Grudging Embrace of Skype, Other IP Providers is Rational, If Maddening

Major U.S. carriers haven't been happy about the emergence of Skype and other third-party VOIP clients, which threaten to undermine the global industry revenue model.

One can hardly blame them for not rapidly embracing new technology that threatens to bankrupt them, anymore than politicians will embrace being voted out of office by more attractive candidates, labor unions will embrace automation or outsourcing,  accountants and attorneys will get excited about really-simple tax codes or Microsoft is happy about effective and free operating systems and business productivity suites.

Nor can one blame VoIP enthusiasts, application providers or users for wanting VoIP to work on whatever devices they typically use.

As VoIP gets better and better, more and more users are going to conclude tha all they really need from their service provider is good broadband. Someday, service providers will have weaned themselves off a reliance on voice revenues and found other business models that work as well, or better. In the interim, service providers will not move any faster than they have to.

So disputes are going to keep occurring.

The Free Press has asked the Federal Communications Commission to investigate whether or not the restriction of Skype use on AT&T Apple iPhones, except when in Wi-Fi access mode, is in violation of federal law.

The Voice on the Net coalition Europe, which includes Google, Microsoftand Intel, has asked European telecom regulators to ban blocking of VoIP apps on 3G networks an devices. T-Mobile Deutschland blocks use of Skype application on the iPhone, for example.

AT&T allows use of Skype when users are connected to Wi-Fi, rather than the 3G wireless broadband network. That's AT&T's way of not prohibiting use of the applications, but also not encouraging them to replace voice directly. Inability to control network quality sometimes is invoked as the reason for not encouraging Skype or over-the-top VoIP over the existing network.

Someday that will change. At some point all networks will be IP-only. For wireless providers, that generally coincides with the arrival of fourth-generation networks. For wired network providers, a switch to all-fiber or high-bandwidth digital subscriber line access (plus robust wholesale regulations) typically is the driver.

But so long as the entire network is supported by legacy voice, services providers are not going to encourage IP-based voice any more than they have to. Do you know any executives, at any company, in any industry, willing to put themselves out of business as fast as possible by enabling customers to avoid buying their products?

http://blogs.computerworld.com/skype_for_iphone_doesnt_bode_well_for_at_t_telcos

Google Trying to Buy Twitter?

Like it or not, Google seems to be the most-logical buyer. One can argue that Google could write an app that replicates Twitter.

But that's only part of the value Twitter, as opposed to any other micro-blogging and real-time search app anybody might produce.

Twitter has gone viral. It has mindshare. People like it and use it.  Sometimes that trumps every other consideration.

A sale to Google alleviates the need to  "find a business model." Google already has one.

And if one assumes Twitter always has been an acquisition candidate (for most firms the "going public" exit does not presently exist), then Google simply is the most-logical buyer. The value Twitter provides is congruent with the value other Google tools provide.

http://www.techcrunch.com/2009/04/02/sources-google-in-late-stage-talks-to-buy-twitter/

Random VoiceCon Observations

Here's a set of fairly random observations from VoiceCon, ranging from "slow" return on IP telephony to "no return," as well as the usual cautions about buyer resistance. Joe Abate, Mounrt Kisco Medical Group director of IS says " I don’t think we’ve seen any productivity gains at all after deploying IP telephony. Ouch!

Conrad Cross, City of Orlando CIO, says he "expects the return on investment on the city's TDM-to-IP migration to take four to five years. Three years or less is what most buyers probably would want to see. Small businesses won't even be willing to wait that long, I'd guess.

But Gary Grissum, BNSF Railway VP Telecom, estimates that 40 percent of his company's workforce will retire in next few years, and unified communications might be a way to attract a new generation of workers. That's a big deal. Some of us have argued we need to see a change of buyer influences (younger, in other words) before we can really assess how far technology buyers are willing to shift their preferences.

Overheard a VAR mention that the problem with selling unified communications to smaller businesses is that they don't see the benefits, forget about the price. I'd say that has emerged over the last year or so as a key impediment. Buyers in the small business segment discount all "soft" gains such as productivity, less wasted time and unified message boxes. Really, you have to show them how they save money--hard dollars--right away.

Kevin Gavin at ShoreTel points out that the tough economy is focusing IP PBX buyers on return on investement, even more than typically is the case. Duh! Customers demand very-clear ROI before buying.

Wells Fargo to Replace 50% of Desk Phones

Karen Bailey, Wells Fargo director of voice services, says her firm plans to replace 50 percent of employee desk phones with soft clients and mobile phones.

Disney Willing to Challenge Video Ecosystem

Walt Disney Co. CEO Robert Iger is not so sure it is wise to tie consumption of online content to the purchase of a multi-channel video (specifically cable TV) subscription, though cable operators tend, for obvious reasons, to favor the idea.

Cable operators obviously dislike the idea that the content they sell in subscription packages might be found online, at no incremental cost. They like better the idea of being able to charge a bit extra to their subscribers to enable online viewing. Disney doesn't agree.

"Preventing people from watching any shows online, unless they subscribe to some multi-channel service could be viewed as both anti-consumer, and anti-technology, and would be something we would find difficult to embrace," Iger says.

Of course, Disney also was early to move its content to iTunes and to stream content over the Internet, and is seen as "more open" to the idea of allowing its content to be viewed in new ways.

Nor does Iger share the view that people who stream video frequently are substituting that behavior for multi-channel video. They are more apt to watch television, buy HDTV sets and subscribe to digital and premium services, Iger maintains.

That doesn't mean Disney is casually willing to jeopardize its multi-channel video distributor partners. It does mean the company is more open to side-loading, downloading and streaming.

Sprint Upgrades Cable Digital Voice

Sprint has added new features such as Caller ID to the TV, Caller ID to the PC, and new voicemail features that include a home voicemail alert sent to a customer's mobile phone, and voicemail to email, for its cable operator customers. Sprint provides wholesale cable VoIP services to 14 leading cable companies and supports more than 4.5 million cable VoIP/digital phone subscribers, covering more than 31 million cable households-passed.

Perhaps the development to note is that the innovations are "both practical and fun." "Fun" and "playfulness" and "personalization" are among elements that have made the mobile end user experience so popular. Wired phone service has always been useful, but not as much "fun."

The new features are ways cable operators will try to change the wired voice experience, beyond simply offering tradtional value at a lower price.

AT&T Tests New Bundle: Netbook, Wireless and Wired Broadband for $59.95 a Month

AT&T is testing its new netbook-plus-wireless broadband bundle in its Atlanta and Philadelphia markets, offering a ultra-portable netbook with built-in AT&T 3G wireless capabilities when bought with a $59.95 per month "Internet at Home and On the Go" broadband service that includes both at-home digital subscriber line service plus wireless broadband.

Mini laptops available in selected AT&T stores in Atlanta and Philadelphia include the Acer Aspire One, Dell Inspiron Mini 9 and Mini 12, and LG Xenia. Promotional prices range from $49.99 to $249.99 with the purchase of an "AT&T Internet at Home and On the Go" plan, which includes an AT&T DataConnect plan and AT&T Fast Access DSL, starting at $59.95 per month. Without those AT&T services, these mini laptops range in price from $449.99 to $599.99.

AT&T is offering two mobile DataConnect plans in the trial, including a 200 MByte plan for $40 per month and a 5 GByte plan for $60 per month.

For users who wnat more standard notebooks, the trial also will feature the Lenovo X200 for $749.99 with "Internet at Home and On the Go." The laptop is available for $849.99 if a user buys only the two-year DataConnect plan.

The embrace of traditional mobile phone subsidy models is part of the story. The bundling of wireless and wired broadband might ultimately be just as big a part of the story. Consider that the $60 a month plan includes both wireless broadband and DSL as well.

Though the DSL likely will not include the faster speeds many users now require, you might think of the offer as something like a "free DSL" program, as wireless broadband access now costs about $60 a month for 5 Gbytes of usage. The new AT&T includes the heavily-discounted PC plus wireless and DSL broadband for just $59.95 a month.

http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=26676

Verizon to Activate 25 to 30 LTE Markets in 2010

Verizon Communications CEO Ivan Seidenberg says his firm will begin deployment of its fourth-generation Long Term Evolution network "later this year with a few commercially-ready markets and will roll it out to 25 or 30 markets in 2010."

But the infrastructure only is "just one piece of the puzzle," he says. "It's the combination of devices, applications and network capabilities that will really cause this market to take off," Seidenberg says. "No single company will be able to envision, let alone provide, every aspect of this whole 4G ecosystem on its own."

That is a primary reason why the 4G business model will be different from what we have seen with 2G networks, with 3G being someplace in between. Where 2G was largely a vertically-integrated business, 3G has been more open, at least to the extent that broadband access to the Internet itself is an "open" environment.

The 4G model inevitably will be more of an "ecosystem" approach, in part because many applications are seen as "machine to machine," and in part because device and application openness will be much more central ways of creating new applications.

http://sev.prnewswire.com/telecommunications/20090401/NY9285501042009-1.html

Big Telcos Bluffing about Broadband Stimulus?

Some people think the "big telcos" are bluffing about refusing to apply for funds to be awarded under either of the programs authorized for "broadband stimulus" programs as part of the American Recovery and Reinvestment Act.

There are concerns about strings attached to the grants, to be sure. But there are other, more practical issues that suggest many "big telcos" will be unable to apply, or will find the "strings" too onerous.

"Big" companies serving "urban" areas, or even rural areas within states where they also serve classic small and rural communities, are generally barred from getting Rural Utilities Service funds, and RUS is in charge of some of the funds. So "big companies" cannot apply for RUS funds.

Big companies might be able to apply for NTIA funds, if they get waivers. But the clear logic and language of the statute makes clear a preference for non-profits and government-related agencies as "eligible" applicants. That's why the language about "waivers" exists. "Big telcos" are seen as exceptions to the rules about eligible applicants.

You can make your own educated guesses about the likelihood of applications from "big companies" being funded, under those circumstances. "Big companies" aren't seen as the logical applicants, even if the final rules might allow them to bid. At this point, waivers seem to be necessary, in any event.

Aside from strings that also bother some U.S. governors about accepting funds authorized by other parts of ARRA, it is possible bigger telcos might just take a pass for those reasons alone. The statute is written in ways that make clear an intention to fund non-profits and projects that primarily create jobs (it is part of the "stimulus" bill, recall), and only secondarily create infrastructure.

There are lots of reasons for carriers to think they will not be allowed to apply for some of the funds, and are not the most-favored applicants for most of the funds.

http://blog.wired.com/business/2009/04/big-telcos-bluf.html

Is Cable's WiMAX Business Model Anything Like Wi-Fi?

Cable operators continue to have more questions about wireless services than they do about any other products delivered over their wired broadband plant. They should. Wireless would be the first service not delivered over networks they fully control, and which build relatively logically on what their existing networks offer, in terms of value.

Wireless wouldn't be the first service they've ever offered that must take share from other providers in a saturated market. Cable digital voice clearly has had to take share from incumbent telcos. But core video entertainment and cable modem services essentially were "green field" services that only had to grab attention, not steal market share.

Wireless voice and data are not businesses where cable has existing core competence, and a price "race to the bottom" is not where cable traditionally is most comfortable.

Everybody seems to think mobile video and content is where cable might leverage its formidable assets in a more-logical way. But no killer app yet has emerged.

Should that tack succeed, the business model for WiMAX might be along the lines of how Cablevision Systems Corp. positions it own metro Wi-Fi offerings. Essentially wireless access drives the value and profitability of cable modem service.

So if "cable modem services" provide the business model for providing free metro Wi-Fi, perhaps wired video entertainment will provide the ultimate business model for WiMAX.

Thinking About Absconding with a Netbook Under Contract?

LM Ericsson has developed a new modem, intended for use in netbooks sold at a discount by wireless providers, that will remotely disable the computer if a customer on a contract stops paying his or her bills. Of course, there are other applications as well. An enterprise information technology manager dealing with a stolen laptop could lock down data on the machine to ensure security.

Lenovo Group, which makes the enterprise-oriented IBM ThinkPad line of PCs, has said it will build this sort of feature into its laptops.

The new Ericsson modem also is said to have the ability to remain active even when a PC is turned off, perhaps listening for messages such as email or Skype calls.

http://tech.yahoo.com/news/ap/20090331/ap_on_hi_te/tec_techbit_laptop_modems

Opera for Virgin Mobile

Opera Software will be available on some Virgin Mobile USA handsets as part of a deal that makes Virgin Mobile USA a distributor of the mobile browser. Helio was the first U.S. carrier to sign a deal with Opera Mini in the United States.

Open Range to Bring WiMAX to 6 Million Rural Homes

For those of you who might be wondering, high-speed broadband in rural America is not in as dire straights as you might think. There's a problem, but it is being solved. Consider that estimates of rural un-served or underserved households range from six million to 10 million.

Then consider that just one company--Open Range Communications--has raised enough money to bring fourth-generation wireless to about six million U.S. households in rural U.S. areas. And construction is about to begin.

Level 3 Communications has announced an agreement with Open Range Communications, which intends to deliver wireless broadband using WiMAX to 500 rural communities in 17 states, reaching an audience of six million potential subscribers.

Open Range will leverage Level 3’s extended on-net services to offer high-speed Internet and voice services to millions of previously un-served or underserved communities across North America.

Open Range has gotten a $100 million investment by One Equity Partners, the private equity arm of JPMorgan Chase and a loan provided by the United States Department of Agriculture's Rural Development Utilities Program (RDUP) for $267 million.

Personally, I'd argue Open Range is going to build more broadband facilities, reaching more potential customers, than every single project funded under the American Recovery and Reinvestment Act ("broadband stimulus"). And for a lot less money.

U.S. Telecom Capex to Drop 7% in 2009

U.S. communications carrier capital spending will dip 7.3 percent in 2009, Yankee Group analysts now predict. That's less than the 10 percent figure some of us have speculated about, purely on a non-scientific “gut feeling” basis.

Actual declines will vary based on industry segment. Wireless investment is going to continue at healthier levels, as will broadband investments related to IPTV rollouts and broadband access generally. As you would predict, investments in legacy voice are going to be starved, by comparison.

Telecommunications carriers globally will chop about $12 billion from their capital budgets, decreasing their spending from $284 billion in 2008 to $272 billion in 2009.

Some observers will find that figure relatively heartening news, as it represents a bit more than a four percent dip, at least globally. And some regions and countries actually will increase spending, the Asia Pacific region in particular.

Globally, capex, as a percentage of revenue, will decline from 15.2 percent of revenues in 2008 to 14.1 percent in 2009.

U.S. IT Forecasts Revised: Down in 2009 (no surprise)

Gartner and Forrester have both lowered their expectations of U.S.technology spending this year.

Gartner now forecasts a 3.8 percent drop in spending worldwide to $3,200 billion, compared with the $3,400 billion recorded in 2008. Three months ago, it was predicting a modest rise in spend this year over last year. Gartner points out that the decline it now predicts is worse than the 2.1 percent fall in IT spending in 2001, after the dot-com bubble.

Gartner predicts a 15 percent decline in computer hardware shipments, a three percent fall in telecom spending, a two percent drop in IT services and 0.3 percent growth in software sales.

Forrester now expects information technology sales to shrink by 3.1 percent in 2009, compared with the 1.6 percent it previously suggested.

All analysts overshoot. We extrapolate from past trends, which generally works fine so long as markets are not at turning points. One can almost predict an overshoot to the down side at some point, as trends change again.