Investment Incentives Key for National Broadband Plan, McDowell Says

As part of the recently passed American Recovery and Reinvestment Act of 2009 ("stimulus package"), the Federal Communications Commission must create a national broadband plan.

Commissioner Robert McDowell says “it is essential that our plan give current and prospective broadband network and service providers the proper incentives to deploy new technologies."

"We must also provide entrepreneurs with the flexibility to make full use of all available spectrum, including the television white spaces, to backhaul broadband traffic," McDowell says. "In order to attract investors to fund the build-out of new networks, we must not engage in rulemakings that produce whimsical regulatory arbitrage."

"Rather, we must allow market players to succeed or fail on their own merits and not due to the government picking winners and losers," McDowell says. "In short, our rules must allow network operators to have a reasonable opportunity to pay back their investors. That’s the only way to improve existing networks and build new ones.”

Broadband is Partly an Availability Problem; Partly a Demand Problem

"Predominantly, even in contexts with reliable supply of broadband, it is consumer demand for broadband that is the tallest barrier to adoption and represents America’s competitive vulnerability," says Connected Nation.

It might be worth keeping that in mind as plans for the broadband stimulus program operated by the National Telecommunications & Administration and Agriculture Department's "broadband stimulus" rules are finalized.

There clearly is a physical access problem in rural areas (at least in terms of wired access: though some locations may not have clear line of sight, multiple providers of satellite access are available, and it is possible to supply speeds up to perhaps 5 Mbps using satellite), but broadband availability is not the same problem as lack of adoption. In fact, people have lots of reasons not to buy services they already have access to.

The largest barrier to broadband adoption is a lack of awareness about broadband’s benefits, Connected Nation says. Nearly one-half (44 percent) of those with no home broadband connection say “I don’t need broadband.”

Likewise, the top barrier to computer ownership is also a perceived lack of need. Nearly two-thirds

(62 percent) of those who do not own a computer say “I don’t need a computer,” Connected Nation says.

In other cases, perceived cost is an issue. Nearly one fourth (24 percent) of those who do not own a computer cite the up-front cost as a barrier. Similarly, nearly one-fourth of those without a home broadband connection say broadband is too expensive.

Four out of ten parents with children who are without a home computer see no need for having a computer in the home. And nearly one-third (30 percent) of parents with children who do not have a home broadband connection see no need for a broadband connection.

More than one half (56 percent) of people with disabilities who do not own a computer see no need for having a computer in the home. Four out of ten people with disabilities who do not have a home broadband connection see no need for a broadband connection, Connected Nation says.

Close to one half (42 percent) of rural residents without a home broadband connection say it is because they do not need broadband. This compares with 19 percent of these rural residents who say they do not subscribe because broadband service is not available in their area.

Additionally, 22 percent of these rural residents say broadband is too expensive.

http://www.nga.org/Files/pdf/0812BROADBANDCHALLENGE.PDF

Internet Video Complementary to Cable, Satellite and Telco Video, Study Indicates

Fears that the recession will encourage more and more people to drop cable or satellite TV service and rely on free online video services appear to be exaggerated, Pike & Fischer researchers say. Some might say grossly exaggerated. In a recent survey, less than half of one percent of respondents indicated they would cancel a multi-channel video subscription.

That said, about 15 percent of respondents said they intend to downgrade to a lower-priced video subscription this year, through such means as giving up premium channels. Both the findings are consistent with consumer behavior in past economic recessions.

Typically, consumers hang on to their subscriptions and do not disconnect. They do however tend to downgrade premium services or postpone upgrades.

About eight percent of respondents said they plan to upgrade their service to receive expanded numbers of channels or advanced services such as high-definition TV.

Although there are no signs yet that the Web is on its way to replacing traditional TV, a substantial number of respondents said they are turning to the Web to watch video, Pike & Fischer says. About 32 percent of respondents to the survey said they regularly watch video from Web sites such as Hulu, YouTube and iTunes.

"The results indicate that consumers appear to be willing to continue paying for cable or satellite TV, despite the fact that they can get a vast amount of shows for free or very low cost on services like Hulu and Veoh," says Scott Sleek, Pike & Fischer director. "But they don't appear to be willing to spend any extra money for premium channels or on-demand movies. And they're increasingly willing to go to the Internet to watch their favorite shows."

Telco of the Future is a Software Company

"The telco of the next five years has to be a software company," says John Lazar, MetaSwitch CEO. That statement is rich with implications for business strategy, organization, investment and priorities, but must at least incorporate the ability to "create and tear down" whole applications, service or features very rapidly, without labor-intensive physical processes. That's why MetaSwitch believes in IP Multimedia Subsystem.

The meaning does not extend as far as the notion that access networks and a range of services related to voice, data and video services will be unnecessary. What Lazar means is that since nobody really can predict what the killer app of the future is, providers simply must have the ability to react quickly when users suggest demand exists for any application that benefits from network access.  

And the access and services platform has to transcend silos. "You have to innovate quickly and build links between things," says Lazar. "Things you don't expect will stick," he notes, reminding people that  "nobody predicted SMS (text messaing) would be the huge success it hsa turned out to be."

But addressing both the current recessionary climate, which has nearly everybody reacting caustiously, Lazar also warned that some "people are not thinking ambitiously enough." There are opportunities to be seized, but action is necessary. And Lazar predicts innovators will do well in this recession.

There are constraints, to be sure. "Damn the dollars, full speed ahead" may not be a strategy many firms can embrace. But keep in mind: when somebody, or a company, says "something can't be done," you have to translate.

What the speaker means is that "I, or my organization, for a host of very-real reasons, cannot do it." That is different than saying something really cannot be done.

Other speakers may well say "something is possible, and can be done," because they do not have barriers of one sort or another that prevent them from doing something others say "cannot be done."

Over the next five years, people will do things that "cannot be done." They will be done for one simple reason. Despite a host of reasons why one contestant says something "cannot be done," others will operate without those constraints.

Mobile Broadband PC Data Card Growth Decelerates

Mobile broadband PC card accounts continued to grow in the fourth quarter of 2008, but at a much-reduced rate compared to the prior six quarters, researchers at comScore say. But it is a product that continues to have an enviable growth pattern.

PC data card adoption grew 163 percent overall in 2008, slightly ahead of the 157 percent growth rate in 2007. However, despite this rapid adoption curve, fourth-quarter growth showed the first signs of decelerating growth. On a quarter over quarter basis, the subscriber growth fell to just five percent, following sequential growth of 22 percent in the third quarter of 2008.

One can speculate about the reasons for the slower growth rate, but one obvious explanation is a deceleration of employment, reducing the number of users whose consumption is subsidized by their employers. Add to the that the slowing economy, and one probably has all the explanation one requires.

Consumer users might also be choosing to access the mobile Web using their smart phones, as a data plan already is required, and the logic of paying for another subscription plan to access the Internet and Web applications probably is unattractive.

PC Data Cards Cannibalize Landline Usage

Researchers at comScore say PC-based mobile broadband usage largely displaces tethered PC Internet usage. That is not to say wireless broadband is displacing fixed broadband, but only to note that most users do not spend more time online overall, when both mobile and fixed modes are available.

Looking at total hours of use in the fourth quarter of 2008, comScore found that the U.S. Internet user spent 90 hours online, or roughly one hour a day. Users who had both fixed and mobile broadband access spent 89 hours online during the quarter, using mobile or fixed access.

Of PC data card users with both a PC data card and a wired connection, 25 percent of their total online time (22 hours) was spent using a PC data card.

The rather clear implication is that PC mobile broadband is a substitute for fixed access, and does not increase the amount of time the typical user spends online.

There are some obvious implications. Over time, the typical user will start to see broadband access as something they have, irrespective of network. They will start to see this as a value that is measured against the cost of satisfying that need.

They probably are going to approach this as "broadband access is worth X dollars to me every month." They are not going to indefinitely pay for multiple accounts, supporting a single device, much less multiple accounts supporting multiple devices, forever.

The logic likely will parallel the way some wireless-only users behave. They simply decide that the ability to talk and text is worth some finite amount of money, and conclude that paying for that capability twice does not make sense. So they drop landline voice service and use some of that money to pay for heavier mobile usage.

Overall spend probably doesn't change much. As with so much else these days, consumers are willing to switch behavior when functionally equivalent products are available, and when use of those products costs no more than what they already spend, or costs less.

http://www.comscore.com/press/release.asp?press=2771

More Qualms About Broadband Stimulus: This Time From Small Rural Telcos

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.

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.

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.

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

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

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.

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. 

http://www.bloomberg.com/apps/news?pid=20601081&sid=aBA74wtO9nDc&refer=australia

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. 

http://www.comscore.com/press/release.asp?press=2763

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.

http://www.eweek.com/c/a/Mobile-and-Wireless/Skypes-iPhone-App-May-Force-FCC-Hand-on-Wireless-Net-Neutrality-527564/?kc=rss