Moody's Issues "Most Likely to Default" List

Here's a list no company wants to be on: a new Moody's list of 283 companies which it believes are the most likely to default on their debt within 12 months. Moody's estimates about 45 percent of "Bottom Rung" companies will default on debt in the next year.Among the firms of interest to communications industry watchers:

Blockbuster,  CavTel, Charter Communications, Clearwire, Cleveland Unlimited, Global Crossing, Grande Communications, Intelsat, Integra Telecom, Level 3 Communications, Palm, Primus Telecommunications and Securus Technologies.

The Bottom Rung list, which Moody's will update monthly, represents roughly the riskiest 15 percent of all companies the agency tracks.  Seeking Alpha calls it the "leper list." Others call it the "death list." Others might call it a potential list of "dead pool" companies.  

Whatever one calls it, it is not a list one wants to be on. Some of them have been in dangerous straits for years, though, without crashing. One hopes Moody's is wrong. 

Broadband, Video, Mobile: What Will 1Q 2009 Show?

U.S. consumer spending on subscription TV, broadband, and mobile services will be "about the same" for most consumers, but about 15 percent say they intend to cut back in 2009, says In-Stat. The first test will come as first quarter 2009 results are released.

Should consumers do what In-Stat analysts think they might, these three service segments could see nearly a $5 billion decrease during the next 12 months.

The In-Stat might yet prove to be correct. But the latest round of earnings reports do not yet show evidence of the trend. comcast revenue was up 9.2 percent in the fourth quarter of 2008, the latest quarter for which returns are available. Time Warner Cable revenue was up 6.7 percent.

In February 2009 average spending at Verizon and Sprint increased by three percent and one percent respectively. T-Mobile and AT&T saw declines of slightly more than one percent each.

Still, since October, both Verizon and AT&T have seen relatively stable revenues, according to the Geezeo. Main Street Spending Index. Customer spending increased four percent at Verizon while AT&T customers are spending one percent more in the October 2008 to February 2009 period.

Sprint and T-Mobile, have seen a dip since October 2008. T-Mobile’s customer spending dropped by 9.36 percent and Sprint’s customer spending dipped 13.36 percent.

"It important to note, however, that all four of these firms have seen positive spending figures from this time last year, in both overall and year on year statistics," Geezeo says.

In its fourth quarter of 2008, Verizon grew year-over-year revenue over 12 percent in wireless, nearly 37 percent in broadband and video and over eight percent for the key strategic services offered by Verizon Business. In addition, ARPU grew 1.4 percent in wireless and over 14 percent in consumer. In the fourth quarter, Verizon grew revenue 4.6 percent.

At AT&T, fourth quarter revenue grew 2.2 percent sequentially and 3.4 percent year over year.

So it is likely that cutbacks, should they materialize, will have the effect of shifting revenue from some providers to others. It also is possible that aggregate industry revenue in each of the segments--wireless, broadband and multi-channel TV--actually will increase, though just about everybody believes that underlying secular declines in wired voice will continue, and might intensify.

In-Stat suggests that the biggest decrease in spending on mobile, broadband and subscription TV services, though, will come from households with income below $35,000, a finding most would find logical. The offset is that revenue and average revenue per user still seem to be growing, at least based on fourth-quarter results. Of course, the first quarter 2009 results will be instructive.

Verizon Thinks "Hub" Has a Gender Bias

Several notable elements stand out as Verizon starts to market its "Hub" appliance. First, the wireless broadband device aims to displace a standard wired voice line, an example of Verizon essentially cannibalizing itself.

Second, Verizon Hub, the new multimedia phone, might especially appeal to women buyers, who likely will be targeted for adoption, Verizon Wireless says. So though Verizon will market to men as well as women, it plans to make special efforts to market to female buyers.

Third, the device could open up a new "use case" for mobile broadband, essentially as a fixed-mobile implementation.

Women seem to find the "at my fingertips" features of the Hub useful, including such things as a calendar function and its ability to text to multiple wireless handsets.

The Hub sells for $249.99 with a two-year contract and allows users can make unlimited calls; locate family members using GPS; text, e-mail and video message and buy movie tickets, for example.

The findings are the result of two surveys taken by Web site iVillage.

Verizon indicates it does not see demand as exclusively female, of course, but lead users might well be found in the "female user" market. There's nothing wrong with tailoring devices and applications to end user segments. Perhaps Verizon has found another one.

AIM "Call Out" Shutting Down

"AIM Call Out," the VoIP service offered by AOL, is shutting down on March 25, 2009. AIM Call Out allowed users to make long-distance calls from their mobile phone, landline, or through AIM, and was the successor to the original AIM Phoneline service launched in November 2007, with the intention of building not just a VoIP calling service, but one with lots of new applications created by a developer community.

In this case, the direction was solid, but traction apparently became an issue.

AOL launched an Open Voice platform, a developer's toolkit that allows developers to more easily develop products running on AOL's network. Of course, critical mass is really important when taking that approach, and AOL, like some other highly-used instant messaging services, simply wasn't able to establish that mass.

Yahoo Voice also failed to establish itself, and was sold to Jajah, for example. And anybody who has tried to build a robust third-party application development ecosystem can attest to the difficulty. Apple's AppStore has been phenomenally successful, but most of those apps are built for Web apps rather than voice.

Still, you can be sure the general approach is the right one. Lots of other contenders are using the same game plan, for the right reasons. Development of new apps requires the creativity only an open platform can unleash.

As the saying goes, "an API is not a business model." No, not by itself.

Fixya: Social fix-it Site

Fixya is a social site devoted to helping consumers fix their technology products, ranging from mobile phones and PCs to automobiles. 

Fixya is a community resource capable of providing relevant and up-to-date troubleshooting data.. 

Today, with over 12 million visitors and one million products in its database, FixYa empowers individuals to repair and improve upon their already-purchased possessions.

The company also offers business services to manufacturers and retail businesses through its custom partnership opportunities.

FixYa is a place where individuals can share real world experience and connect to provide each other practical advice. From fixing cars, to cameras, to iPhones, FixYans are part of a DIY revolution that helps empower techies, tinkerers and hobbyists across the globe.

FixYa is a venture-funded Web 2.0 company with offices in San Mateo, California. 

Toktumi Business VoIP Service

Toktumi offers a business IP telephony service costing $14.95 a month without contracts, activation fees,  termination fees, equipment to buy or per-minute charges. 

Click the graphic to see a large version of the comparison Toktumi provides.

Toktumi offers a dedicated number local number, an 800 number, or a ported existing number.

Features include call waiting, call transfer, caller ID, call forwarding, auto attendant, as well as a second number for a mobile phone that allows users to place and receive calls on mobiles using the Toktumi number. 

Instant conference calls for up to 20 people, including call recording, visual voice mail, customized greetings  for business and personal callers and PC-based calling are included. Directory-based dialing, unlimited calling, call forwarding, and conferencing to U.S. and Canadian numbers as well as other Toktumi users worldwide also are included. 

International calls cost $.02 per minute for calls to destinations including China, Italy, and the United Kingdom.

Windows IP PBX in 10 Minutes?

Hak5 claims a Windows based IP-PBX can be set up in 10 minutes using software by 3CX. You might wonder why somebody who is fairly technical and in the "do it yourself" mode would not choose to use Asterisk. The answer is that some people will be able to create the functionality in Windows faster than they can using Linux.

Apparently 3CX offers a "free" download and then incremental payment for features such as unified messaging or call parking, for example. Hak5 reports the auto-provisioning to a Linksys Linksys SPA962 IP phone was flawless.

It's just another example of a sort of inversion of value in communications, where important communications functionality and value are very low cost, despite providing high value. It is conventional--and largely correct--wisdom that value is "moving up the stack."

That does not mean "pipes" and "infrastructure" such as call control are unimportant. People might not think electricity is unimportant, but watch the disruption when it suddenly fails. Still, even carriers and service providers increasingly are facing issues familiar to people working in the software business: lots of really valuable utility now is widely available at low cost.

So businesses have to built on incremental value using the still-essential but "utility-like" infrastructure. It's something like a million lines of code becoming an inexpensive foundation and value and revenue built on new apps that might, in some cases, require only scores of lines of additional code.

Setting up 16 phones took about two hours, including a firmware upgrade, Hak5 reports. Basic user maintenance apparently is simple enough that administration can be turned over to people who aren't IT staffers.

"I really would suggest anyone with a Windows machine lying around the house who has a need for a basic PBX for use with either a VOIP provider, or a PSTN gateway look at 3CX," says Matt Lestock, Hak5 contributor and a systems architect.

The analogy is the "freemium" business model, where basic and valuable features are offered "at no incremental cost" and fees support enhanced features.

Communications, Not Entertainment or Shopping, Now Dominates Online Use

As conventional wisdom has it, entertainment, rather than voice and data, will drive the communications business in the future. But recent research by Netpop suggests that even in the online world, it is communications, not shopping or entertainment, that drives usage.

Netpop | Connect Social Networkers 2008 Teaser

View more presentations from Netpop. (tags: advertising marketing)

Wireless Industry "Collapsing"?

Mobile subscriber penetration in the U.S. market is nearing saturation, no doubt about it. But it seems wildly wrong to maintain, as does Craig Moffett, Sanford C. Bernstein &  Company analyst, that “this industry is collapsing”

Slowing subscriber growth will lead to devasting price wars, he believes. To be sure, analysts always are worried about price wars. But "collapse"? Slowing subscriber numbers are a fact. But so is higher average revenue per user. 

Moffett notes that in 2008, wireless carriers added 5.9 percent more subscribers in the United States,  but he thinks they will add only three percent this year. A reasonable assumption, many might agree.

“The fourth quarter saw the lowest growth rate ever for the U.S. wireless industry,” Moffett notes. And yes, that is what happens in a maturing industry, at least on the subscriber front. But Moffett always seems to be more bearish on virtually all telecom companies than on cable companies, which also are losing video customers, though growing voice and broadband accounts. 

Small Business: TARP Failing

Small business customers are a key customer segment for many service and application providers, as they often are more willing to make faster decisions about new communication services and software.

To the extent that firm growth is a direct driver of software, hardware and communications activity, and given that up to 85 percent of new jobs are created by small businesses, perhaps somebody should be listening to them.

A survey conducted in February 2009 by online payroll service SurePayroll found that most small business owners feel the government should be taking a different approach to boost the economy during tough times.

Nearly three out of four small business owners disagree with the way the U.S. government has allocated funds in its Troubled Assets Relief Program (TARP), and believe tax cuts would be the ideal solution.

TARP was deemed effective by only three percent of respondents, while 72 percent were clear on their disapproval and 25 percent did not have a strong opinion.

BlackBerry App World Launches: Implications for Service Creation, Business Models Clear

Research In Motion has opened its new online application store, called BlackBerry App World, according to UPI. BlackBerry App World accepts PayPal for payments and starts prices at $2.99. That move might be an effort to screen apps for quality, something some believe is an issue for Apple's AppStore.

Price options also run up to $999, suggesting RIM will push high-end downloads through the store. To access the store, BlackBerry users will need to have a least a Version 4.2 operating system on their phones.

RIM appears to be negotiating back end revenue shares with vendors of applications that generate revenue through advertising or other means. It’s unclear what the share is, but language in developer contracts suggests that a revenue share is part of the model, Alec Saunders, Iotum CEO, notes.

The broad emergence of app stores, distributing or selling a wide variety of entertainment, utility or business apps, mostly Web related or data related rather than voice related, does raise some questions about the voice "service creation environment."

It is becoming possible to assemble apps rather than "create" them, using open and loosely-coupled processes. The problem would seem to be that "assembled" apps more nearly resemble the old "over-the-top" or loosely-coupled model rather than the high-availability, vertically-integrated model that has in the past been typical of voice applications.

There are obvious business model implications. Independent software developers and device manufacturers obviously participate in the revenue stream. It is less clear how access providers participate, and, if so, to what degree.

The longer-term implications are equally momentous. Up to this point the bulk of revenue has been generated by using "big iron" or "big code." And that might continue to be true for quite some time. Value, though, increasingly is realized by assembling new apps using building blocks essentially abstracted from the "big iron" or "big code" platforms.

That isn't to say that incremental "value" is equivalent to "revenue" in a linear way. Still, it is hard to see where the trajectory leads. To some extent, access, transport, computing, storage or basic features are--though not commodities--perhaps viewed as "table stakes." The new applications, though creating relatively small amounts of revenue, increasingly are viewed as the "secret sauce."

For service providers, there's a sort of inversion of value here. Most of the cost and even the value is provided by the basic infrastructure and connectivity. Yet the "sizzle" is coming from the new apps that represent little incremental revenue. The good news is that given enough sizzle, it will be easier to keep users using the "basic" features.

Broadband Stimulus Meeting in Washington March 10

The National Telecommunications & Information Administration is holding a meeting March 10, 2009 in Washington, D.C. on the "broadband stimulus" provisions of the "stimulus" bill. Click "related article" for details.

Separately, Mark Seifert, formerly with the Federal Communications Commission, has been tapped to head up the policy side of the NTIA's allocation of broadband stimulus grant and loan money. Bernadette McGuire-Rivera will be handling administrative duties.

Representatives of the NTIA, the FCC and the Ag Department's Rural Utilities Service are meeting next week to talk about how to hand out $7 billion-plus set aside in the Obama administration's economic stimulus package to provide Internet to un-served and underserved areas.

VMWare Cloud Computing Initiative

VMware has released its new Virtual Data Center Operating System (VDC-OS), software that creates an on-demand computing capability integrating computers, storage devices, and networking equipment.

"Virtualization," the ability to partition storage so more apps can  be run on fewer servers, used to be a topic computing staffs and storage suppliers were interested in. These days, it is beginning to be interesting on a wider scale, to more enterprises, developers, content, software and service providers because of the way whole computing infrastructures now are capable of "virtualization."

The software, due later in 2009, reflects VMware's push into cloud computing, essentially a virtualized data center. By making the leap, VMware joins Microsoft, Google and Amazon.com as providers of cloud computing infrastructure. 

The world's next generation of software may well hinge, in large part, on use of cloud-based computing, especially for high-volume Web-based applications. 

Hal Varian: Data is Cheap, Ubiquitous, So Value Lies in Meaning

More than ten years into the widespread business adoption of the Web, some still fail to grasp the economic implications of cheap, ubiquitous information and communications and modular, open software. But executives are learning fast precisely what the implications are.  

Inside enterprises, ubiquitous information is reshaping and flattening organizational structures. In the broader economy, retailing and distribution processes are transforming. 

The impact is perhaps nowhere more startling than in print media, music and pre-recorded video, where value is so much altered that some distribution channels are being destroyed, others merely reshaped. 

For communications providers the changes are less direct, if no less challenging. Value and revenue now are shifting inexorably towards "data" experiences rather than simple "voice." But data experiences are precisely where loosely-coupled software, hardware and communications change value contributions so much. 

In a broad sense, the global telecom industry is going to have to learn to do what others are being forced to do: assume an environment of cheap, ubiquitous "things" and learn to create value by extracting meaning and usefulness out of those ubiquitous things. 

Global Telecom Dip in 2009 to Reverse in 2010, Climb for 4 Years

Analyst Simon Sherrington says global telecom capex is set to decline by about 0.7 percent in 2009 to around $297 billion, with steeper declines in mature markets such as the United States and Western Europe offset by investments in growth markets such as China and India, and regions such as Africa and the Middle East.

But the contraction should be short-lived. Sherrington forecasts an increase in global spending in 2010 and in the following three years, with the global capex total hitting $350 billion in 2012.