saarbrucken, Germany on March 2, 1934, to a German father and a French mother. His family fled the Nazis, and by the time he was 10 years old, young Andrew had lived in four countries, learning a new language with each move. His fluency in many languages and ease with international clients helped him establish Hughes’ presence in 17 countries and build international sales to $1.4 billion by the time he retired in 2000. 

Mr. Werth, a graduate of Columbia University and an Air Force veteran, began his career at ITT Laboratories in New Jersey. Following the launch of Sputnik, he was assigned to do research in digital satellite communications in the late 1950s.

He left ITT for satellite operator COMSAT Corp. in 1964, and his first job was working on the Early Bird project team with the manufacturer, Hughes Aircraft Company. He soon transferred to COMSAT Laboratories, where he developed a series of high performance satellite modems and was awarded a number of patents in satellite communications applications. His work in the digital satellite communications was cited in 1982 when he was named a Fellow of the Institute of Electrical and Electronics Engineers, the profession’s highest award.

In 1972, Mr. Werth and a group of colleagues left COMSAT to form Digital Communications Corp. (DCC), a company that specialized in building sophisticated digital communications systems utilizing both terrestrial and satellite technology. 

The company prospered and was acquired in 1978 by Microwave Associates and became MA/COM Telecommunications, which was acquired by Hughes Electronics in October 1987, becoming Hughes Network Systems (HNS).

Mr. Werth was initially general manager of the satellite communications division. He later led international marketing and sales for a new satellite technology, very small aperture terminals (VSAT), that eventually became the backbone of the private satellite network industry, connecting millions of retail establishments, hotels, gas stations, and other users. 

Software-Based Telecom (Video in 5 Parts)

Voice has for decades been a "service" sold by the "the line" or as an "application" created by a premises switch. Now voice also is a feature of instant messaging, Web sites, enterprise applications and email. As a result, there now are multiple business models, revenue streams and applications that use the "voice" feature. This panel will examine some of the ways this is happening, and what it means for traditional providers of voice services.

Gary Kim, Editor-in-Chief, IP Business

Rodrigue Ullens, Co-founder & CEO, Voxbone

Trevor Baca, VP, Software Engineering, jaduka

Michael Veys, COO, JAJAH

Eric Reiher, Founder & CTO, Mobivox

Click on "Related Article" at the bottom of this post for the first of five parts. Click "Watch in HD" if you have the bandwidth. 

Voice Peering Drivers and Strategies: 7-Part Video

Gary Kim, Editor-in-Chief, IP Business
Carlos Da Silva, Americas Marketing Director, France Telecom
Paul A. Woelk, Sr Manager, Access Strategy, Sprint
Heather Olson, Regional Manager, Telecom Italia Sparkle
Rodrigue Ullens, Co-founder & CEO, Voxbone

click "Related Article" at the bottom of this post to launch the first video segment. Also, if you have the bandwidth, select "Watch in HD." It's better.

Mobile Broadband Supplemental, But High Risk of Substitution

A huge explosion in mobile broadband use in Europe over the next five years largely will be driven by consumers, and largely will complement, not supplant, wired broadband connections, predict researchers at Analysys Mason.

That said, a separate forecast by Informa Telecoms & Media suggests the potential for broadband substitution will remain high.

Analysys Mason projects148 million mobile broadband connections in Europe by 2014, when they will account for almost half of all broadband connections in the region.

The potential for fixed-line voice substitution also will remain high. About 40 percent of total mobile traffic was generated in the home environment in 2007, says Informa Telecoms & Media.

By 2013 it is expected to reach 58 percent, with about eight percent of total mobile traffic offloaded to fixed broadband. In 2008, the home environment likewise represented more than 43 percent of total mobile data traffic and will climb to 60 percent by 2013.

That's the danger for fixed services providers, particularly in single-person households, households of non-related persons and households where every person in the household above a certain age has a mobile.

Mobile use at home will represent about 40 percent of total mobile usage, while use at work will represent 30 percent of usage, with nine percent of calls initiated while users are moving. About 21 percent of calls will be generated from other public environments.

"In the same way that voice traffic has moved from old fixed line telephony service PSTN to mobile, there is reason to believe that a significant percentage of Internet traffic generation will move away from fixed personal computers to mobile devices including mobile handsets, mobile Internet devices (MIDs) and connected notebooks," says Malik Saadi, Informa principal analyst.

As more casual users adopt mobile broadband, they typically will do so as a complement to tethered broadband, usually opting for prepaid subscriptions rather than monthly contracts, Analysys Mason forecasts. Prepaid subscriptions will account for 59 percent of mobile broadband connections in 2014, up from eight percent in 2008.

New customers will tend to behave differently from early adopters and users who have substituted wireless for wired connections, many observers believe. Most significantly, use will be casual. So, at some point, continued growth of mobile broadband in the U.S. market likewise will require charging mechanisms better suited to casual users, who will not be inclined to add substantial fixed-fee subscriptions when their anticipated usage is relatively light.

T-Mobile Outage: "All Markets West of Mississippi River"

T-Mobile has a  BlackBerry email services outage in "all markets west of the Mississippi River," I am told by tech support. Sunday, Feb. 15, about noonish Mountain time.....

Apparently there also was a Feb. 3, 2009 outage on a more-localized basis on the AT&T network in  Houston, New York, New Jersey and Baltimore/Washington D.C. areas.

There are some reports T-Mobile and possibly some Sprint BlackBerry users had the same issue on Feb. 3, 2009 as well. Undoubtedly there will be finger-pointing, but it would seem to be a RIM issue if multiple networks had outages at the same time.