Bye Bye RGU, Hello PSU, Says Time Warner Cable

New markets require new terminology. When the competitive local exchange business was roaring in the late 1990s and early 2000s, companies reported using a metric known as "voice grade equivalents," a metric they deemed a better measure of growth than "lines."

Likewise, cable operators began reporting "revenue generating units" when they ramped up new services ranging from voice and broadband Internet access to various types of digital video products.

So Time Warner Cable is using a new subscriber metric its calls a "primary service unit, which the company defines as the total of all discrete video, high speed data and voice subscriptions. A single household buying voice, broadband and video would repreent three PSUs.

The older RGU numbers are similar, but have included digital video or VOD services purchased in addition to basic cable. The new PSU metric presumably is intended to better reflect discrete numbers of voice, broadband and video accounts sold.

In the first quarter, for example, Time Warner Cable reported 26 million PSUs, but 34.8 million RGUs.

http://files.shareholder.com/downloads/TWC/629033522x0x290734/4e925b06-841e-47d8-bcc6-bc8f52f1973a/290734.pdf

Time Warner Cable Reports: Still No Evidence of Cord Cutting

Time Warner Cable first quarter results are in, and, so far, nothing unexpected seems to be happening, relative to financial or subscriber behavior attributable directly to the economy. Comcast reports tomorrow, so we should be in fairly good shape as far as analyzing whether reported or claimed consumer intent to drop video subscriptions, or even scale them back dramatically, is happening.

So far, with results in from Time Warner, AT&T and Verizon, we can note that, despite what people might say, or what observers might believe, the business remains quite stable. We'll have to wait for several other reports from major satellite and wireless providers to assess what is happening with wireless, and to flesh out the video numbers.

But, so far, nothing unusual can be seen. Share shifts continue. Consumers might be scaling back on premium services or discretionary purchases such as video on demand. All of that is typical for a recession. But there is so far no serious evidence of any significant shift in behavior, compared to past recessions, in the video or fixed broadband segments.

Wireless might be a different matter, as the two major providers one suspects will show market share pressure have not yet reported. The issue is whether total postpaid wireless subscriptions have declined. Some shift to prepaid is expected, which potentially could lower average revenue per user, if new data service revenue does not grow faster than the slippage to prepaid voice. So far, data revenue growth remains brisk, so ARPU has not fallen. In fact, it has grown at AT&T and Verizon Communications, the two major wireless companies to report so far.

Time Warner Cable revenues for the first quarter of 2009 increased five percent ($204 million) over the same quarter of 2008,  to $4.4 billion. Subscription revenues grew six percent ($256 million) to $4.2 billion. Video revenues rose two percent ($64 million) to $2.7 billion, driven by video price increases and continued growth in digital video subscriptions partially offset by a year-over-year decrease in basic video subscribers and premium channel and transactional video-on-demand revenues.

High-speed data revenues increased 11 percent ($107 million) to $1.1 billion while voice revenues were up 23 percent ($85 million) to $451 million. Advertising revenues declined 26 percent ($52 million) to $145 million.

Customer relationships were 14.7 million as of March 31, 2009. Primary service units, which represent the total of all video, high-speed data and voice subscribers, reached 26 million with net additions of 435,000 during the first quarter of 2009.

Revenue generating units (“RGUs”) totaled 34.8 million – reflecting net additions of 556,000 during the first quarter of 2009.

Triple Play subscribers exceeded 3.2 million (or 22 percent of total customer relationships), benefiting from 146,000 net additions during the first quarter of 2009.

Video penetration now is at 48.7 percent while high-speed data penetration of the customer base now is at 33.5 percent. Phone penetration is at 15.1 percent of the customer base.

Some 55.2 percent of households buy a bundle of some sort. A third of households buy a triple-play package, while about 22.1 percent of those bundle buyers take a double play.

Perhaps the most shocking number for anybody who has followed the cable industry over the past couple of decades is customer penetration of homes passed. Time Warner Cable today sells a service to 54.5 percent of locations the network passes. But looking just at multi-channel video, Time Warner sells video services to just 48.7 percent of households passed, down sharply from the nearly-70-percent levels operators used to have in many markets.

Industrywide, cable penetration now is at 51 percent, according to the National Cable & Telecommunications Association.

Mobile and Social Network Ad Revenue Hot Through 2014

Mobile and social networks are the hottest areas of online advertising growth, say researchers at Forrester Research.
The cumulative average growth rate for the six-year period from 2008 through 2014 is 17 percent, Forrester Researchers say. However, the growth rate for mobile advertising is much higher, at 27 percent per year, and the growth rate for social network advertising is 34 percent per year.
Click the image for a larger view.

Advertising Down, Internet Advertising Up, ZenithOptimedia Says

Consumers are saving money by spending more time at home, so media consumption is increasing, particularly of television and the Internet, says ZenithOptimedia Group. That might explain what appears to be consistent performance by providers of multi-channel video entertainment, though there are share shifts occurring.

And though overall advertising will decline globally in 2009 by about seven percent, Internet ad spending should increase 8.6 percent in 2009, down from 20.9 percent in 2008, ZenithOptimedia Group says.

Most of this growth will come from search advertising. The firm predicts U.S.search advertising to grow nine percent in 2009, while classified grows just 1.8 percent and traditional display shrinks 1.8 percent.

Internet video and rich media advertising is growing about 30 percent annually, while Internet radio advertising is growing 29.7 percent. Podcast ad revenue is growing 11.9 percent, but each from relatively small bases. Internet video, Internet radio and podcasting revenues represent about 12 percent of overall U.S. Internet ad spending.

Internet ad growth is predicted to grow at 11.3 percent in 2010 and 15.3 percent in 2011, ZenithOptimedia Group says. The Internet's share of total advertising will grow to 14.6 percent in 2011, up from 10.4 percent in 2008.

http://www.zenithoptimedia.com/about/news/pdf/Adspend%20forecasts%20April%202009.pdf

Triple Play Future for Web Business Models

Where are Web business models headed? Towards a mix of advertising, subscription and transaction models, says Bernard Lunn ReadWriteWeb COO. There are some obvious implications.

Advertisers will adopt a barbell approach: where they will buy media on a traditional cost-per-thousand basis for branding and cost-per-action for direct-revenue generation, he says. Cost per click will still be dominated by Google but will become less dominant as CPA gains traction, Lunn argues.

The big issue, though, is that Google so dominates the CPC business that it makes tough any other third party CPA model. Lunn thinks ad-suported media will be a mix of CPM and CPA models, but must deal with CPC to achieve a workable balance.

Content increasingly will be dominated by user-generated sources, if only because the amount of professionally-created content is not going to keep up with the amount of UGC. To make UGC consumable, more human editing will be required.

http://www.readwriteweb.com/archives/mapping_the_current_web_transition.php

Small Business Sees Web Site Investments as "Advertising"

In 2008 small and medium-sized organizations spent $6.7 billion on online advertising and will increase that spending relatively slowly between now and 2013, according to researchers at Borrell Associates.

By 2013, SMEs will be spending about $7.4 billion on online advertising, representing relatively slowish growth of nine percent over a five-year period, an annual growth rate of a bit more than 1.5 percent annually.

That might surprise you, if only because the rate of growth is slow slow it might be considered "flat." But Borrell suggests something else is happening. SME spending on Web sites will grow about eight percent a year.

You might not consider Web site spending as advertising, but Borrell Associates says this is precisely how SMEs think about the matter. It isn't so much a shift of advertising from traditional methods, including telephone directory listings and direct mail, to the Internet. It is that small businesses see their own Web sites as a form of "advertising," perhaps a functional substitute.

Consider this a sort of shift to "earned media" (awareness gained through promotional efforts rather than paid advertising). The other angle is that small businesses rightly see their Web efforts as partly a direct sales channel, partly direct marketing and partly a substitute for other sales activities such as printing and distributing flyers, postcards and other direct marketing messages.

60% of Twitter Users Do Not Return the Following Month

Twitter’s unique audience exploded over 100 percent in March 2009, meaning it likely has reached an inflection point of some sort. But there are issues: Currently, more than 60 percent of Twitter users fail to return the following month, says David Martin, Nielsen Online VP.

That means Twitter’s audience retention rate, the percentage of a given month’s users who come back the following month, is about 40 percent.

To put that in perspective, it is roughly the equivalent of turning over 100 percent of the user base every three months. Such a churn rate is unsustainable.

"It is clear that a retention rate of 40 percent will limit a site’s growth to about a 10 percent reach figure," says Martin. "A high retention rate doesn’t guarantee a massive audience, but it is a prerequisite."

There simply aren’t enough new users to make up for defecting ones, at some point.

When Facebook and MySpace were emerging networks like Twitter is now, their retention rates were twice as high, says Martin. When they went through their explosive growth phases, that retention only went up, and both sit at nearly 70 percent today.

http://blog.nielsen.com/nielsenwire/online_mobile/twitter-quitters-post-roadblock-to-long-term-growth/

CableVision to Offer 101 Mbps, Claims Blagging Rights

Cablevision Systems Corp. plans to sell a new 101 Mbps service (with 15 Mbps upstream) for $99.95 a month. The service also will include free access to Cablevision's metro Wi-Fi service, beginning May 11, 2009.

These days, such really-fast services are more a matter of marketing rights than revenue. Earlier this year, Tom Rutledge, Cablevision COO said the company didn't expect much financial impact from any of the really-high speed services in 2009, at least where the consumer market is concerned.

To the extent actual sales will be happen, they are more likely to be generated by small business users. 

http://bits.blogs.nytimes.com/2009/04/28/cablevision-goes-for-us-broadband-speed-record/

Are IP Telephony Suppliers Off the Mark?

Are VoIP retailers "failing to rethink their products aimed at small and medium-sized business owners?

It's hard to argue with this argument in favor of simplicity, savings and support. On the other hand, there arguably are other issues. Demand, for example.

Recent surveys conducted by Savatar Research over the last couple to several years consistently have shown relatively high awareness of IP telephony but flattening sales. Quarterly SME adoption rates of IP telephony have been falling since the third quarter of 2006, Savatar notes.

Since it is hard to think of any IP telephony provider that is not acutely aware of the need for simplicity, savings and support or extreme ease of installation so support isn't necessary, there still is some buyer resistance, apparently.

Savatar surveys also show fairly high awareness of new features IP telephony makes possible. About 38 percent of managers or executives at firms with up to 500 employees already believe IP telephony will save them money, says Savatar. At firms with less than 100 employees, as many as 42 percent of prospects might already believe IP telephony will save them money.

About 18 percent of prospects might be expected to believe that IP telephony offers a more innovative set of features, Savatar says.

Of course, some providers would argue they have cracked the code on IP telephony, and do not have any need to "rethink" how they are packaging and selling their products.

As Savatar says, SME buyers just want to be sure they are buying a phone system that works. Unified communications, software as a service, hosted and managed services, cloud computing and mashups are interesting to lots of us. Small organizations and businesses are unlikely to be so inclined. They just want a phone system or service that works.

Phone.com Debuts Consumer Service

Phone.com has introduced a "Virtual Number" service, allowing one primary phone number to function as the gateway to all of a user's mobile, landline, or VOIP phone numbers and devices.

Address books can be uploaded from most major email programs, and those entries can be used to program call routing based on caller ID, to enable click-to-call, call blocking or other functions.

The Phone.com Virtual Number essentially is a consumer version of the firm's business service, and will include voicemail, free international calling to popular destinations, send fax, call routing based on a time schedule, call recording, caller-id routing, SMS voicemail notification, email delivery of voicemail as a .wav file. Voicemail transcription is also available for a small additional fee, as are other upgrades.

Prices and plans range from $4.88 to $18.88/month (plus taxes) for unlimited minutes.

http://www.phone.com/

Mobile Web Sites 30% Slower than PC-Accessed Sites

Mobile Web sites are 30 percent slower than PC-based Web browsing, say Gomez, a provider of Web application experience management and web performance benchmarking, and dotMobi, the mobile domain registrar. 

Mobile Web applications and sites do not yet match the performance levels of “traditional” Web applications, the firms say. Among the five metrics not measured and monitored by Gomez are "discoverability," how readily a consumer can find the mobile Web site using different URLs.

"Readiness" measures how well the mobile Web site renders on popular mobile devices. "Availability" measures the percentage of successful transactions or the availability of a Web page.

"Response time" is a measurement of  how long each page takes to download and the duration of an entire transaction.

"Consistency" looks at how well the mobile Web site performs on different mobile carriers, in different geographies and time frames.

http://www.gomez.com/news_events/releaseview.php?prid=142

Lots of New Voice Apps are Fairly Subtle

Lots of new voice apps are fairly subtle, and many are related to call center or business-to-business applications, which is one reason one gets the impression (not unfounded) that innovation is voice is pretty limited.

As is typical, many are driven directly by customers with a specific problem to solve. Consider a new call screening feature developed by Stage 2 Networks, a provider of hosted PBX solutions, and BroadSoft.

The firms have developed an "Enhanced Call Screening" feature for Stage 2 Networks' hosted PBX service.

Stage 2 had a customer requiring that any inbound caller's name to be announced, even when the system identifies the 10-digit phone number as "Anonymous" or "Private".

A typical call screening feature provides a prompt to a caller to "please say your name," allowing the recipient to hear who is calling when caller ID displays block such information.

Verizon and AT&T: F. Scott Fitzgerald Said it Best

First-quarter financial reporting by AT&T and Verizon Communications now illustrates clearly how diverse telephone industry contestants, and the market, now has become.

Wireless now constitutes 57 percent of Verizon Communications consolidated revenue. Also, 27.9 percent of service revenue comes from data, with 58 percent of data revenue now earned from non-messaging services.

At AT&T, fully 72 percent of revenue now comes from sources other than landline voice.

Compare that with revenue sources at a typical independent, probably rural telephone company. There, revenues are very much tied to voice landlines in service. A typical small telco might earn 45 percent--nearly half--of its money from access revenues (terminating long distance traffic for another carrier), according to Telecom Think Tank.

About 35 percent of total revenue comes from universal service funds. Local service fees paid by end users is about 18 percent of total revenues.

Add it all up and 98 percent of small telco revenue is dependent on active voice lines. So note the clear dichotomy. AT&T and Verizon represent something on the order of 80 percent of all U.S. communications market share. And for these two companies, mobility drives the business, while multi-channel TV is becoming a key contributor, with broadband Internet access, to overall revenues.

Verizon also had 299,000 net adds for its FiOS TV service, which now is at 23 percent penetration of homes that can buy the service, and added 298,000 net FiOS Internet access customers, bringing penetration up to 27 percent.

Most other telcos do not have the option of relying on mobility, television or global enterprise customers to dramatically change their revenue composition. That is the big cleavage in the U.S. telco market.
The rich are different from you and me, " F. Scott Fitzgerald once wrote ("The Rich Boy" in the volume of short stories "All the Sad Young Men."). One might say the same about AT&T and Verizon, compared to virtually every other telecom company in the U.S. market.

For AT&T and Verizon, the transition to new revenue sources--away from wired voice--is largely completed. For many other telco, the future pattern is less clear.

Very-small telcos often also own separate cable TV or local wireless operations. The good news is that the "video" and "mobile" functions possibly already are provided. The less-good news is that small video and small wireless operations do not spin off the same level of gross revenue or margin that the national operators are able to.

So some independent telcos might well be said to have, or will in the future have, the same basic wireless-video-broadband strategy employed by Verizon and AT&T. Many others, though, will not be able to do so, and will have to craft strategies based on a different pattern. The issue now is what those patterns might be.

Opera Mini: More Evidence of Rapid Mobile Web Use

In March 2009, Opera Mini had over 23 million users, a 12.1 percent increase from February 2009 and more than 157 percent compared to March 2008.

Opera Mini users viewed over 8.6 billion pages in March 2009. Since February 2009, page views have gone up 17.4 percent. Since March 2008, page views have increased 255 percent.

In March 2009, Opera Mini users generated more than 148 million MBytes of data worldwide. Since February, the data consumed went up by 19.3 percent.

Data in Opera Mini is compressed up to 90 percent. If this data were uncompressed, Opera Mini users would have viewed up to 1.4 PBytes of data in March. Since March 2008, data traffic is up 319 percent.

http://www.opera.com/media/smw/2009/pdf/smw032009.pdf

Internet has Fragmented: Mobile, Video Will Accelerate Change

Though it is painful for many Internet proponents, the "Internet" now has fragmented. Though in a physical sense there might be said to be "one" Internet, in practice this is no longer the case.

There are lots of private networks, language communities have developed, and national government restrictions on unfettered access to content and use of services. In some sense, it still is true that any end point can reach any other public endpoint.

But we now are witnessing the birth of a mobile-optimized "Internet" as well as a "video-optimized" net, the primary constraint being screen size for the former, bandwidth the issue for the latter.

http://mashable.com/2009/04/27/my-internet-your-internet/