What Paid Online Newspaper Access Might Mean for Telcos

Sometimes one can gain useful insight into the business impact IP services pose for one industry, such as communications, by looking at other industries that also are in the throes of a transition to IP-based services that challenge legacy approaches.

One example is the way newspapers are attempting to create new "for free" versions of their products online, as physical distribution remains under great pressure. While some point to the Wall Street Journal as the preeminent example of an online product that has been successful, most newspapers do not have the scale or unique readership to copy that model in a straightforward way.

That is similar to the difference between firms such as AT&T and Verizon Communications, compared to most other providers in the communications market. Strategic options are hugely different for those two firms and the hundreds to thousands of smaller firms without the assets those two firms possess.

So what about newspapers in smaller, often rural markets? Some point out that the online editions tend to cost about 75 percent of the print product prices, and tend to have smallish readership levels (perhaps five percent or less of the print base).

TheDaily Gazette in Schenectady, New York has a paid print circulation of about 44,000, and offers online-only subscriptions for $2.95 a week; while print subscribers pay $3.00 a week for home delivery, can get unlimited online access for just an additional cent a week. Some limited features remain free to view.

After a conversion to paid online viewing, Web site traffic has plummeted by 40 percent in the three weeks since the Gazette started charging for most of its online content.

The Newport Daily News in Newport, R.I. has a paid print circulation of about 12,000.Online-only subscriptions cost $5 a day, $10 a week, $35 a month, or $345 a year. Print and online combo subscriptions cost $11 a month or $100 a year.

Since converting to paid online access, Web site traffic is down by about 30 percent. But the Daily News says the goal is not to generate online revenue but rather drive readers back to print. That might be working, as single-copy paper sales are up about eight percent. In fact, the online product costs more than the print product.

The Arkansas Democrat-Gazette in Little Rock, Ark. has a paid print circulation of about 183,000 readers. Online-only subscriptions, which include access to an electronic edition, are available for $5.95 a month or $59 a year. Print subscribers get online access for free. Apparently print circulation is down about one percent since the paid online program was started.

Revenue from online subscription sales amounts to only about $200,000 a year, modest compared to print revenues.

The Albuquerque Journal in Albuquerque, New Mexico has about 102,000 paid print readers. The Journal charges $110 a year (or $38.25 for three months) for full access to the paper’s website, along with an electronic edition of the paper.

Readers can also pay $185 a year for a subscription to the print edition, the electronic edition and online access. Alternatively, they can pay $153 a year for home delivery and online access.

Between 1,500 and 2,000 people pay extra each month for some sort of additional online access, a number that has “remained fairly consistent” over the past eight years. Paid daily circulation is down about six percent since the newspaper instituted the paid online plans.

The Bend Bulletin in Bend, Oregon has paid circulation of 32,682. Online-only subscriptions are available for $8 a month or $96 a year. Print subscribers pay $11 a month or $132 a year for home delivery, in addition to online access.

There are 1,200 online-only subscribers, or about 3.6 percent of the print base.

Based on those examples, one might conclude that paid alternatives to print circulation have had modest success, and that is partly or primarily intentional. The newspapers want online access to remain expensive enough that it simply makes more sense to pay for the paper version.

Communication servicer providers likely do not have even that option. Unlike newspapers, telcos and cable companies cannot "wall off" customers who have broadband connections from using "over the top" voice or applications. Charging higher prices for VoIP than for legacy voice, for example, therefore is not an option. Unlike newspapers, third party VoIP providers also can supply a fully-functional substitute to legacy voice. That is not the case for local newspapers, for which there is no convenient content.substitute.

But there is one similarity. Daily newspapers, like landline voice, seem to be products for which there is declining demand. Newspaper readership has been declining for more than a decade or two. Landline voice subscriptions have been declining since 2000.

Current newspaper policies about charging for online access might only delay further decline. Likewise, charging higher prices for VoIP service compared to legacy voice likewise seems unfruitful, as users have other functional substitutes. What remains unclear is the long-term consequences of charging identical prices either for VoIP or legacy voice service. Up to this point, dominant service providers have tended to price both products in similar ways.

Unlike newspapers, telcos already have other replacement products to sell, namely wireless voice, wireless data and broadband. So a rational strategy might be to harvest much of the legacy voice business as long as possible, then shifting to a lower-priced VoIP service at some point, when a lower-priced VoIP product can compete well with third party alternatives and the providers actually make less money by sticking with legacy pricing.

Right now, a telco executive would rationally conclude that firms make more money by sticking to higher prices for legacy voice and losing market share to lower-price VoIP services, especially when many see landline voice as a product in the declining years of its life cycle.

That doesn't mean major changes couldn't happen. Nobody yet knows whether service providers can shift to a new features-driven model where the basic access costs little, but powerful new features are what people pay for.

Consider what is happening in the mobile business. In many cases, mobile users pay more for data access, features and service than they do for voice usage, for example.

Still, telcos are better placed than newspapers. Newspapers are in the ad-supported content business. Newspaper execs seem to be using paid online to prop up the legacy business.

Telcos already are multi-product businesses. They are growing new businesses to replace their older business, and only need to harvest their original business, while experimenting with applications that are replacements for that older business.

Unified communications could be the revenue driver, not the minutes of use, in other words.

That's a better place to be.

Apple Approves Vonage for iPhone

Apple has approved an official Vonage VoIP application to give iPhone users the ability to make voice calls over WiFi, as does the Skype app for iPhone.

The restriciton to "WiFi only" is part of an agreement with AT&T to not allow customers to use their network to initiate VoIP sessions using the AT&T 3G network.

The decision does not go as far as many would like, but as far as the current agreement with AT&T will allow. But change will come, though not fast enough to suit some. Over a 10-year period between 1997 and 2007, for example, U.S. communication service providers replaced the nearly 50 percent of revenue derived from long distance charges with an equivalent amount of wireless revenue.

It would be reasonable to suggest that IP services and mobile broadband likewise will, over a possibly similar amount of time, also transition from reliance on voice revenues to a reliance on mobile broadband and data services. In fact, such a transition is virtually required, as 3G and 4G networks do not support the existing voice format for technical reasons.

That said, it is no so clear that all voice will be consumed using any particular VoIP business model. Some portion will be provided by third parties, while some will be provided by the carrier themselves. Over time, though, there is little debate about the relative importance of the voice revenue stream declining while the relative importance of the data streams increases.

Given the already-reasonable retail cost of domestic U.S. calling, VoIP might have the most obvious impact in the global calling market, where per-minute prices are much higher.

That said, a mobile voice capability actually is a bundle of several values. The simple ability to make and take local or domestic calls is analogous to the function of a voice fixed line. Most mobile plans, and most VoIP plans, alrready eliminate the distinction between local and domestic long distance calling. The difference between "unlimited" plans, and "buckets of minutes" also already is being narrowed, at least for domestic U.S. calling.

The ability to place international calls has many product substitututes, including VoIP, but also including calling cards, for example. Email, instant messaging and text messaging are functional, if not complete substitutes as well.

It might take a while, but relatively standard use of mobile VoIP is coming, as it likewise ultimately will come in the landline business as well. But complete change will take quite some time.

AT&T, Sprint Nextel, Verizon Among Top-10 Social Networking Advertisers

AT&T was the leading display advertiser on social networking sites in June 2009, Sprint Nextel was the fourth-biggest and Verizon Communications was the 10th largest advertiser on social networks that same month. About 80 percent of all social networking display ads were placed with just two sites: MySpace and Facebook.

Though most of us probably have not been paying attention, social networking sites quietly have grown to represent more than 20 percent of All U.S. online display impressions, according to comScore Ad Metrix.

MySpace and Facebook each represent nearly 10 percent of total U.S. online display ads, and then there is a classic long tail of advertisers each representing a fraction of percentage point of the overall online display advertising market.

The reason spending is shifting to social networking sites, and to online venues overall, is that advertising ultimately follows people. And leading U.S. communication companies have moved aggressively to follow their potential customers to social networking.

“Over the past few years, social networking has become one of the most popular online activities, accounting for a significant portion of the time Internet users spend online and the pages they consume,” says Jeff Hackett, comScore senior vice president.

“Social networking sites now account for one out of every five ads people view online. Because the top social media sites can deliver high reach and frequency against target segments at a low cost, it appears that some advertisers are eager to use social networking sites as a new advertising delivery vehicle.”

In the month of June 2009, AT&T got two billion impressions (the number of times an advertising item is seen, heard or watched), representing about 30 percent of AT&T's total advertising impressions for the month, across all media. AT&T's social networking ads were seen by more than 87 million unique people during the month.

Sprint Nextel served up 790 million impressions, representing more than 26 percent of its total ad impressions during June 2009, and was seen by 68.6 million unique visitors.

Verizon Communications represented 435 million impressions, representing 10.5 percent of its June 2009 ad impressions, and reaching 54 million unique visitors.

All of those are bigger numbers than I would have guessed.

Clearwire Activates 10 More Markets

As Clearwire activates 10 additional markets, it also is elaborating on service plans that offer casual use in addition to the more-standard monthly subscriptions.

The new markets include Boise, Idaho; Bellingham, Wash.; and eight Texas markets, including Abilene, Amarillo,Corpus Christi, Killeen/Temple, Lubbock, Midland/Odessa, Waco andWichita Falls.

Clearwire mobile and residential plans can be purchased by the day or by the month. Home Internet service plans start at $25 per month; while mobile Internet plans start at $35 per month, or customers can purchase a convenient mobile day pass for $10.

For a limited time, customers can also choose the "Pick 1 Unlimited" plan; offering an unlimited home or mobile Internet for $22.50 for the first three months and $45 per month thereafter.

Equipment options include USB modems for PCs, including WiMAX-only or dual-mode modems that allow roaming on Sprint’s nationwide 3G network service whenever the Clear 4G service is not available.

Pricing for modems start at $49.99, after instant rebate, or may be leased for prices as low as $4.99 monthly.

For residential service, modems can be purchased for $69.99 or leased for just $4.99 monthly. Residential customers can also add in-home voice service with purchase of the "Clear Voice Adapter" for $15, and receive unlimited local and long distance service for just $25 per month.

With the "Clear Spot," any existing, off-the-shelf Wi-Fi device (802.11b/g) can connect to Clearwire’s 4G WiMAX network. The Clear Spot creates a personal Wi-Fi hotspot that travels with consumers anywhere they happen to be within CLEAR’s mobile WiMAX service area.

This $139.99 device is a portable, battery-powered router that seamlessly connects up to eight standard Wi-Fi-enabled devices (computers, mobile phones, portable gaming, consoles, cameras). The Clear Spot is compatible with both the Clear 4G and Clear 4G+ mobile USB dual-mode service options.

Clearwire also sells Intel Embedded WiMAX laptops, including the Dell Studio 17, Studio XPS 16, Latitude E4300, Latitude E6400, Latitude E6400 ATG, Latitude E6500, Precision M2400, Precision M4400 and Vostro 1220.

The company also offers the Fujitsu LifeBook P8020. WiMAX-ready laptops from Lenovo include the ThinkPad line: SL400, SL500, X200, X200s, X200 Tablet, X301, T400, T500, W500 and W700.

Samsung offers the X460 notebook as well as the NC10. The Samsung Mondi is a mobile WiMAX-enabled handheld device.

Leap Wireless Seeks $8.6 Million in Broadband Stimulus Funds

Cricket Communications, which owns Leap Wireless, has applied for a $8.6 million broadband stimulus grant in partnership with One Economy Corporation, to provide 23,000 low-income families primarily in Baltimore, Houston, Memphis, San Diego and Washington, D.C. with sustainable, innovative broadband access and digital literacy training.

Project Change Access would furnish subsidized, low-cost wireless broadband using Cricket’s 3G wireless network.

One Economy would provide targeted and localized content for education, employment, and health care through its multiple online portals, in addition to training.

Clearwire Seeks "Modest" Broadband Stimulus Funding for 2 Markets

Clearwire says it has applied for a "modest" amount of broadband stimulus funds to bring new service to underserved areas within Detroit and Puerto Rico, two areas that were not otherwise part of Clearwire’s current business plan.

Clearwire also announced its plans to affiliate with a limited number of other grants submitted, as a spectrum and technology partner, covering additional territories in five states.

These stimulus-related projects would have no significant impact on Clearwire’s funding or build-out plans, the company says.

As it appears fewer telcos applied for funds than might otherwise have been expected, it is possible that fixed wireless providers will have a relatively high profile amongst service provider applicants in rural areas.

8x8 Adds Web Conferencing

8x8, has introduced new Web-based conferencing service to its existing portfolio of business communication offerings for small to medium sized businesses.

The first in a series of new unified communications services to be introduced over the coming months, the "8x8 Virtual Meeting" Web conferencing service is an online collaboration tool accessible instantly (no software download required) from any web browser and any computing platform.

Available as an add-on service for existing 8x8 customers or as a stand-alone offering for new subscribers, 8x8 Virtual Meeting lets users conduct centralized online meetings, complete with integrated voice conferencing (to and from any telephone or web browser platform), presentation slide sharing, desktop and application sharing, instant messaging, chair control, conference control and call recording, with up to 50 participants per conference.

Free Press Asks for Future-Proof National Broadband Speed Definitions

The Free Press has filed comments wtih the Federal Communications Commission asking for a "future-proof" definition of "broadband" that takes into account the services and applications consumers can use, especially high-quality video communications.

Derek Turner, research director of Free Press, says the definition has to be flexible, evolving over time and not unduly restricting speeds or capabilities.

In all likelihood, though service providers will likely always have some differences with Free Press, broad agreement on standards that relate more to capabilities than specific immutable numeric targets makes good sense.

Everybody believes speeds will continue to increase over time, but carriers obviously do not want rigid standards set that distort investment priorities or have negative implications as far as raising investment capital to build those capabilities into networks.

Free Press, on the other hand, does not want targets set so low that carriers do not have incentive to keep upgrading.

The good news here is that a greater degree of understanding about broadband standards seems to have developed over the past couple of years, between policy advocates and industry suppliers.

Verizon to Introduce New Feature Phone Data Plans

“Enhanced Multimedia Phones” using an HTML Web browser, EV-DO Rev. A and a QWERTY keypad, and sold by Verizon Wireless starting in September 2009, apparently will be sold with a new data plan, according to the Boy Genius Report.

Apparently the Samsung Rogue is the first new Verizon handset to meet the criteria. The idea, clearly, is to monetize expected bandwidth use--expected to be light--by customers buying those phones.

One of the new data plans costs $9.99 for 25 MBytes while the other costs $19.99 for 75 MBytes of monthly usage.

The assumption is that users of such devices will mostly want access to email and light Web access on an occasional basis. The data caps might appear at first glance to be paltry, but Verizon Wireless undoubtedly has done enough data mining of its current customer base to set the caps in an appropriate way.

Heavier users of course have the option of buying the other standard data plans.

Not all users will be happy about the new charges, but they will be even less happy about charges for casual use, set at $2 a Mbyte.

Sprint Sells HTC Touch Pro2

Sprint Nextel will begin selling the Windows Mobile-based HTC Touch Pro2 on Sept. 8, 2009, for $349.99 with a two-year service agreement and after $100 mail-in rebate. The touch-screen device features the more-popular slide-out QWERTY keyboard and a 3.6-inch tilting screen.

Additional business features available on HTC Touch Pro2 include International Quad-Band capability (CDMA, GSM), full HTML browser from Opera, stereo Bluetooth wireless technology, WorldCard Mobile Business Card Scanner, Facebook integration and Linked inboxes, which link personal and work contacts. A 3.5 mm headphone jack, a microSD card slot and an auto-focus 3.2 megapixel camera/camcorder also are standard.

As does the Palm Pre, the Touch Pro2 organizes messages across message formats, so that voice, text or email messages from a single person can be searched "under a single contact card," HTC says.

Sprint appears to be bundling the device, or suggesting it be bundled with, Sprint TV and Sprint’s sports applications NFL Mobile Live and NASCAR Sprint Cup Mobile.

Without knocking either the device or the way Sprint Nextel envisions the user scenario, the launch illustrates the complex problems marketers now are having in positioning specific devices and network features.

"Smart phone" doesn't cut it, in many ways. HTC seems to have developed the Touch Pro2 as a business device, aimed at users who want to do things like participate in conference calls. But it seems to me a confusing positioning to emphasize entertainment applications for such a device.

That isn't to say people aren't increasingly interested in devices that bridge the work and personal spaces, but simply that the positioning of the Touch Pro2 would more logically have been as an enterprise tool for users who think conferencing on a mobile is a more compelling feature than simple email handling, which RIM seems to have staked out, or the simple Web surfing niche, which Apple now "owns."

"Conference in your pocket" would seem a better fit between end user niche and the device's native capabiltiies. To be sure, Sprint is emphasizing "stay productive" in its messaging. And perhaps that is where Sprint should be developing messaging around this specific device, as tough as that is. The references to Sprint TV--to me, at least--conflice with the "collaboration tool" features of the device.

HTC’s Straight Talk technology enables the Pro2—with carrier cooperation—to transition from an e-mail to a single- or multi-party conference call, as well as having the ability to offer itself as a conference room–like speakerphone system.

Straight Talk technology, according to HTC, includes a mechanical and acoustic design that allows it to offer a speakerphone experience similar to those in boardrooms; asymmetric speakers and noise suppression technology with full-duplex acoustics deliver a “high-fidelity voice and sound experience.”

That's the end user niche it seems to me Sprint Nextel should not stray from with this particular device.

Mobile Broadband Makes a Shambles of "Broadand Penetration" Statistics

At the end of 2009, Forrester expects mobile Internet penetration to reach 17 percent in Western Europe, the same adoption rate for the PC Internet a decade ago. If the growth rate remains the same, mobile broadband would hit something on the order of 60 percent to 70 percent penetration in 10 years.

That would make a shambles of efforts to quantify broadband penetration in Western Europe, as similar trends in the U.S. market likewise would make most current concerns about broadband penetration likewise irrelevant.

We have seen this sort of thing before in the global communications business. Policymakers used to wring their hands about voice penetration in developing countries. But monthly costs of $5 to $10 a month now are making mobility the way many people are getting access to voice. Increasingly, wireless handsets will be the way most people in developing regions get access to Internet communications and applications as well.

U.S. policymakers thought a major revamp of communications policy would spur competition in voice, almost precisely at the point that Internet applications were about to make those concerns, if not moot, then of much-lesser concern.

Forrester expects mobile Internet to grow to 39 percent penetration by the end of 2014. That's a lower end point than for the PC Internet in 2004, but the growth curve per se looks quite the same, Forrester Research says.

Netbook Growth Rate Twice That of Notebooks

If you have looked around the table at your last conference room meeting, you have noticed that netbooks already have grabbed significant user share. A new study by NPD Group confirms the traction. In the second quarter of 2009, the netbook segment grew 40 percent sequentially, while notebook sales grew 22 percent sequentially.

In some markets, such as China and Latin America, netbook sales already are greater than notebook penetration.

Still, the installed base of netbooks is about 22 percent of the portable computer market. Asus, the pioneer in mini-note PCs, has been steadily losing share because tier one brands like Acer, HP, Dell, Lenovo and Toshiba have become increasingly aggressive in the segment, NPD Group says.

In many regions, telecom providers have been offering subsidized mini-notes for several quarters, which helped propel growth. In Western European countries, a number of telecoms are subsidizing 100 percent of the price of the mini-notebook devices when the customer signs a two-year data plan contract.

Mini-notebooks have been a significant contributor to the growth in the portable PC market as their very attractive price points make owning a secondary computer viable for many consumers.

Suppliers generally seem to be differentiating notebooks from netbooks by screen size. At about 12 inch screen sizes, netbooks start to overlap with notebooks. Some suppliers likely want to increase average selling prices for netbooks, but price is probably the reason so many netbooks have been sold.

Hulu Cannibalizes Pay Per View, DVR

There's one take-away we ought to gain from looking at the number of subscribers to multi-channel video entertainment services or users of Hulu.

And the take-away is that Hulu cannibalizes pay per view or on-demand programming or digital video recorder income that otherwise might be gained by linear video providers.

On the other hand, we might also note that the revenue potential to be gained from time-shifted services is not all that great at the moment.

The issue is much the same as now experienced by content publishers in most other areas. Namely, that although online distribution costs are lower, revenues are much lower. There remains a revenue gap for online distribution compared to legacy distribution that is not yet fully understood, yet.

Some service providers think the answer might be "TV Everywhere," where a user paying for a linear video subscription can watch that content on mobiles or broadband-connected PCs. The business issue there is just about as challenging: the revenue comes from keeping a multi-channel video subscription. Most of the rest of the distribution is just cost.

The Difference Between Video and Music Business Models

The video business is different from the music business in one significant respect: where people routinely prefer to own their personal collections, they rarely want to "own" news, sports and most serial TV fare. That has some fairly signficant implications for business models. "Buy to own" makes logical sense for consumers of music. "Rent to view" makes more sense for most video and movie fare.

The historic example is the difference between adoption of cable TV and adoption of subscription music services. There are perhaps 20 million XM Sirius subscribers, compared to 63 million cable TV subscribers, plus three million telco video subs and 31 million satellite TV subscribers. In other words, there are 97 million video subscribers, compared to 20 million XM Sirius subscribers.

Most video watchers want to see news, sports and other events only once, movies once or twice. Most music listeners want to own and listen to some favorite songs over and over again. That suggests a stronger market opportunity for video subscriptions, compared to music subscriptions, and a larger market for on-demand video than on-demand music streaming.

iPhone to Go Multi-Network in 2011?

One likely would bet against Apple extending its exclusive U.S. distribution deal with AT&T past 2010, based on market share statistics gathered from around the world, including markets where Apple has an exclusive carrier partner as well as markets where Apple has a multi-partner distribution. Consider the Frech market, where Apple has multiple distributors.

"In France, the company now enjoys dramatically higher market share (in the 40 percent range vs. about 15 percent in ROW) than in countries with exclusive carrier agreements (such as AT&T in the U.S. where the iPhone has market share in the mid-teens).Gene Munster, Piper Jaffray senior research analyst.

Those market penetration figures should prove more compelling than the lower revenue per iPhone unit Apple gets in countries with multiple distributors, Munster argues.