3% Consume 40% of Mobile Bandwidth, AT&T Says

The top three percent of smartphone users consume 40 percent of all mobile data bandwidth, says AT&T Mobility and Consumer Markets president Ralph de la Vega. Those three percent of users also consume 13 times the data of the average smart phone user, he adds. Another way of quantifying such usage is to note that users who consume 40 percent of AT&T's mobile data bandwidth constitutute just 0.9 percent of all AT&T postpaid mobile subscribers.

The point was clear enough: Without adequate management of network access, most customers will find their experience damaged because of a small number of other users.

There are legitimate public policy concerns about anti-competitive behavior in the wireless and wireline businesses where it comes to gatekeepers of any sort using that power to impair competition. But that is a different and distinct matter from the obvious need to manage shared network resources in ways that actually preserve reasonable access for all other users.

De la Vega used the word "crowd out" to describe such contention, and it is a legitimate issue. Anti-competitive actions certainly are to be protected against. But there are valid network resource managment issues that obviously have to be addressed as well, especially in the wireless domain.

Beyond that, there are valid reasons for wanting competition protected, but without stifling consumer access to new products that offer mass market customers features enterprise users take for granted, such as the ability to prioritize their own use of bandwidth to perserve performance of mission-critical applications. If any consumer end user wants to prioritize their own video, voice or other bits, they ought to be able to do so.

There is nothing anti-competitive about this, so long as any applications in the class can receive such prioritization. Consumer advocates are right to note that issues can arise if voice bits sold by the ISP can be prioritized, but not voice bits sold by other competing service providers.

Some approaches will work better than others, and that is an issue one would hope policymakers take seriously into account as new "neutrality" rules are crafted.

Telemedicine Spending to Approach $3.6 Billion Annually by 2014

Wireless service providers likely will be key beneficiaries of increased spending on tele-medicine services and devices will generate nearly $3.6 billion in annual revenue within the next five years, says Pike & Fischer Senior Analyst Tim Deal.

The need to control health care costs, along with the development and expansion of faster wireless broadband networks, smartphones, and data compression solutions, will drive the market growth, Deal says.

Wireless applications, devices, and services solutions will account for more than 70 percent of the total market spend within five years.

Driving that spending is the economic stimulus law that President Obama signed earlier this year. That initiative includes $20 billion for health information technology, with a specific focus on electronic medical records and telemedicine, Deal says.

"We project that at least 25 percent of the $20 billion in stimulus funds earmarked for health information technology will be applied toward broadband-enabled telemedicine services such as remote patient monitoring and mobile access to medical records, and consumer applications such as interactive fitness guides and mobile health-related videos," says Deal.

AT&T will have the largest presence in this market, followed closely by Verizon and Sprint Nextel, Deal projects.

AT&T Chief Warns About Heavy Users

The top three percent of smartphone users consume 40 percent of all mobile data bandwidth, says AT&T Mobility and Consumer Markets president Ralph de la Vega. Those three percent of users also consume 13 times the data of the average smart phone user, he adds. Another way of quantifying such usage is to note that users who consume 40 percent of AT&T's mobile data bandwidth constitutute just 0.9 percent of all AT&T postpaid mobile subscribers.

The point was clear enough: Without adequate management of network access, most customers will find their experience damaged because of a small number of other users.

There are legitimate public policy concerns about anti-competitive behavior in the wireless and wireline businesses where it comes to gatekeepers of any sort using that power to impair competition. But that is a different and distinct matter from the obvious need to manage shared network resources in ways that actually preserve reasonable access for all other users.

De la Vega used the word "crowd out" to describe such contention, and it is a legitimate issue. Anti-competitive actions certainly are to be protected against. But there are valid network resource managment issues that obviously have to be addressed as well, especially in the wireless domain.

Beyond that, there are valid reasons for wanting competition protected, but without stifling consumer access to new products that offer mass market customers features enterprise users take for granted, such as the ability to prioritize their own use of bandwidth to perserve performance of mission-critical applications. If any consumer end user wants to prioritize their own video, voice or other bits, they ought to be able to do so.

There is nothing anti-competitive about this, so long as any applications in the class can receive such prioritization. Consumer advocates are right to note that issues can arise if voice bits sold by the ISP can be prioritized, but not voice bits sold by other competing service providers.

Some approaches will work better than others, and that is an issue one would hope policymakers take seriously into account as new "neutrality" rules are crafted.

FCC Chair Promises More Mobile Spectrum

"What happens when every mobile user has an iPhone, a Palm Pre, a Blackberry Tour or whatever the next device is?" asks Federal Communications Commission Chairman Julius Genachowski."What happens when we quadruple the number of subscribers with mobile broadband on their laptops or netbooks?"

"The short answer: we will need a lot more spectrum," he says. So look for the FCC to explore ways to promote spectrum efficiency and use of Wi-Fi, for example.
 
"Wi-Fi allows carriers to offload to fixed broadband as much as 40 percent of traffic in the home, freeing up capacity of licensed spectrum," he says.

But even efficiency measures do not alleviate the need for more spectrum. So the FCC chairman says he will work on reallocating spectrum currently being used for other purposes.

U.S. Wireless Data Hits New High

Wireless data service revenues climbed to more than $19.4 billion for the first half of 2009, CTIA-The Wireless Association says. This represents a 31 percent increase over the first half of 2008. In addition, wireless data revenues were more than 25 percent of all wireless service revenues.

The survey also found that more than 246 million data-capable devices are in use, while more than 40 million of these devices are Ssmartphones or wireless-enabled PDAs. More than 10 million are wireless-enabled laptops, notebooks or aircards.

More than 740 billion text messages carried on carriers’ networks during the first half of 2009, roughly 4.1 billion messages per day. That’s nearly double the number from last year, when only 385 billion text messages were reported for the first half of 2008.

Wireless subscribers are also sending more pictures and other multi-media messages with their mobile devices—more than 10.3 billion MMS messages were reported for the first half of 2009, up from 4.7 billion in mid-year 2008.

As of June 2009, the industry survey recorded more than 276 million wireless users. This represents a year-over-year increase of nearly 14 million subscribers.

Wireless customers used more than 1.1 trillion minutes in the first half of 2009—breaking down to 6.4 billion minutes-of-use per day—and six-month wireless service revenues of nearly $76 billion.

Study Finds Consumers Do Not Want Targeted Ads

“Contrary to what many marketers claim, most adult Americans (66 percent) do not want marketers to tailor advertisements to their interests, s new study from the Annenberg School for Communication, University of California Berkeley School of Law and the Annenberg Public Policy Center suggests.

“Moreover, when Americans are informed of three common ways that marketers gather data about people in order to tailor ads, even higher percentages— between 73 percent and 86 percent—say they would not want such advertising,” the Annenberg study says.

Respondents showed somewhat more interest in receiving personalized discounts and news, but still, less than one-half of Americans wanted any tailored Web content at all.

That was true of consumers in every age group—even young adults ages 18 to 24 were more likely to say no to behavioral targeting than to accept it, except for discounts.

More than two thirds of respondents to the Annenberg/Berkeley study felt they had lost control over their personal information. At the same time, however, they believed businesses handled their data well and that they were already protected by current regulations.

One suspects the responses might be different if consumers are asked whether they would be willing to receive tailored messages in exchange for some other tangible benefit, such as lower Internet access costs, free text or lower-cost voice, discounts or other tangible benefits.

The precedent is TV commercials. Just about everybody says they do not like commercials. But if asked whether they would rather watch TV without commercials, if the cost were higher, most people then say they will choose an ad-supported service.

New AT&T Mobile Browser

AT&T has developed its own mobile browser, providing customers three windows to the Web. From the homepage, users can easily browse the global Internet as well as assign bookmarks and shortcuts or set other preferences so they have quick access to their favorite content.

A second window gives users location-aware local news and weather; one-click results for nearby restaurants, nightlife venues, ATMs and other points of interest; and access to maps, driving directions and traffic information.

A third window delivers the latest headlines from popular news, sports and entertainment sites.

Additionally, customers accessing att.net from their PC can customize their mobile att.net page by sending shortcuts to popular Web sites through a "Send to Mobile" feature.

"The new browser powering the att.net service brings the best of the open Web to consumer feature phones while making the mainstay of the mobile Web easy to find and also delivering local tools and bookmarking management," says Ted Woodbery, vice president of Wireless Data, Voice and Ancillary Products for AT&T Mobility and Consumer Markets.

The custom browser suggests one way service providers can optimize mobile Web experiences for users by making navigation easier. AT&T also is introducing new phones late this fall, including the Samsung "Flight," which features both a touchscreen and a QWERTY keypad.

Does Net Neutrality Posse Credit Risk for U.S. Wireless Providers?

While there is still uncertainty around potential new rules regarding net neutrality and its impact on wireless operators, Fitch Ratings does not believe potential regulatory changes will materially affect the credit profiles of wireless companies over the longer term.

Fitch does believe the controversial plans outlined by the FCC chairman could face process delays and potential legal challenges once there is clarity about the proposed rules. In other words, there will be no clarity for some time after promulgation of new rules.

In Fitch's opinion, the competitive environment would have likely dictated that the wireless industry naturally evolve in this direction but the conditions and rules currently contemplated by the FCC will likely accelerate the pace at which this transition occurs and place more definitive regulatory restrictions on wireless operators.

Consequently, carriers will likely need to adapt access plans to mitigate the impact that devices with more data intensive applications could have on network quality.

Since nearly all markets experience lower demand when prices are raised, it is likely that access pricing will evolve in ways that generally  match consumption to usage, though that does not have to take the form of strict metering of usage, but more likely will take the form of buckets of use, one would suspect.

Fitch also believes that 4G networks offer the potential to generate additional revenue from several new sources like machine-to-machine applications which could more than offset pressure from further erosion of voice related average revenue per user.

From a credit perspective, Fitch believes the dominant market share, higher margins, strong free cash flow, and robust spectrum portfolios of Verizon Wireless and AT&T Wireless strongly position the companies to capture additional share and future market growth opportunities, at least partially offsetting structural changes that could pressure certain revenue and cash flow streams.

However, the market strength of Verizon and AT&T has implications for the remaining national, regional and niche wireless operators, which will likely face increasing credit risk as the wireless industry evolves to 4G and the competitive market intensifies for certain products and services.

Net Neutrality Structurally Flawed, Entropy Economics Says

Network neutrality has deep structural flaws, says Bret Swanson, Entropy Economics president.

Though aiming to ensure equal treatment of applications on the best-effort Internet, network neutrality would ban packet prioritization that might actually benefit consumers, denying them the ability to voluntarily buy services that ensure best performance for voice and video, or any other applications they may deem equally important.

Network neutrality as envisioned by the Federal Communications Commission also would prohibit creation and offering of new differentiated services, he argues.

The FCC seems to argue that although the Internet and the Web have been wild successes, the market cannot be counted on to take the Internet to the next level, Swanson argues.

"The events of the last half-decade prove otherwise," he says. Since 2004, bandwidth per capita in the U.S. grew to three megabits per second from just 262 kilobits per second, and monthly Internet traffic increased to two billion gigabytes from 170 million gigabytes—both tenfold leaps.

The FCC's desire to extend wireline rules to wireless likewise is dangerous, he argues. No sector has boomed more than wireless, yet the FCC wants to extend new regulations to the technically complicated and bandwidth-constrained realm of wireless, he argues.

Wireless carriers invested $100 billion in just the past three years, and the United States vaulted past Europe in fast 3G mobile networks while Americans enjoy mobile voice prices 60 percent cheaper than foreign peers, he argues.

The danger is that heavy-handed new rules will stifle needed investment in new networks.

"My research suggests that U.S. Internet traffic will continue to rise 50 percent annually through 2015, and hundreds of billions of dollars in fiber optics, data centers, and fourth-generation mobile networks will be needed," Swanson says. "But if network service providers can't design their own networks, offer creative services, or make fair business transactions with vendors, will they invest these massive sums to meet, and drive, demand?"

"If you don't build it, they can't come," he says. And that is the danger.

Enterprise Telecom Spend Now $1500 to $2000 Per Employee, Says Gartner

North American enterprises spent between $1,500 and $2,000 per employee on telecoms services in 2008, say analysts at Gartner. Total telecom spending represents about 20 percent of IT budgets. Wireless spending represents about 15 percent to 30 percent of total telecom spending but remains both the strongest growth category.

Fixed services continue dominate spending primarily due to enterprise spending on data networks.

But enterprises are shifting the way they buy services. Wireline services generally are sourced from multiple providers, as you might expect, given the regional nature of fixed access networks.

Wireless services ncreasingly are sourced on a national basis, when possible. That also makes sense since the tier one mobile providers offer nationwide service.

Contracts that combine buying of fixed and wireless service are more popular when possible, as they generally lead to volume discounts.

MPLS rates fell by double digits in 2008 as enterprises squeeze their VPN transport accounts, Gartner says.

The average North American fixed services contract is a three-year deal with an incumbent provider, although cost concerns have proven a boon for alternative providers and technologies such as audioconferencing.

Enterprises increasingly are bundling wireless with wired services to gain volume discounts, Gartner says. As a result, enterprises have reduced total communicatons spending.

T-Mobile UK Offers "Free Texting for Life"

It appears a "free text messages for life" promotion lead to the highest-ever single-month gain in new subscribers for T-Mobile UK in September 2009.

T-Mobile UK gained an estimated 100,000 net new subscribers in September, compared to a net loss of 200,000 subscribers in the first six months of the year.

The promotion runs month to month, allowing any users that tops up a prepaid subscriber information module to £10, in any month, unlimited texting the next month. So the promotion requires subscribers to top up their prepaid accounts to that level, every month, to keep the "unmlimited texting" feature.

Growth in T-Mobile UK's prepaid business accounted for most of the increase in the month, but the company says there was also a "healthy increase" in the number of contract customers in the period.

The thing about mobility is that it is a multi-product business, allowing service providers a number of options for "merchandising" features to enhance new customer acquisition, retention, revenue or profit margin. In this case, T-Mobile UK has opted for merchandising of text messaging to boost customer acquisition and retention.

Speakeasy Joins Google Voice in Refusing High-Cost Terminations

It is unclear whether a common carrier or Internet service provider lawfully can refuse to terminate calls to some area codes, though the issue now will have to be resolved. Google, for example, refuses to terminate calls to some high-cost areas in Iowa and elsewhere commonly used by free conferencing services.

Tier-one service providers also have tried to refuse terminations to these area codes and have been forbidden to do so by the Federal Communications Commission.

Speakeasy now apparently also does not want to terminate calls to some high-cost area codes, at least as part of its standard service.

"Speakeasy will disallow voice traffic to a few selected area and prefix codes (“NPA-NXX”) in North America," says Michael Czerwinski, Speakeasy VP. "In addition, we are clarifying our non-standard use clause and will be extending additional options to these specific customers affected."

Operators of services such as adult lines and “free conferencing” are using these local area codes and are causing additional fees, he notes. "Instead of passing on these fees to you, we have chosen to maintain the most competitive rates possible by implementing this policy," he says.

Regulatory arbitrage is a fact of life in the communications business. Sometimes it is a mnor irritant; sometimes it rises to a more-painful level. One suspects high termination rates in a few jurisdictions now are rising to a level when some action is to be expected.

Is Net Neutrality Possible?

It has been quite some time since the typical service provider executive has had confidence about the stability of rules governing the communications business. To greater or lesser degrees, there has been some element of regulatory instability and uncertainty since the mid-1990s, to go along with heightened market uncertainty.

Investors and executives do not like uncertainty. Yet greater uncertainty is likely what the industry now faces as the Federal Communications Commission ponders new rules about network neutrality, wireless competition and national broadband policy.

The latest reason for heightened uncertainty is the fundamental nature of questions inevitably raised by some of the regulatory discussions and rule makings, and the time it will take to sort out the application of the rules.

How does regulation separate "common carrier" obligations carriers may have from content rights they may have as providers of their own information and content services?

What does "common carriage" mean in an Internet era, for Internet-delivered services that might not work reliably and consistently in a strict "best effort" delivery mode?

What scope exists for "private IP" services provided to consumer users, much as business users have the right to buy "private IP" services that allow prioritization of packets?

How can regulation provide fair and equitable treatment of like services when the fundamental regulatory frameworks apply to different providers?

How does the framework handle instances where a "service" or "application" provider also acts as a "carrier"? When it is impossible to prevent a single legal entity from acting simultaneously as an information provider and a service provider and an application provider and a carrier, how does regulation handle the contradictions between treatment of roles?

Above all, will the sum total of new rules create more freedom, or less? And when freedom for one actor conflicts with freedom for another, how will balance be maintained?

The answers ultimately will matter for reasons other than perhaps-abstract notions about extending or squashing freedom; protecting individuals and companies from the power of government. At a time when everybody agrees that continued robust investment in facilities is in the public and national interest, how will the new rules affect investment and innovation?

The issue is not so much whether the outcome is greater freedom for application providers--that certainly will happen no matter what the outcome--but whether facilities providers also have freedom to change their business models to take advantage of new freedoms.

Virtually all regulators assume that the proof of deregulatory success is that incumbents lose market share and revenue. Some financial pain, inflicted on incumbents,  therefore is the whole point of deregulation.

But there is some point beyond which the infliction of pain must stop, or wider disruption of core facilities is impaired.

A rational observer might argue that "level playing fields" have yet to be fully created.. The issue is when such a point will have been reached, and how we will know it.

Will Net Neutrality Affect Teleworkers?

New "net neutrality" rules proposed by the Federal Communications Commission could affect teleworkers across the country, says Irwin Lazar, Nemertes Research VP.

If new rules strictly require Internet access providers to treat all traffic equally, which has a nice ring to it, it follows that it would also be unlawful to prioritize traffic, such as giving top priority to voice traffic or conferencing traffic at remote work sites.

That might have implications for the sorts of broadband access services organizations are able to buy for remote workers.

Enterprises and organizations might very well require the ability to prioritize voice and conferencing sessions, while assigning lower priority to Web surfing or entertainment video, for example.

That might mean it is not possible to buy standard broadband access services, and might require sourcing of private business class connections where such prioritization is possible. The ability to create virtual tunnels and virtual private networks might be required, and therefore might preclude buying of consumer broadband connections.

That could prove troublesome for teleworker support, as Nemertes Research now estimates that 86 percent of companies are planning to increase the number of teleworkers.

Proposed Net Neutrality rules may hinder their ability to utilize latency sensitive applications without purchasing a business-class service with performance guarantees. Uses of client-based optimization as well as desktop virtualization are likely to increase.

"Do not continue to assume that your employees will always have cheap access to high-speed residential services," says Lazar. "Develop contingency plans that include purchasing of business class services, use of optimization, and, or desktop virtualization to guarantee application performance."

UC Glass Half Full?

Unified communications can improve productivity, a survey by Orange Business suggests. The poll shows that 41 percent of the CIOs of large multinationals are considering unified communications. The other way of looking at matters is that 59 percent are not looking at it.

CIOs say UC features such as integrating mobile devices into the enterprises, implementing real-time identification through presence, instant messaging, and adding audio conferencing and desktop videoconferencing to work-flows enhance business efficiency.

Orange's report polled more than 600 CIOs from multinational corporations across various vertical industries. It revealed that most companies had to track and support seven different communications tools and applications.

This multitude of communications tools not only hampered an MNC's ability to collaborate internally, but it also delayed businesses processes and decision making.

While 95 of the CIOs polled said that new communications technologies have increased productivity, the amount of communications tools used within their respective companies slowed down internal communications.

Some 45 percent of CIOs indicated that multiple communication channels cause severe delays in colleague response time which can negatively impact business processes and productivity.

Customer service was seen as the primary UC beneficiary by 33 percent of respondents, while 28 percent thought sales benefitted most.

What is not clear is how much those respondents are willing to pay to acquire various capabilities, or how much enterprise workers will agree with CIO assessments.