U.S. Mobile Market Goes North in 4Q; Rest of World Goes South

The U.S. mobile market behaved differently from most of the rest of the world in the fourth quarter of 2008: most markets saw revenue declines; the United States did not..

Mobile end-user average revenue per user dropped between five percent and 15 percent globally in the fourth quarter of 2008, year-over-year, according to researchers at ABI Research. China, India, and a number of other Asian markets dropped more than 10 percent.

In Europe the ARPU contraction was in the range of five to eight percent.

But in North America, ARPU grew, on the strength of mobile data revenues. In South America, markets were more mixed with some markets deflating inline and others, like Brazil, managing to hold up ARPUs, says ABI Research.

To be sure, mobile data revenues are growing in virtually every market. Mobile data (messaging and mobile Internet) contributes 38 percent of Japanese ARPUs, and many European operators depend on mobile data for over 25 percent to 30 percent of their ARPU.

One can only speculate about why the U.S. market has behaved differently. Perhaps, despite the recession, consumers have more discretionary income. Perhaps pricing models are such that variable usage reductions are less attractive. Maybe there is something different about the demand curve for mobile Internet.

Whatever the reasons, the U.S. mobility business was somewhat atypical in the fourth quarter.

http://www.abiresearch.com/press/1421-Economic+Conditions+Reducing+Mobile+End-User+Spending+Up+to+15%25

Vonage Not a Telecommunications Service, Apppeals Court Says

The 8th U.S. Circuit Court of Appeals has upheld a lower court ruling that Vonage is not a telecommunications service provider, and is not required to contribute to the Nebraska Universal Service Fund.

The logic, of course, is that independent VoIP companies such as Vonage provide an “information service” rather than a “telecommunications” service. But the regulatory regime has to be considered unstable.

Cable companies do pay into the USF fund, for example. Also, the time is coming when lots of portals, Web sites and other providers will be offering such information services.

At some point, the typical regulator test--if it walks like a duck, and talks like a duck, it's a duck--will have to be addressed. The regulatory wall between "information services" and "communications services" is going to be hard to maintain, long term.

36% Mobile Marketing Growth in 2009

The U.S. market for mobile advertising will grow 36 percent, increasing from $169 million in 2008 to $229 million in 2009, according to a new forecast by Interpublic's Magna.

That's a downward revision from the company's previous forecast for mobile ad growth in 2009, primarily due to the brutal economy.

The sheer number of mobile devices in use, about 270 million at the end of 2008, according to the CTIA, is one driver. The  mobile Web is the other driver. In January, 22 million individuals accessed the mobile Web daily and 63 million monthly, up from 11 million and 37 million for each frequency during January 2008, Magna says.

The report found that smart phones are key to growth. About 32 percent of AT&T Wireless contract subscribers owning such a device at the end of the first quarter of 2009, more than double that of the previous year, for example.

78% of Small Firms Hold or Increase Online Spending

About 74 percent of small U.S. business-to-business advertisers are either increasing spending over 2008 or keeping it level, according to an Outsell survey of 1,019 U.S. and U.K. advertisers. About 26 percent of these smaller companies are reducing budgets, in contrast with the 40 percent of large B2B advertisers who forecast cuts.

But here's an interesting angle, something other surveys also are showing: small firms increasingly see spending on Web sites as "advertising" and Web site spending is the largest single category of online expense.

Spending on their own Web sites remains the largest item for B2B advertisers, at 59.1 percent and 51.1 percent of total online budgets for small and large firms, respectively.

Online marketing/ad spending is growing among U.S. B2B companies in general—up 8.2 percent from last year among smaller firms, and up 0.4 percent for larger ones.

Small U.S. B2B companies are also growing spending more than 10 percent each for keyword buys on search engine sites, e-mail marketing, industry-specific sites, and webinars.

http://www.outsellinc.com/press/press_releases/ad_mkting_study_highlights

What a Quantum Shift Looks Like

Inflection points--times when a rate of growth or decline shifts to a different trajectory are key business events. More startling by far as quantum shifts, where an entire business model either takes off or collapses.

The basic business lesson is to recognize that when whole new markets are growing, while legacy businesses are declining, one can go for longish periods of time where the change seems to be simply quantitative.

You see slightly more of the new stuff, slightly less of the old stuff, but within a business environment that seems stable.

Then the quantum shift occurs and something entirely new appears, as in a flash. That's pretty much what is happening now, in the print media space.

But lots of other businesses have some exposure to quantum shifts. Just about anything touched by Internet Protocol or bandwidth has at least some exposure to sudden quantum shifts.

To be honest, those of us who make forecasts always use linear thinking. Excel forces you to do that. Most of the time that works. Except when a quantum shift occurs. Then everything changes, very rapidly.

Sort of like water changing to ice, or water to steam: one minute you are dealing with one sort of element; the next moment, it is something else.

http://247wallst.com/2009/05/03/the-sun-sets-on-businessweek-forbes-and-fortune/

"Remnant" Inventory Fastest-Growing Online Ad Segment, Says ThinkEquity

Non-premium display advertising (often known as "remnant" inventory) is likely to remain the highest-growth segment of online media over the next five years, with the greatest potential to create significant opportunities and market dislocations, say ThinkEquity analysts William Morrison and Robert Coolbrith.

Premium display includes graphical display advertising inventory sold through a direct sales force such that ad placement, impression volume, and time-frame within which the advertisement will run are guaranteed.

Non-premium display advertising is sold without specific time-frame or placement guarantees, typically by a third party. Historically, there has been an order of magnitude to 20 times price differential between premium and non-premium channels.

"On a percentage basis, we expect non-premium display to be the highest-growth category in online media, through a combination of significant volume mix shift and pricing growth versus other media types," they argue.

Also, look for big changes in the ecosystem. Online advertising exchanges should eventually come to dominate the inventory aggregation function traditionally performed by online advertising networks, although some networks' proprietary inventory aggregation channels should remain relevant in niche and high-value market segments, ThinkEquity says.

Likewise, ad network and ad agency and even publisher business models should increasingly converge. Among other things, the major Internet media companies (Google/Doubleclick, Yahoo!, Microsoft, and AOL/PlatformA) are likely to continue consolidating and

capturing the overwhelming majority of the non-premium market.

Exchanges increasingly are being used as inventory aggregation platforms with traditional horizontal ad networks(ValueClick, Advertising.com, Tribal Fusion) increasingly abdicating their supply-side aggregation role and acquiring media directly on the exchanges and “meta ad networks” (MediaMath, Varick Media Management, X+1) that are focused on data,

optimization, and arbitrage, ThinkEquity notes.

The premium CPM (cost per thousand) advertising segment has been losing market share to performance-based advertising (typically to non-premium inventory) since 2001, with the share shift accelerating during the past three years, ThinkEquity says.

Click the image for a larger view.

Dramatic Shift in Sprint Nextel Net Ads Performance

Not often will you see a sequential change in subscriber additions as Sprint Nextel saw between the fourth quarter of 2008 and the first quarter of 2009.

That isn't to say Sprint Nextel's churn problems are behind it. The company apparently still is losing customers to AT&T and Verizon Communications.

But Sprint Nextel got a boost from Amazon Kindle users and prepaid customers.

In principle, an increase in prepaid, at the expense of postpaid, should put pressure on margins.  So far that does not seem to be a problem. All in all, though, the first quarter was impressive, at least on the metric of net customer additions or losses.

If Sprint Nextel can follow through in the second quarter, it might be an inflection point.

Tips for Mobile Marketers

A couple of tips for mobile marketers: bite-sized chunks of entertainment work. Ask users to send in photos from their mobiles. Offer an incentive.

Incentives such as access to weather, news alerts, local event information, mobile content or even a coupon increase take rates and consumer participation. 

And many campaigns take advantage of interstitial time; those short blocks of time that happen all day when users have a couple of minutes of downtime or waiting. 

Late last year, the Army National Guard launched a nationwide in-theater advertising campaign featuring "Warrior," a two-and-a-half minute music video by Kid Rock, and an appearance by NASCAR driver Dale Earnhardt, Jr. 

As part of the campaign, a mobile Web site allowed movie watchers to access and interact with the "Warrior" site on their mobile phones while sitting in the theater.

"Warrior" appeared for a two-month period before PG-13 and R rated movies in more than 3,000 theaters nationwide. During the campaign, the mobile site saw over 50,000 page views and an impressive level of engagement from mobile users who often downloaded and viewed the multimedia content multiple times as well as shared it with friends.

http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=104915

26% of IT Execs Say They Will Invest in VoIP This Year

Information security tops a list of projects information technology executives expect their firms to invest in this year. Some 43 percent of surveyed IT executives say they will do so, says Robert Half Technology.

Voice over Internet Protocol investments will be undertaken by 26 percent of respondents.

Some 28 percent say virtualization initiatives will be funded while data center efficiency was cited by 27 percent of respondents.

You might be surprised that so many enterprise executives are planning VoIP initiatives of one sort or another, this year. That's almost as many as those saying they will undertake data center virtualization efforts.

http://www.roberthalftechnology.com/PressRoom?id=2458

89% SIP Trunking Growth to 2013

SIP trunking will grow at 89 percent cumulative average growth rate between now and 2013 says Diane Myers, Infonetics directing analyst.

The converse is that we might finally be seeing the peaking of T1 services as the mainstay of business bandwidth. To be sure, SIP trunks are a replacement for channelized T1s used to support voice termination and origination operations. But even on the Internet access front, midband Ethernet services now are approaching price points that make them reasonable substitutes for data T1s, in some markets.

 

In 2008 the VoIP services market grew 33 percent to $30.8 billion. For the first three months of 2009, hosted IP service providers experienced an average of 40 percent to 50 percent year-over-year growth, says Myers.

"We expect hosted unified communications services to take off, with worldwide revenue doubling between 2009 and 2013," she says.

While residential VoIP services make up the bulk of VoIP service revenue, business VoIP service revenue growth outpaced residential in 2008, she says.

In 2008, managed IP PBX and hosted IP Centrex/hosted UC revenue together accounted for nearly three quarters of all business VoIP service revenue while IP connectivity service revenue made up the balance.

Web Use Shows Serious Fragmentation of Attention

In March the average American visited 111 domains and 2,500 web pages, according to Nielsen Online.

The average time spent per page is 56 seconds. Portals and search engines dominate, capturing approximately 12 of the 75 hours spent online in March.

That's what you call fragmentation.

Sprint Narrows Losses; Kindle and Prepaid Help

Sprint Nextel's 182,000 total net subscribers represents a sequential improvement of over one million subscribers and the best sequential net change in total subscribers in Sprint Nextel history, says Hesse.

Sprint Nextel appears to be having success adding prepaid customers, a trend noticeable at some other wireless firms, as well as with its wholesale business, driven in part by Amazon Kindle subscriptions.

Sprint Nextel had 49.1 million customers at the end of the quarter, compared to 49.3 million at the end of 2008. This includes 35.4 million post-paid subscribers (25.3 million on CDMA, 8.9 million on iDEN, and 1.2 million Power Source users who utilize both networks), 4.3 million prepaid subscribers (3.5 million on iDEN and 800,000 on CDMA) and 9.4 million wholesale and affiliate subscribers.

In the first quarter, total wireless customers declined by approximately 182,000, including net losses of 1.25 million post-paid customers – comprising 531,000 CDMA and 719,000 iDEN customers (including a net 94,000 customers who transferred from the iDEN network to the CDMA network).

The company also lost 90,000 prepaid CDMA customers. The company gained a net 764,000 prepaid iDEN customers and 394,000 wholesale and affiliate subscribers. The company achieved total subscriber growth on the iDEN network.

Wireless service revenues for the quarter of $6.4 billion declined 10 percent  year-over-year and two percent quarter over quarter.

Wireless post-paid ARPU in the quarter was stable sequentially and year-over-year at $56, primarily due to growth in fixed-rate bundled plans such as "Simply Everything," offset by seasonal declines in usage.

Data revenues contributed greater than $15 to overall post-paid ARPU in the first quarter, led by growth in CDMA data ARPU. CDMA data ARPU inow represents more than 31 percent of total CDMA ARPU.

Prepaid ARPU in the quarter was approximately $31 compared to $29 in the year-ago period and $30 in the fourth quarter of 2008. The year-over-year and sequential increases reflect a growing contribution from prepaid subscribers on unlimited plans.

Do You Actually Own Your Brand, When Social Networking is Growing?

Some day we are going to look back at this period and wonder "what were we thinking?" about how social networking is integrated with business processes. Consider "branding," the creation of a company image. These days, an actor can do so much. After that, users take over.

Recalling my management studies in grad school, is "leadership" something leaders do, or is it something "followers" give? That's leadership as distinct from bureaucratic management (I give an order and you follow it). Think of the normal military chain of command--that's management--and contrast it with combat leadership.

Managers must be obeyed because of their roles. Leaders are followed for different reasons.

Management is the sum total of all the efforts firms make to create and sustain a brand; brand leadership is the voluntary assent of consumers to agree with a firm's promise, or to give the brand a new promise.

What is clear is the serious attention enterprises now are giving to social networking and how to use it.

http://www.businessweek.com/smallbiz/running_small_business/archives/2009/05/social_networki.html

New U.K. Satellite Broadband Service Launches

Eutelsat Communications has launched "Tooway" consumer Internet access service in the U..K, offering 2 Mbps downstream access for £29.99 per month. Company executives say 14 to 20 percent of U.K. homes cannot today get service at 2 Mbps. Service had been launched in France earlier in the year. Service providers in Italy and Spain also use Tooway.

But more is coming. In 2010, Eutelsat will launch a new Ka-band satellite that will offer downstream speeds of 10 Mbps. By way of comparison, the new bird will have the capacity of 40 traditional satellites and will offer service comparable to terrestrial ADSL2 networks.

Eutelsat says video services will be available using a single receiver and antenna once the Ka-band satellite is operational. It is possible that VoIP services might also be possible, though some latency issues will remain for online gaming.

Voice support would be key, as it would allow Tooway to offer an actual triple-play service over a single network, much as terrestrial competitors do.

BT 21CN Hits Turbulence

BT Group might be rethinking or simply slowing deployment of its 21CN voice network architecture, based in large part on a network element called a Multi-Service Access Node (MSAN), intended to dramatically simplify access plant operations.

It isn't clear whether it is the architecture or simply the price points at which BT now is able to source MSANs that are the issue.

But at least one Internet service provider that wants to use the 21CN network has found the cost unappealing, lending at least some credence to the notion that the costs of its MSAN-driven access infrastructure remain higher than desired.

"Things are not entirely going to plan," says says Andrews & Arnold Ltd., operators of AAISP.net, on the company blog. "Some of the cost reductions we expected are not happening as we expected, which means 20CN lines will continue to cost us a lot more than 21CN lines."

"Until we get a new service (WBMC IPStream connect) from BT (which could be 6 months off) we don't make any savings moving lines to 21CN and in fact increase costs," AAISP says.

But "the last straw" is the cut-over process, AAISP says. Many customers were out of service for days as the network cut-overs were executed. "We have had something like six whole exchanges that have not worked in the last week alone," AAISP says.

So AAISP is trying to cancel all planned customer upgrades to the 21CN network. BT normally charges AASIP £15 for each cancellation so AAISP is seeking a mass waiver these charges so it can cancel all pending cut-overs to 21CN.

Separately, BT Wholesale has been under pressure as well. We hear that the cost of fully integrating what used to be the Infonet network now are so high that BT is simply going to run its legacy network and the former Infonet assets separately.

Unfortunately, it appears the complexity of the BT Wholesale networks overall are great enough that salespeople have been quoting costs that actually are less than the cost to provide services. Those of you who have had to deal in such things will appreciate the complexity of those sorts of issues.

Most of us will be wishing BT the best of luck resolving both the 21CN and BT Wholesale issues. Some competitors obviously will not be saddened, and perhaps some retail customers are happy they are buying service below cost.

But the U.K.'s broadband infrastructure hangs on BT getting things fixed, since so much domestic capability is dependent on the carrier of last resort.

http://aaisp.blogspot.com/2009/04/state-of-play.html

http://www.lightreading.com/document.asp?doc_id=176244&f_src=lightreading_gnews