Will Broadband Stimulus Work, If So, How Well?

An argument can be made that the "broadband stimulus" program, which has yet to award its first funds, will change very little. Most people who use the Internet already buy broadband services.

People in "underserved" areas might already have several providers (wired and by satellite and terrestrial broadband); the real barrier being lack of PCs, lack of training or simple lack of interest.

In rural areas, there are perhaps hundreds of thousands of locations with no terrestrial access at all, though satellite service might be available. An argument easily can be made that funds should be focused on locations that literally have no terrestrial access at all.

But those locations will be expensive to reach, meaning fewer households will benefit.

Also, building facilities will only improve broadband usage to the extent those new locations have consumers who want to buy broadband. A good percentage will not want to, because they don't use the Internet, do not own computers or cannot afford the incremental cost of broadband service.

That said, even if funds are targeted very precisely, overall broadand usage in the U.S. market will not change much, if only because the number of new subscribers in rural areas will, by definition, be limited. Even in most rural areas, an overwhelming majority of locations already are reached by one or two wired networks, plus satellite and terrestrial broadband in many cases.

The number of truly isolated locations is quite limited, in comparison to all U.S. locations and current broadband subscribers.

Good policy reasons underpin the drive to connect the unconnected. But a "passing" (facilities are in place) is not the same thing as "a user" (a household that buys service). It's good to build facilities to isolated locations. But that doesn't mean people always will buy, or that the number of new subscribers will move the needle.

http://techdirt.com/articles/20090811/0058095834.shtml

Microsoft, Nokia to Challenge RIM

Microsoft and Nokia are working together to bring native versions of Microsoft Office to Nokia smart phones, in a challenge to Research in Motion.

Over time, the companies plan to release applications for Nokia phones (using the Symbian operating system) that include the ability to view, edit, create and share Office documents on more devices in more places with mobile-optimized versions of Microsoft Word, Microsoft PowerPoint, Microsoft Excel and Microsoft OneNote.

The initiative also includes enterprise instant messaging and presence, and optimized conferencing and collaboration experience with Microsoft Office Communicator Mobile.

The collaboration also will lead to mobile access to intranet and extranet portals built on Microsoft SharePoint Server.

Apple and Android Gaining, Nokia and Microsoft Losing Share in Smart Phone Market?

Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 percent decline over the year earlier quarter, but smart phone sales rose 27 percent over the same period, surpassing 40 million units for the first time (40.96 million), says Gartner research director Carolina Milanesi.

Apple saw the largest rise in its share of the global smart phone market, rising from a 2.8 percent share in the second quarter of 2008 to 13.3 percent in the same quarter of 2009. Apple is the third most popular provider of devices, with Nokia number one, despite losing new sales share from 47.4 percent to 45 percent. Research in Motion is third.

In the area of operating systems, Nokia's Symbian has 51 percent installed base share, down from 57 percent a year ago, while RIM and Apple grew their shares year-on-year.

Google's Android platform accounted for just under two percent share in the second quarter.

Microsoft's share continued to drop year-on-year to account for nine percent of the market in the second quarter.

ESPN to Limit Social Networking

New technologies, especially those that arrive in the enterprise space from the consumer space, eventually reach some point where corporate managers feel the need to establish policies that serve enterprise business requirements.

In the latest example, ESPN has issued 12 guidelines to its employees about social networking.

The guidelines say that on-air talent, reporters and writers are prohibited from having sports-related blogs or Web sites and that they will need a supervisor’s approval to discuss sports on any social networking sites.

They will also be restricted from discussing internal policies or detailing how stories are “reported, written, edited or produced.”

“The first and only priority is to serve ESPN-sanctioned efforts, including sports news, information and content,” the new rules say.

Violating the new guidelines could lead to suspension or dismissal.

Similar struggles occurred when mobiles started appearing in the workplace, when email started being used and when Web access moved into the workplace as well. In many cases, employees tried blanket prohibitions, before gradually figuring out how to protect business information and interests while still allowing employees to use the new tools.

The same will happen with social networking tools.

http://www.nytimes.com/2009/08/05/sports/05espn.html?_r=4&ref=sports

So far, Mobile, Broadband Revenues Compensate for U.K. Fixed Voice Losses

In 2008, 49.6 percent of U.K. retail revenues were earned providing mobile and data services, while 33.8 percent of revenues were earned from fixed and mobile data services, says Ofcom, the U.K. communications regulator.

The long term challenge is that even a majority of current mobile voice revenues are likely to shrink as mobile VoIP services become more widespread.

That doesn't necessarily mean voice usage has been falling. Instead, we essentially have productivity effects, as the per-unit cost of using voice has fallen as volumes have grown. That doesn't necessarily mean voice revenues will disappear, but that voice will be a smaller percentage of total revenues on both the fixed and wireless networks.

And though mobility has been the revenue source primarily responsible for telecom providers managing the transition away from classic fixed voice, that will not always be the case. Mobile voice revenue growth has slowed significantly as penetration has saturated and prices have fallen.

Mobile voice revenue growth was just 1.6 percent in 2008, compared to an average of 7.7 percent annual growth over the previous five years, Ofcom says.

As voice services generate nearly three quarters of total mobile revenue, there was a similar

slowing in the growth of total mobile service revenues, to 2.2 percent in 2008, compared to the

annual average of 9.6 percent growth over the previous five years and 15.5 percent over the previous ten years.

Fixed voice revenues have been in decline since 2000 when they reached £12.3 billion, and had

fallen by 26.9 percent in nominal terms from this peak to £9.0 billion by 2008. Growth in mobile voice revenues, which more than tripled from £3.6 billion to £11.5 billion between 1998 and 2008, ensured continued growth in total voice telephony revenues until 2008, when they declined for the first time.

All of that is important for one salient reason. Some have argued that telecom providers would collapse as their core businesses were undermined by new IP-based alternatives. And while the danger remains, so far service providers have proven adept at creating new replacement services and applications at nearly the pace the legacy revenues are falling.

The possibility of disruption exists, of course. But at least so far, telecom providers have proven themselves rather more adept at structural change than many had expected. IP is disruptive to many industries. Whether it is fatal remains to be seen.

Mobility, Broadband Drive U.K. Service Provider Revenue Growth

In 2008, 49.6 percent of U.K. retail revenues were earned providing mobile and data services, while 33.8 percent of revenues were earned from fixed and mobile data services, says Ofcom, the U.K. communications regulator.

The long term challenge is that even a majority of current mobile voice revenues are likely to shrink as mobile VoIP services become more widespread.

That doesn't necessarily mean voice usage has been falling. Instead, we essentially have productivity effects, as the per-unit cost of using voice has fallen as volumes have grown. That doesn't necessarily mean voice revenues will disappear, but that voice will be a smaller percentage of total revenues on both the fixed and wireless networks.

And though mobility has been the revenue source primarily responsible for telecom providers managing the transition away from classic fixed voice, that will not always be the case. Mobile voice revenue growth has slowed significantly as penetration has saturated and prices have fallen.

Mobile voice revenue growth was just 1.6 percent in 2008, compared to an average of 7.7 percent annual growth over the previous five years, Ofcom says.

As voice services generate nearly three-quarters of total mobile revenue, there was a similar

slowing in the growth of total mobile service revenues, to 2.2 percent in 2008, compared to the

annual average of 9.6 percent growth over the previous five years and 15.5 percent over the previous ten years.

Fixed voice revenues have been in decline since 2000 when they reached £12.3 billion, and had

fallen by 26.9 percent in nominal terms from this peak to £9.0 billion by 2008. Growth in mobile voice revenues, which more than tripled from £3.6 billion to £11.5 billion between 1998 and 2008, ensured continued growth in total voice telephony revenues until 2008, when they declined for the first time.

All of that is important for one salient reason. Some have argued that telecom providers would collapse as their core businesses were undermined by new IP-based alternatives. And while the danger remains, so far service providers have proven adept at creating new replacement services and applications at nearly the pace the legacy revenues are falling.

The possibility of disruption exists, of course. But at least so far, telecom providers have proven themselves rather more adept at structural change than many had expected. IP is disruptive to many industries. Whether it is fatal remains to be seen.

Is Apple's Business Model About to Change?

Though it remains for the moment an unanswerable question, it is probably not too early to ask whether Apple's business model might change in the future, and at what pace.

Until recently, virtually all of Apple's profits were built on hardware sales. Everything else, system software or iTunes music revenue only mattered as a way to drive hardware sales.

The iPhone and iTunes are the best examples of how and where the change might come.

Apple might make $200 to $300 or so selling an iPhone, but $600 to $850 is more like the additional service revenue Apple receives from an AT&T iPhone sale, the difference being the value of the recurring service revenue Apple gets from AT&T, some analysts say.

For the 2009 quarter ending in June, Apple sold 5.2 million iPhones for a recorded revenue of $1.7 billion, or about $324 per iPhone.But iPhone-related service revenue was about$4.4 billion, compared to $3.3 billion in Mac sales. So at least for the moment, iPhone service revenues are a bigger revenue contributor than the Mac PC product line.

One wonders what will happen if Apple gets into the e-book reader business. What percentage of revenue might be earned from selling readers, or iPhones, compared to the recurring content business?

Apple could become a distributor and micro-payment agent for goods and services. All of this remains speculative, of course. It is not clear Apple always will be able to claim some portion of service provider revenues. But other content or application-related revenue streams might emerge to replace those recurring service revenues.

Big Changes In Mobile Business Last 2 to 3 Months

Piper Jaffray analyst Christopher Larsen has cut his rating on Sprint Nextel, arguing that industry dynamics have shifted significantly over the lat two to three months.

The trends of most importance are the higher subsidies service providers are providing on handsets as well as lower prices for attractive pre-paid offers that are likely to put pressure on postpaid pricing, especially as more data intensive handsets become available at lower price points.

The other trend of note is that although the prepaid business has traditionally been viewed as a segment comprised of lower-income or credit-challenged customers, that is likely to change. Already we see more smart phones available for use on prepaid plans, a departure from past practices.

To be sure, mobile service providers will continue to use handsets as a differentiator, but wider availability of capable handsets used with pre-paid plans seems inevitable. At the same time, $45 and $50 prepaid plans that also feature unlimited usage are going to destabilize postpaid pricing.

Facebook Can Get You Fired

About eight percent of corporate executives surveyed by Proofpoint say they have terminated

employees for disclosing confidential, protected or simply embarassing information put up on socialnetworking sites such as Facebook or LinkedIn, up from four percent who reported doing so in 2008.

About 17 percent of respondents said they had incidents of that nature this year, compared to 12 percent in 2008.

But email still seems to be a more-common reason for terminations of this sort. About 43 percent of respondents reported they had investigated an email-based leak of confidential or proprietary information in the past 12 months.

Nearly a third of them, 31 percent, terminated an employee for violating email policies in the same period, up from 26 percent in 2008.

About 18 percent of respondents say they had investigated a data loss event from a blog or message board in the past 12 months. About 17 percent disciplined an employee for violating blog or message board policies, while nearly nine percent reported terminating an employee for such a violation, up from a disciplinary rate of 11 percent in 2008 and a termination rate of six percent in 2008.

More respondents also reported investigating video-related exposure events. This year, about 18 percent have had to do so, up from 12 percent in 2008.

About 15 percent of respondents have disciplined an employee for violating multimedia sharing or posting policies in the past 12 months, while eight percent reported terminating an employee for such a violation.

Even short message services like texts and Twitter pose a risk. About 13 percent of respondents

investigated an exposure event involving mobile or Web-based short message services in the past 12 months.

About 38 percent of respondents say they now read or analyze outbound email before it is sent.

As more U.S. companies reported their business was affected by the exposure of sensitive or

embarrassing information (34 percent, up from 23 percent in 2008), an increasing number say they employ staff to read or otherwise analyze the contents of outbound email (38 percent, up from 29 percent in 2008).

In addition, companies are regularly ordered to produce employee email as part of legal actions,

exposing its contents to outside scrutiny. Nearly a quarter (24 percent) of large US companies report that employee email was subpoenaed in the past 12 months.

Malaysia Open Access Network Challenges Business Model

Service providers, end users and policy advocates will be keeping close watch on Malaysia's open access fiber network Jalenasn which will begin building as early as October, says Comms Day International.

Based on an open access model, Jalenas will only own and control the fiber infrastructure, leasing access instead to broadband service, applications and content providers who in turn will offer end user services.

The model probably is not directly applicable to U.S. markets, in part because measurable government support is required, in part because of massive service provider opposition.

But the plan will provide new real-world data about the economics of such methods, which require extreme operational efficiency by the infrastructure provider.

A similar wholesale access approach is being undertaken in nearby Singapore, and both Australia and New Zealand are weighing somewhat similar approaches as well.

The Jalenas network is owned by Pahang state-backed High Speed Broadband Technology.   
 
Ericsson will manage the project for at least the first five years, in yet another new twist. The Malaysian access network will be owned by one entity, managed by another, while retail services will be provided by other third parties.

FairPoint Unhappy About Broadband Stimulus Competition

FairPoint lobbyists and officials say the University of Maine System is unfairly competing with them for federal funds available as part of the American Recovery and Reinvestment Act "broadband stimulus" program.

“The fact is, we are competing with the University of Maine,” says Severin Beliveau, an Augusta, Maine attorney representing FairPoint. “I am concerned at what the university is proposing here, because it is receiving a form of subsidy, no, they are in fact receiving a subsidy from taxpayers, in competing with the private sector.”

Jeff Letourneau, the associate director of information technology at UMS, said the proposal is not the university’s but is from a private-public partnership and that the UMS is just one member.

FairPoint is developing a $20 million proposal that builds on its existing Internet infrastructure, the company indicates. FairPoint says the project will bring broadband access to 90 percent of Maine by 2013.

Though the first of the funds have not yet been awarded, organizations and companies now are starting to complain about the rules. FairPoint Communications, librarians and FiberNet in West Virginia are among those who have voiced complaints about the rules.

http://www.bangordailynews.com/detail/114263.html

Video Tipping Point in 2010?

The mass-market tipping point for online video will occur in 2010, when online video will be viewed by 50 percent of U.S. consumers, says eMarketer.

Online video also will achieve a 59 percent penetration rate in 2013, up from 47 percent in 2009.

The number of U.S. online video viewers will grow to 188 million in 2013, up from 144 million in 2009, says eMarketer.

Online video viewers will make up 85 percent of Internet users in 2013, up from 72 percent in 2009.

“This will put online video within range of Web activities such as search and e-mail, which are nearly at saturation points among U.S. Internet users,” says Paul Verna, eMarketer senior analyst.

The ability to share video through social networks, blogs, microblogs, e-mail and other social platforms will play a role. So will mobility.

All of that will hasten the day when changes must be made--especially on mobile networks--relating to end user consumption and pricing.

Is the USPS a Natural Monopoly?

Just thinking out loud, but is mail a natural monopoly?

The U.S. Postal Service has seen a precipitous drop in volume lately.

So they raise their prices, making other alternatives more attractive, which further depresses volume. It sort of looks like a death spiral.

Of course, "mail" can mean messages, so email is a functional substitute, as was facsimile.

And mail and packages can be delivered by any number of competitors (FedEx, UPS and others). To the extent that FedEx, UPS, the Internet and other alternatives aer widely available, perhaps "mail delivery" is not a natural monopoly.

Still, without large subsidies, the network is not profitable. It could not provide universal delivery without subsidies and it certainly does not ever make money. So it is one of the other models one has to look at when thinking about the future of the communications network business.

Communications Spend Down 1% in 2009, Up 2.6% Next 5 Years

Total U.S. communications spending will decline one percent in 2009 to $882.6 billion, but will grow 3.6 percent per year over the next five years to more than $1 trillion, according to Veronis Suhler Stevenson, a normally sober outfit.

The caution there is how one defines "communications." Estimates of this magnitude for the U.S. market necessarily include lots of other activities such as local area network and other premises networking services and products, and is not a direct proxy for "telecommunications."

This growth will make communications the third fastest-growing sector (behind mining and construction) of the U.S. economy through 2013, VSS says.

Telecom's Third Rail

There's a thoroughly uncomfortable question nobody in the telecom business wants to touch. Most people have heard the analogy that communications networks are fundamental underpinnings to future economic success, much as roads, railways or airline routes might be.

Most people are at least casually familiar with the plight of the newspaper business, which seemingly has yet to find a way to remain financially viable in a market that offers many substitutes.

Now there are the first projections that the advertising business, which except for normal economic fluctuations has grown for 30 years or more, might now face a future where brand spending actually decreases over time, in a structural, not secular shift.

So the uncomfortable question is whether the telecom business is in fact becoming a sort of infrastructure, like roads. And what I mean by that is that the business model for roads is largely indirect. True, there are some toll roads, but most roads, though an input to other revenue-generating enterprises, do not make money: they lose it.

So the "roads" or infrastructure analogy should be troublesome in the extreme. It at least implies an industry that has the profit sucked out of it, that is foundational and important, but not profitable in the way it has been.

At some point, should that continue, the industry as we now know it could not continue to exist. There would be a need for big pipes to virtually all locations. We need roads. But all the other economic activity would then be created by industries that support people driving cars.

This is something here more than the fear of being reduced to "dumb pipe" providers. Many businesses operate as low-margin "commodity" affairs, especially when they have large scale.

The newspaper analogy is more unnerving. That analogy suggests that communication networks could become something more akin to "roads," where there actually is no viable business model, and the infrastructure is a societal "cost" borne by taxpayers.

Perhaps you think governments globally have enough extra headroom to increase taxes to do such a thing. If there is no viable business model, that will be your only choice.

Being an optimist, I suspect the analogy is imperfect. I think executives will show enough creativity to avoid the worst case, and that regulators will be prudent.

What seems less debatable is the risk that if enough profit is drained out of the telecom business, even a robust "pipes" business might be tough to sustain.

That's an insight regulators in many countries have learned they must grapple with. Let us hope sane heads will prevail