Large U.S. telcos have their doubts about whether it will make any sense at all to apply for any funds under the National Telecommunications & Information Administration's portion of "broadband stimulus" funds, and generally are barred from applying under the Rural Utilities Service rules.
It appears small, independent, rural telcos have similar qualms. Attendees at a MetaSwitch Forum workshop on the broadband stimulus plan were shaking their heads in disbelief about "strings" attached to receipt of funds under the RUS plan, in particular the nebulous language about investments in access that allow multiple providers to compete.
Depending on how the final rules shape up, it is conceivable that most telcos and cable companies will decide not to participate directly.
Wednesday, April 8, 2009
More Qualms About Broadband Stimulus: This Time From Small Rural Telcos
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Twitter Adoption Surprises: Business Users Key
Twitter already seems to have been embraced as a business tool, new user data from comScore suggests.You would expect the highest Twitter adoption by the youngest users. But that does not seem to be the case. Instead, older age cohorts are heavier users.
Analysts at comScore think business users explain the pattern. For whatever reason, business users seem to be acting as though Twitter and other micro-blogging tool have immediate business value.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Titanic Battle Shaping Up over Broadband
As busy as people are trying to prepare for the imminent opening of the first of three proposal submission windows for funds authorized by the American Reinvestment and Recovery Act ("broadband stimulus"), a bigger food fight will begin to break out next year as the Federal Communications Commission opens a new rule-making on a national broadband strategy. As much attention as the broadband stimulus program is getting, it is going to be dwarfed by any new framework that emerges from the FCC effort.
The stimulus money is a temporary "shot in the arm." In fact, some question whether there will be much of any long-term impact from the majority of the money that ultimately is allocated, in jobs, an identifiable uptick in broadband use or economic growth.
Any new national broadband policy will reshape the broadband marketplace, creating new winners and losers on the supplier and reshaping the financial terrain for existing and would-be contestants, in ways that contribute "in a material way," to use the financial term, to the health of virtually all service providers, software and hardware suppliers.
Specifically, the FCC now is charged, by statute, to determine how tax dollars will be spent on deploying and upgrading Internet access across the United States. Telcos large and small--and their suppliers--have huge stakes in how those rules are recast. And make no mistake: current business models, revenue streams and company valuations are at stake.
The FCC's responsibility is also to update policies and regulations that have conspicuously failed to keep pace with changes in communications technologies and the different ways in which the US public actually get their phone, cable TV and Internet services.
It would not be overstating the case to say we will witness the biggest single change to U.S. communications regulation since either the 1934 Communications Act, or the Telecom Act of 1996, each of which has been foundational for shaping the U.S. communications environment.
As some of us have been arguing for a half decade or more, it is likely that regulators will be looking at greater structural change involving a form of structural or functional separation, developments which already have occurred in Europe and now are happening in Southeast Asia, and which has happened on a small scale in the United States as well, principally in Rochester, N.Y., where Rochester Telephone agreed to form a new wholesale access company providing local loop services to all licensed providers.
That move will be fiercely resisted by most telcos, you can be sure, as it formally breaks up the vertically-integrated model historically the mainstay in the U.S. market. Cable operators have to worry that they will, for the first time, also be forced to provide widespread wholesale access to competitors as well, something the cable industry always has opposed but which will be hard to avoid if other key providers are required to do so.
Small telcos face equally-large challenges, as a shift to broadband concerns might necessarily reshape rural investment rules in ways that directly harm the existing voice revenue support many hundreds of companies now rely on to support their firms. For hundreds of independent and rural companies, that government support is the single largest income category, vastly outstripping actual direct end user revenues.
The other potential changes are new requirements for minimum bandwidth, control of network management practices and a wide variety of business-model-shaping changes.
If you have any familiarity with the on-going disputes about universal service funds, or the intense pressure created by the debates leading up to the Telecom Act, you have some idea of what is about to happen.
Oddly enough, you will find widespread sentiment that the Telecom Act failed. But you will not find many human beings that believe their own choices, value or communications richness now are worse than they were before the Act was passed. What is clear is the foundational impact any rules changes will have on competitor fortunes. Still, an early prediction: no matter what ultimately happens, no matter which sectors claim they have "won or lost," end users will have richer options than before, with or without rules changes. But rules changes are inevitable.
The stimulus money is a temporary "shot in the arm." In fact, some question whether there will be much of any long-term impact from the majority of the money that ultimately is allocated, in jobs, an identifiable uptick in broadband use or economic growth.
Any new national broadband policy will reshape the broadband marketplace, creating new winners and losers on the supplier and reshaping the financial terrain for existing and would-be contestants, in ways that contribute "in a material way," to use the financial term, to the health of virtually all service providers, software and hardware suppliers.
Specifically, the FCC now is charged, by statute, to determine how tax dollars will be spent on deploying and upgrading Internet access across the United States. Telcos large and small--and their suppliers--have huge stakes in how those rules are recast. And make no mistake: current business models, revenue streams and company valuations are at stake.
The FCC's responsibility is also to update policies and regulations that have conspicuously failed to keep pace with changes in communications technologies and the different ways in which the US public actually get their phone, cable TV and Internet services.
It would not be overstating the case to say we will witness the biggest single change to U.S. communications regulation since either the 1934 Communications Act, or the Telecom Act of 1996, each of which has been foundational for shaping the U.S. communications environment.
As some of us have been arguing for a half decade or more, it is likely that regulators will be looking at greater structural change involving a form of structural or functional separation, developments which already have occurred in Europe and now are happening in Southeast Asia, and which has happened on a small scale in the United States as well, principally in Rochester, N.Y., where Rochester Telephone agreed to form a new wholesale access company providing local loop services to all licensed providers.
That move will be fiercely resisted by most telcos, you can be sure, as it formally breaks up the vertically-integrated model historically the mainstay in the U.S. market. Cable operators have to worry that they will, for the first time, also be forced to provide widespread wholesale access to competitors as well, something the cable industry always has opposed but which will be hard to avoid if other key providers are required to do so.
Small telcos face equally-large challenges, as a shift to broadband concerns might necessarily reshape rural investment rules in ways that directly harm the existing voice revenue support many hundreds of companies now rely on to support their firms. For hundreds of independent and rural companies, that government support is the single largest income category, vastly outstripping actual direct end user revenues.
The other potential changes are new requirements for minimum bandwidth, control of network management practices and a wide variety of business-model-shaping changes.
If you have any familiarity with the on-going disputes about universal service funds, or the intense pressure created by the debates leading up to the Telecom Act, you have some idea of what is about to happen.
Oddly enough, you will find widespread sentiment that the Telecom Act failed. But you will not find many human beings that believe their own choices, value or communications richness now are worse than they were before the Act was passed. What is clear is the foundational impact any rules changes will have on competitor fortunes. Still, an early prediction: no matter what ultimately happens, no matter which sectors claim they have "won or lost," end users will have richer options than before, with or without rules changes. But rules changes are inevitable.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Tuesday, April 7, 2009
Comcast to Use Smarter Phones to Enhance Wired Experience
Devices increasingly are key as service providers seek to add value to their wired and wireless experiences. "Compelling end user devices are definitely part of the story," says Chris Mairs, MetaSwitch CTO.
So it comes as no surprise that Comcast plans to roll out new cordless phones that add email and other Internet features, as Verizon is doing as well.
http://www.lightreading.com/document.asp?doc_id=174853&site=cdn
So it comes as no surprise that Comcast plans to roll out new cordless phones that add email and other Internet features, as Verizon is doing as well.
http://www.lightreading.com/document.asp?doc_id=174853&site=cdn
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Conference Calls Really Do Need Live Blogging
Seth is right: conference sessions are more valuable--or can be, when a large call is in process--when there is a live blogging or chat function.
http://sethgodin.typepad.com/seths_blog/2009/04/reinventing-the-conference-call.html
http://sethgodin.typepad.com/seths_blog/2009/04/reinventing-the-conference-call.html
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
More Signs of Prepaid Wireless Surge
MetroPCS added more than 1.5 milion gross customers in the first quarter of 2009, up 59 percent over the same point a year ago, and 684,000 customers after accounting for quarterly churn of five percent.
The growth suggests one thing: more wireless users are keeping their mobile service, but downgrading to prepaid plans. We can make a couple of observations: despite fears, wireless is now so embedded in user lives that it cannot be dispensed with.
On the other hand, there are ways to satisfy that need at lower cost, and consumers are taking that option.
The growth suggests one thing: more wireless users are keeping their mobile service, but downgrading to prepaid plans. We can make a couple of observations: despite fears, wireless is now so embedded in user lives that it cannot be dispensed with.
On the other hand, there are ways to satisfy that need at lower cost, and consumers are taking that option.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Australia to build $31 Billion Fiber to Home Network
The Australian government is moving ahead with a $31 billion national broadband network that will operate on a structurally separated, wholesale-only basis, with all licensed retail providers able to buy and use the network. The network aims to connect 90 percent of Australian homes with service at speeds up to 100 Mbps.
Every private company bid submitted in any earlier tender process earlier had been rejected by the Australian government as inadequate.
Instead, a public-private partnership will be commissioned to construct the network, with provatization planned for five years after network operations begin. But construction might take seven to eight years, so it will be some time before an privatization event occurs.
The network would operate on a wholesale-only, open access basis, separating retail operations and allowing Optus, Telstra and other companies to build services into the system.
Telstra, though, will not be barred from applying to manage the wholesale network, once built. In some ways, the scrapping of the original plan might be positive for Telstra, which now will face for the first time a high-speed optical fiber network that virtually any other retail competitor can use.
The upside is that although Telstra might not savor the new and more-competitive marketplace, it might be able to salvage a role as the wholesale operator, even as it has to compete as a retail provider buying access from the wholesale entity.
There are other, shorter-term sub-plots as well. One is the mix of motives, from economic stimulation and job creation, that are blending with the concrete goal of creating a broadband platform; as well as the issue of how well the plan will work out in terms of end user pricing, which affects the ability to raise investment capital to build the network in the first place.
Still, the move potentially ends the stalemate that has prevented Australia from moving ahead on badly-needed broadband upgrades that have been stalled by inability of regulators and policymakers to come up with a solution acceptable to Telstra, the national incumbent.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Monday, April 6, 2009
IM Most Popular French Online Activity
French Internet users in February 2009 spent more time uisng instant messaging than any other application, including email. Instant messaging claimed the highest share of total time spent at 14.3 percent, followed by social networking at 5.7 percent, say comScofre. In combination, the two categories accounted for one out of every five minutes spent online during the month.
Online entertainment accounted for 8.6 percent of time spent and online gaming 2.9 percent share of total time spent online.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Wireless "Net Neutrality" Will Lead to Higher Prices
There's a sort of inescapable logic to what wireless network access providers will do if or when mobile VoIP applications are freely enabled, as some policy proponents advocate. Since the entire business model rests on voice revenues, the loss of those revenues will be compensated for in the form of higher mobile broadband access prices.
Existing best-effort plans might be the baseline. But new plans optimized for voice, or conferencing, or other applications, might well emerge. Of course, optimizing might violate some notions of "net neutrality," unless optimizing is available to any provider of voice over a mobile IP network, in which case it might not be a neutrality violation.
But those optimizing services will be an add-on.
You might argue providers can create replacement revenues some other way: selling content or advertising, for example. But the numbers don't work. Build your own spreadsheet and you'll figure that out. There is no conceivable new revenue stream that replaces voice revenues "one for one."
After some years of watching what happens in a robust, mandatory wholesale environment, even European regulators are starting to see what happens. Service providers start spending their money outside the home market, where financial returns are higher.
Investors aren't dumb. Businesses with low growth and margin prospects get less investment than competing alternatives promising a higher return. The current capital stringency is bad enough. Wait until you see a capital strike.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Sunday, April 5, 2009
Enterprise Twitter is Coming, Gartner Says
Analysts at Gartner predict that micro-blogging tools such as Twitter will be widely available in enterprise versions, and will be used in four ways.
Firms will use Twitter as a marketing or public relations channel, using them as part of wider corporate communications strategies such as corporate blogs.
Firms will tweet about corporate accomplishments, provide links to press releases or promotional Web sites, and respond to other tweets about the brand. Inevitably, some firms will "overreach" and publish uninteresting or obviously self-serving tweets.
Employees also will use Twitter or other micro-blogging applications to enhance and extend their personal reputations, thereby enhancing the company's reputation, Gartner says. Employees will enhance their personal reputations by attracting followers who go on to read their blogs.
As people enhance their personal brands, some of this inevitably rubs off on their employers, says Gartner.
Employees use the platform to communicate about what they are doing, projects they are working on and ideas that occur to them, though Gartner does not recommend this, for security reasons.
Inbound signaling also will be a value for firms, which will find micro-blogging posts a rich source of information about what customers, competitors and others are saying about a company.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Communications Still Trumps Entertainment
Getting ready for an upcoming presentation, I've been thinking about the relative value of entertainment services, as compared to voice and data applications.
As important as video is for a telecom provider's business case, as well as its foundational role for satellite and cable companies, my thinking has been that voice and data apps of various sorts have been, and likely will be, more important for firms with roots in the telecom business.
Part of the argument rests on profit margin. Cable and satellite providers can assume they will have high margins. Attackers tend to find more-modest margins, in part because of scale economies that favor providers with high penetration.
Telecom providers tend to see higher margins on voice and data services.
Revenue opportunity also plays a part. The voice and data business simply is far larger than the video entertainment business. Depending on how one categorizes the business, the voice and data service business is twice to three times bigger than video services business.
With the advent of Web and IP-based communications, including email, text messaging, instant messaging and "non-traditional" communication modes such as micro-blogging, blogging, I'd argue the centrality of "communications" has grown, even for activities that might arguably be considered "media" or "content."
Consider that social networking among U.S. broadband users has grown 93 percent since 2006, and has increased the amount of time people spend communicating online 18 percent, to 32 percent of total online time, according to Netpop Research.
As online communications has increased, the time spent on traditional forms of online entertainment has declined 29 percent, and is now down to 19 percent of total online time.
Video is important; just not as important as voice and data. Communications remains more important than entertainment, at least for firms with a telecom rather than entertainment orientation.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Bandwidth is YouTube's Main Cost Driver
YouTube still hasn't figured out a sustainable business model. Ad revenue is the objective, but
most of YouTube's content remains outside the category of "inventory." Credit Suisse analysts estimate that YouTube will bring in about $240 million in revenue in 2009, mostly provided by home page placement ads and in-video overlays and adjacencies.
Credit Suisse estimates that YouTube generates approximately $86.7 million a year on homepage placement ads, or about $7 million per month.
In-video ads and banner adjancencies contribute another $87 million, according to the analyst estimates. Sponsored videos ($37.1 million) and sponsored links ($30.1 million) also contribute to YouTube's revenues.
On the cost side, Credit Suisse estimates that Google spends $711 million in operating expenses related to YouTube. Those costs include bandwidth, content acquisition, partner revenue shares, site overhead, and storage.
The biggest expense for YouTube is bandwidth, as you might guess, as YouTube streams about five million videos a month. That costs YouTube about $360 million a year, or $1 million a day. Keep in mind that observers believe Google pays about half the the lowest "market" rate for
bandwidth.
And Google gradually is assuming some roles more analogous to a traditional network. Credit Suisse estimates that YouTube will pay $260 million in content acquisition costs in 2009.
And despite the estimation that YouTube buys its bandwidth at discounts as high as 50 percent of the lowest "market rates," bandwidth still is the biggest sunk cost.
General overhead represents about $24 million worth of 2009 cost. Storage costs $12.7 million a year.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Saturday, April 4, 2009
Media at the Tipping Point
IP doesn't just reshape the telecommunications, video entertainment and advertising businesses. It reshapes the rest of the media as well. This trend has been underway for decades, but the tipping point has been reached.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Trade Show Blues
As somebody who spends lots of time at industry trade shows, I'd have to say the temporary economy-induced decline in attendance at virtually all major industry meetings is not the biggest problem. There's less real news or value at these venues than there used to be, in part because information moves with the speed of Twitter and the Web.
That doesn't mean these venues are not important for some attendees. They're still valuable for sales people meeting with prospects in suites, away from the sessions and exhibits. But trade shows now seem to be less mission critical for lots of participants in the ecosystem, if only because the industry is developing other ways of replicating the marketplace functions trade shows and industry media once were a larger part of.
Webinars, podcasts, Web conferences, user group meetings, channel partners, Google and Twitter, Real Simple Syndication, blogs, wikis, even email and YouTube, are rival conversation channels.
Attendance likely will pick up again once the recession is over. But I have greater doubts that the value and effectiveness of the bigger industry meetings will improve.
That doesn't mean all "live meetings" are in this bucket. The more-specialized meetings provide more value, at least from my perspective. A few new or emerging venues have "buzz." EComm stands out in that regard.
But it is the "user group" venues that have, over the last couple of years, started to assume more importance, at least from my perspective. The Voice Peering Forum and MetaSwitch Forum, for example, have been quite useful.
So I've been spending much more time at user group meetings. That's where service and application providers are most concentrated and most easy to engage in conversation. That, after all, is why many of us attend such meetings.
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
Friday, April 3, 2009
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?
Gary Kim was cited as a global "Power Mobile Influencer" by Forbes, ranked second in the world for coverage of the mobile business, and as a "top 10" telecom analyst. He is a member of Mensa, the international organization for people with IQs in the top two percent.
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