Palm Pre, iPhone, MyTouch, Droid Compared

Here's one way of comparing some of the latest smartphones, put together by BillShrink.com. One thought comes to mind, when looking at "unsubsidized" cost of these devices.

(Click image for larger view.)

Some users do not apparently like contracts, even if those contracts provide lower handset prices. They should be able to buy their handsets "unlocked" if they choose.

But lots of users, contemplating smartphone prices almost the same as notebooks and PCs, might well prefer the contracts, to get lower handset prices, just as most people say they "hate" commercials but will put up with a certain amount of commercials if it means "free" content access.

In a world that is "one size fits none" rather than "one size fits all," it seems to run counter to consumer preferences to ban any lawful commercial offer. Let people make their own decisions.

On the other hand, if you want to see a dramatic deceleration in smartphone adoption, with all the application innovation that is coming along with those devices, watch what happens if contracts that subsidize handset costs are outlawed.

Google Voice has 1.4 Million Users

Google Voice has 1.419 million users, some 570,000 of which use it seven days a week, Google says, in information Google apparently released accidentally in a letter to the Federal Communications Commission and discovered by Business Week before the information was discovered and removed.

The early version of the documents also suggested Google has plans to take Google Voice global. Google apparently said it already has signed contracts with a number of international service providers.

How Do You Measure the Value of Something That Has No Price?

Global end user spending on communications services (voice and data, not entertainment video) runs about $1.8 trillion a year or so, one can extrapolate from the most-recent International Telecommunicatons Union statistics.

Fixed line voice probably sits at about the $740 billion range in 2009.

Infonetics Research says VoIP services bring in $21 billion for service providers in the first half, so assume an annual total of $42 billion. Assume 16 percent of those revenues are for trunking services of one sort or another and voice revenues might hit $35 billion or so for the full year.

That suggests VoIP services represent about 4.7 percent of total global voice revenues in 2009.

The point is that VoIP remains a relatively small portion of global voice revenues. But the situation is more complicated than simply how VoIP stacks up as a revenue driver. The larger problem with voice revenues, as everyone agrees, is that it is trending towards becoming an "application," not a service. That means it will sometimes be provided "at no incremental cost," or at "very low incremental cost."

The value VoIP represents cannot be strictly measured using "revenue" metrics, anymore than the value of email or instant messaging or presence can be measured by revenue metrics. Probably all that anyone can say with some assurance is that the value VoIP represents is greater than five percent of the total value of voice communications, as many sessions occur on a "non-charged" basis.

Many years ago, consumers got access to email in one of two ways. They got email access from their employers, or they bought dial-up Internet access and got their email from their ISPs. In neither case has it, or is, possible to calculate the economic value of email, as the measurable "product" for a consumer was the value of the dial-up Internet connection.

Business value is even harder to calculate, as organizations can buy software and hardware to host their own email, and then buy access connections that support any number of applications, without any specific fee required to host email services.

The larger point is that, in future years, the service revenue attributable directly to voice services will be a number that might remain flat, might grow or might shrink. If voice revenues ultimately shrink, as they might in many markets, or if VoIP replaces TDM versions of voice, that will not necessarily mean that people are talking less, or that the value ascribed to voice is less.

It simply will mean that the value is only indirectly measurable. Only one thing can be said for sure. Markets whose products cannot be directly measured will not be measured. The first sign of this is the increasing use of metrics such as "revenue generating units" or "services per customer" or "average revenue per user."

At some point, though it might still be a measurable quantity, the value of voice services will be only partially represented by "service" revenue. It's tough to measure the value of something that has no specific "incremental cost."

So what will market researchers and agencies do? What they have done before: they will measure the value of some associated product that does have a market price. They will measure the value of purchased access connections, rather than particular applications, much as one could measure ISP access subscriptions, but not the value of email.

Will Moore's Law "Save" Bandwidth Providers, ISPs?

In the personal computer business there is an underlying assumption that whatever problems one faces, Moore's Law will provide the answer. Whatever challenges one faces, the assumption generally is that if one simply waits 18 months, twice the processing power or memory will be available at the same price.

For a business where processing power and memory actually will solve most problems, that is partly to largely correct.

For any business where the majority or almost all cost has nothing to do with the prices or capabilities of semiconductors, Moore's Law helps, but does solve the problem of continually-growing bandwidth demand and continually-decreasing revenue-per-bit that can be earned for supplying higher bandwidth.

That is among the fundamental problems network transport and access providers face. And Moore's Law  is not going to solve the problem of increasing bandwidth consumption, says Jim Theodoras, ADVA Optical director of technical marketing.

Simply put, most of the cost of increased network throughput is not caused by the prices of underlying silicon. In fact, network architectures, protocols and operating costs arguably are the key cost drivers these days, at least in the core of the network.

The answer to the problem of "more bandwidth" is partly "bigger pipes and routers." There is some truth that notion, but not complete truth. As bandwidth continues to grow, there is some point at which the "protocols can't keep up, even if you have unlimited numbers of routers," says Theodoras.

The cost drivers lie in bigger problems such as network architecture, routing, backhaul, routing protocols and personnel costs, he says. One example is that there often is excess and redundant gear in a core network that simply is not being used efficiently. In many cases, core routers only run at 10 percent of their capacity, for example. Improving throughput up to 80 percent or 100 percent offers potentially an order of magnitude better performance from the same equipment.

Likewise, automated provisioning tools can reduce provisioning time by 90 percent or more, he says. And since "time is money," operating cost for some automated operations also can be cut by an order of magnitude.

The point is that Moore's Law, by itself, will not provide the solutions networks require as they keep scaling bandwidth under conditions where revenue does not grow linearly with the new capacity.

How Many People Will Buy a 50 Mbps Access Service?

Virgin Media now says it has 20,000 subscribers buying its 50 Mbps service. Virgin Media has about 3.77 million broadband access customers. So that suggests about one half of one percent of its customers are buying that grade of service.

I'd be willing to bet U.S. service providers offering a 50 Mbps service are doing about that rate as well, with one possible exception. SureWest Communications has been offering tiers that fast longer than anybody else I can think of, and probably can claim a higher subscription rate.

Virgin Media's current promotion for the 50 Mbps product offers a price of £18 a month (about $29.74) for three months and £28 (about $46.26) a month after that, when bundled with aVirgin Media phone line.

Those sorts of prices will make U.S. consumers jealous, but it is hard to compare pricing across regions and nations. Voice and text message prices on mobiles are far higher than in the United States, though broadband and video entertainment prices seem to be lower, across the board.

SureWest's 50 Mbps and 100 Mbps products are different, though, as they offer symmetrical bandwidth, not asymmetrical as is typical of DOCSIS 3.0 services such as provided by Virgin Media.

When SureWest first introduced its 50 Mbps symmetrical product, it was available as part of a high-end quadruple play bundle including the 50 Mbps access service; a 250-channel digital TV service; unlimited local and long distance telephone and unlimited wireless.

The package was priced at $415.18 a month. If it were offered on a stand-alone basis, SureWest said the 50 Mbps service would be valued at $259.95 per month. Not many consumers are interested in paying that much.

FiOS Does Not Sell Itself

Even FiOS Doesn't Sell Itself

Verizon's third quarter FiOS revenues totaled more than $1.4 billion, up 56 percent year over year. And FiOS average revenue per user also hit more than $137 per month.

Verizon also added about 18 percent more FiOS TV and Internet customers than in the same quarter last year, including 191,000 FiOS TV and 198,000 FiOS Internet customers, increasing Verizon's penetration to 25 percent for TV and 29 percent for Internet.

Still, net adds were less than the record adds of the last two quarters, Verizon says. Gross sales were lower primarily due to a change in promotional activity, the company says.

"As it turns out, we had a couple of promotions that worked, didn't work as well," says Ivan Seidenberg, Verizon CEO. "What happened is we had a couple of better quarters and we toyed with how we could sustain that and found that it was difficult in light of maintaining a fiscal discipline against it."

In other words, Verizon probably did not spend as much as it could have on marketing FiOS services, and the results probably slowed because of that conservatism.

The point, perhaps, is that as powerful a marketing platform as FiOS represents, the value proposition appears to remain less obvious to consumers than we inside the business sometimes think.

Verizon remains committed to adding about one million new FiOS customers every year, on a base of homes passed that stands at about 45 percent of all Verizon residential passings, with video available to about 34 percent of total households passed.

That illustrates part of the problem. Whatever Verizon does, it potentially can sell video services to about a third of all residences, though it can sell FiOS broadband to about 45 percent of homes. It always is tough to market services when a third of homes can buy them, not all.

And as service providers have learned in the past, easing up on promotions, or banking on the wrong promotions, can have significant effect on results. Not even fiber-to-the-home service, in and of itself, seems to "sell itself" to most customers, as powerful as those sorts of connections always have seemed to people in the business.

Twitter Stats Still a Puzzle

Twitter continues to be a bit of a puzzle, for reasons beyond its search for a viable business model. It has enthusiastic users, but also high apparent levels of abandonment. And some studies might lead to the conclusion that Twitter growth is slowing sharply, while other social sites such as Facebook might be accelerating.

Data from hitwise, for examples, shows a peak in Twitter in July 2009, with declines since then. The caveat is that many Twitter users appear to use third party sites to access the service, so the actual Twitter.com visits do not fully capture actual Twitter use.

The hitwise data also might suggest that user engagement with Facebook, a larger and more-established social networking site, is growing much faster than Twitter seems to be growing.

One fact seems clear enough, though, and that is the increased amount of mobile use of the social tool. Although 60 percent of Twitter users say they only use their computers to access the service, about 40 percent say they do so using their mobiles, according to a study of Twitter use during August 2009, Crowd Science.

Crowd Science reports that in August 2009, although only 27 percent of Twitter users posted daily, 46 percent checked for updates every day.

Is Mobile Handset Market Heating Up?

Handset shipments suffered another annual decline in the third quarter but are forecast to rebound in the key final quarter of the year, according to Strategy Analytics and IDC. Virtually all observers attribute the slowdown to slower handset replacement caused by consumer caution in the face of the recession.

Strategy Analytics estimates that global handset shipments reached 291 million units in the third quarter, down four percent from 304 million units year over year.

IDC estimates third quarter 2009 shipments totalled 287.1 million units worldwide, down six percent from a year earlier, but up 5.6 percent from the second quarter.

"The mobile phone market is showing the first signs of improvement since the onset of the economic crisis," says Ramon Llamas, senior research analyst at IDC. "During the third quarter, we saw a number of channels promoting older devices at significantly lower prices. For many, this was enough to spur demand and push volumes higher."

Strategy Analytics forecasts that 300 million handsets will be shipped in the key fourth quarter, an increase of three percent increase on the 294 million units shipped in the last quarter of 2008.

"We believe this will be the first time the industry has returned to positive growth since the third quarter of 2008, signalling an end to the handset recession after four quarters of decline," Strategy Analytics says.

Of course, industry-wide averages sometimes obscure market share changes. Nokia sales dipped eight percent, year over year, while Samsung grew 16 percent. LG grew 37 percent. Both Sony Ericsson and Motorola reported declines.

Pandemic Would Impair Residential Broadband, GAO Says

In a serious pandemic, residential Internet access demand is likely to exceed the capacity of Internet providers’ network infrastructure, says the Government Accountability Office. That means enterprise and government disaster recovery efforts that depend on residential broadband connections may not work as planned, GAO warns.

In a serious pandemic, U.S. businesses, government agencies and schools could experience absenteeism (or forced dispersal of workers as precautionary measure) that could reach 50 percent or higher ranges, thereby displacing Internet access demand from normal daytime sites to homes, says the Government Accountability Office.

But residential broadband networks are not designed to handle this unexpected load, and could interfere with teleworkers in the securities market and other sectors, according to the Department of Homeland Security.

Oddly enough, robust network neutrality measures, such as forbidding any prioritization of bits, could render impotent one obvious way of handling the sudden explosion of traffic.

"Private Internet providers have limited ability to prioritize traffic or take other actions that could assist critical teleworkers," GAO says. "Some actions, such as reducing customers’ transmission speeds or blocking popular Web sites, could negatively impact e-commerce and require government authorization."

In other words, laws and rules that forbid "packet discrimination" would impair ability to prioritize more-important work-related uses of the residential Internet.

"Increased use of the Internet by students, teleworkers, and others during a severe pandemic is expected to create congestion in Internet access networks that serve metropolitan and other residential neighborhoods," GAO warns.

"Localities may choose to close schools and these students, confined at home, will likely look to the Internet for entertainment, including downloading or 'streaming' videos, playing online games, and engaging in potential activities that may consume large amounts of network capacity," GAO says.

"Additionally, people who are ill or are caring for sick family members will be at home and could add to Internet traffic by accessing online sites for health, news, and other information," GAO adds. "This increased and sustained recreational or other use by the general public during a pandemic outbreak will likely lead to a significant increase in traffic on residential networks."

"If theaters, sporting events, or other public gatherings are curtailed, use of the Internet for entertainment and information is likely to increase even more," GAO says. At-home workers will only compound the problem.

Oddly enough, the mechanisms ISPs could use to prioritize bandwidth so that a suddenly-scarce resource can be managed are precisely the tools strong "network neutrality" forbids.

"A provider could attempt to reduce congestion by reducing the amount of traffic that each user could send to and receive from his or her network," says GAO. "Such a reduction would require adjusting the configuration file within each customer’s modem to temporarily reduce the maximum transmission speed that that modem was capable of performing—for example, by reducing its incoming capability from 7 Mbps to 1 Mbps."

"However, according to providers we spoke with, such reductions could violate the agreed-upon levels of services for which customers have paid," GAO points out.

And that is even before any new regulations that specifically would outlaw packet shaping that could, for example, limit video streaming, gaming, and peer-to-peer and other bandwidth-intensive applications during daytime work hours, when teleworkers will have an arguably greater need to maintain functioning connections for voice and data operations essential to their work.

Overly-casual positioning of the need for "packet equality" rules can be dangerous, as the GAO points out.

Google Blocks Calls to About 100 High-Cost Telephone Numbers

Google says that although it still blocks use of Google Voice to terminate calls to fewer than 100 U.S. telephone numbers with unusually high termination cost, it still does so. Earlier, Google Voice had been blocking calls to thousands of numbers in some exchanges.

In a letter to the Federal Communications Commission, Google says a June 2009 study it conducted found that the top 10 U.S. telephone prefixes Google Voice was terminating accounted for 1.1 percent of its monthly call volume, about 161 times the expected volume for a "typical" prefix. That 1.1 percent of calls also accounted for 26.2 percent of its monthly termination costs.

Google says terminating those calls costs as much as 39 cents a minute. Google therefore blocked Google Voice calls to less than 100 U.S. telephone numbers, based on that study.

The difference is that where Google had before only been able to block calls to prefixes, it now can block specific telephone numbers with highly asymmetric traffic typical of free conference call services, for example, which never place outbound calls, but simply receive them.

Will Telecom Markets Grow in 2010?

Worldwide telecom spending will decline four percent in 2009 with revenue of nearly $1.9 trillion. In 2010, telecom spending is forecast to grow 3.2 percent, say researchers at Gartner. The question lots of people logically will have is what pattern growth in U.S. enterprise and smaller business markets will take.

Qwest provided some anecdotal evidence during its third quarter earnings report. "As far as the activity in BMG and wholesale, I would say, yes. we are seeing some quicker decision making," says Teresa Taylor, Qwest COO. "Quicker decision making" is a sign of more buying intent and activity, as longer decision cycles represent less intent and activity.

Qwest's business markets group sells to enterprises, so the anecdote suggests enterprise demand, at least for Qwest, is growing. Business markets segment income of $409 million was flat, compared to the second quarter, but increased 11 percent year over year.

The caveat here is that Qwest believes it has been doing better than AT&T and Verizon over the last couple of quarters. All Taylor will say that trends are "positive."

Verizon to Debut Motorola Droid Nov. 6, 2009

Verizon Wireless will take the wraps off its new "Droid" device, built by Motorola, on Nov. 6, 2009. The new device will feature a 3.7-inch high-resolution screen featuring more than 400,000 pixels total, more than twice that of the "leading competitor," Verizon says.

The Android operating system supports running of multiple applications at once, and allows toggling between as many as six simultaneous applications. Google searches can be conducted using voice input and results are location dependent. Content on the phone, such as apps and contacts plus the Web can be searched using the search box.

"Push" Gmail is supported, as is "push" Microsoft Exchange email. "Google Maps Navigation" provides turn-by-turn voice guidance as a free feature of Google Maps.

Droid will be available in the United States exclusively at Verizon Wireless Communications Stores and online for $199.99 with a new two-year customer agreement after a $100 mail-in rebate.

Customers will receive the rebate in the form of a debit card; upon receipt, customers may use the card as cash anywhere debit cards are accepted.

Customers will need to subscribe to a nationwide voice plan and an email and Web for plan. Nationwide voice plans begin at $39.99 for monthly access for 450 minutes and an "Email and Web for Smartphone" plan costs $29.99 for monthly access.

Consumption-Based Billing Coming?

Sandvine has released Usage Management 2.5, a software solution that enables fixed-line network operators to implement consumption-based billing models, real-time subscriber communications and multiple service plan tiers. The move is significant as it suggests retail pricing might move in that direction in the future, representing a major shift in retail pricing models.

Historically, consumption-based billing has been problematic for Internet service providers. Time Warner Cable tested and then decided not to implement metered billing earlier in 2009 after widespread consumer resistance to tests in in Rochester, N.Y., Austin and San Antonio, Tex., and Greensboro, N.C.

User behavior also is powerfully affected by billing methods. At one point in time America Online charged users by the minute for their dial-up Internet access usage. When it converted to flat fee billing, usage and subscribers exploded, and AOL became the largest U.S. ISP.

Similar results have been seen when other types of services, such as voice calls, also moved from per-minute to flat rate or "buckets" of usage. Generally, users spend more time talking or using the Internet when they are not metered for that usage.

Mobile voice services have a half-way approach that combines usage limits with much of the perceived freedom users feel when they are not charged strict per-minute charges. Such "buckets" of usage are a likely direction much retail Internet access pricing will move as bandwidth-intensive applications become more important and if new "network neutrality" rules forbid ISPs from shaping overall demand at times of peak congestion.

The alternative to traffic shaping then would shift to other measures such as increasing raw bandwidth or providing incentives for users to limit their consumption at peak hours. The former obviously requires more investment, which then would have to be reflected in higher prices, while the latter would allow for more gradual investments and therefore stable or more slowly increasing prices.

One problem today is that few consumers have any idea how much bandwidth they use. The new Sandvine tool would simultaneously allow users to monitor and understand their own behavior, as well as provide ISPs with better ways to create plans matched to end user behavior.

The Sandvine tool also would help ISPs create quality-sensitive service or personalized plans, assuming Federal Communications Commission or Congressional rules allow them to be offered.

Wirefly’s Top 10 Most-Anticipated Cell Phones

In a major change, the top-two "most anticipated" new mobile devices are made by Motorola. That hasn't happened for quite some time, and will be a huge test of Motorola's decision to rely on Android as its ticket back into the top ranks of manufacturers of "hot" devices.

The launches are equally important for mobile service providers, who have found devices to be primary ways of differentiating their services. We'll have to see, but it is possible, perhaps likely, that a key new feature of the top-two Android devices will be their methods of integrating contact information and status updates across applications. That's an angle on "unified communications" we have not seen so much in the mobile arena.

Here's Wirefly's ranking and commentary.

1. Motorola Droid (Verizon Wireless) - The most anticipated cell phone launch of the season is just days away, but the hype for this the Motorola Droid smartphone has been building for quite some time.  Verizon Wireless has invested heavily in a national “teaser” marketing campaign, while keeping the details about this Android-based device close to the vest.  The Droid is the first commercial phone released with the new Android 2.0 platform, and has been dubbed the “iPhone killer” by many a technology-writer.  Verizon Wireless is stoking the fire with a campaign that touts all the things the Droid does that the iPhone doesn’t – from running multiple apps, to a full slide-out keyboard, to changeable batteries and memory to a 5.0 megapixel camera that takes photos in the dark.

2. Motorola CLIQ MB200 (T-Mobile) - The highly-anticipated Motorola CLIQ is the new king of the T-Mobile Android smartphone lineup, and the first since the original G-1 to have a full slide-out keyboard.    What really makes it buzz-worthy, though, is that it utilizes the new MotoBlur user interface that syncs your social media, contacts, and e-mail in real time, providing instant access to the latest happenings and messages from friends.  (The Cliq is currently available to existing T-Mobile customers, however, new customers will not be able to purchase the device until November 2nd, and therefore, it still garners a spot on our top picks.)

3. Samsung Moment (Sprint) - Sprint’s second Android device, the Samsung Moment, mark’s Samsung’s entry into the Android smartphone market with a full slide-out keyboard and a first-of-its-kind AMOLED touch screen, providing unprecedented brightness that’s also kind to your battery life.

4. LG Chocolate Touch (Verizon Wireless) – The LG Chocolate is an iconic Verizon Wireless phone, and this new touch version should be even sweeter than its predecessors.

5. Samsung Behold II (T-Mobile) – The Behold II is the sequel to the very successful Samsung Behold but with one MAJOR difference - the latest version runs on the Android smartphone operating system.  The Behold II also features a "cube menu" that provides quick access to six multimedia features at the flick of a finger: music, photos, videos, the Web, YouTube, and Amazon MP3.

6. HTC Desire 6200 (Verizon Wireless) – Verizon Wireless is making headlines with the Droid, but is expected to follow quickly with a second Android-powered smartphone dubbed the Desire.  The Desire will not have a keyboard, and will boast HTC’s touch screen “Sense” interface that has won rave reviews on the HTC Hero.  

7. Sprint Palm Pixi (Sprint) – The Sprint Palm Pixi is being touted as a tiny, sleek webOS-based handset that offers many of the same features and functionality as the Pre without the hefty price tag.

8 . BlackBerry Storm 2 (Verizon Wireless) – This next generation of the touch screen BlackBerry Storm looks similar to the original model on the outside, but boasts notable improvements on the inside such as a Wi-Fi radio, sleeker design, and an improved SurePress typing system.

9. BlackBerry Bold 9700 (AT&T & T-Mobile) –This smartphone is an updated version of the high-end Blackberry Bold that hit the market last year.  It is thinner and lighter with a faster Web browser than its predecessor and replaces the original Bold's track ball with an optical track pad.

10. LG Shine 2 (AT&T) – The successor to the immensely popular Shine; but as its name indicates, it promises to be twice as sleek and sexy.

Real-Time Internet Traffic Doubles

Real-time entertainment has almost doubled its share of total Internet traffic from 2008 to 2009, while gaming has increased its share by more than 50 percent, says Sandvine. Real-time entertainment traffic (streaming audio and video, peer-casting, place-shifting, Flash video) now accounts for 26.6 percent of total traffic in 2009, up from 12.6 percent in 2008, according to a new analysis by Sandvine.

As the percentage of real-time video and voice traffic continues to grow, latency issues will become more visible to end users, and will prompt new efforts by Internet access providers to provide better control of quality issues not related directly to bandwidth.

One reason is that video downloads, for example, are declining in favor of real-time streaming. Downloaded content is less susceptible to latency and jitter impairments.

Traffic to and from gaming consoles increased by more than 50 percent per subscriber as well, demonstrating not only the popularity of online gaming, but also the growing use of game consoles as sources of “traditional” entertainment such as movies and TV shows, says Sandvine.

Gaming, especially fast-paced action games, likewise are susceptible to experience impairment caused by latency and jitter.

.The growth of real-time entertainment consumption also is leading to a decline of peer-to-peer traffic. At a global level, P2P file-sharing declined by 25 percent as a share of total traffic, to account for just over 20 percent of total bytes, says Sandvine.

The changes have key implications for ISPs and end users. One way to protect real-time service performance for applications such as voice, video, videoconferencing and gaming is to take extra measures to protect latency performance for such real-time applications. And that is where clumsy new network neutrality rules might be a problem.

Whatever else might be said, user experience can be optimized at times of peak congestion by prioritizing delivery of real-time packets, compared to other types of traffic that are more robust in the face of packet delay. File downloads, email and Web surfing are examples of activities that are robust in the face of congestion.

So it matters greatly whether ISPs can condition end user traffic--especially with user consent--to maintain top priority for streaming video, voice or other real-time applications when networks are congested. Enterprises do this all the time. It would be a shame if consumers were denied the choice to benefit as well.