Smartphone Niches Emerging

Data from ChangeWave about smartphone preferences might suggest both the existence of clear smartphone segments as well as an evolution of those segments.

By definition, all smartphones handle voice and text. Beyond that, there seem to be distinct user niches.

One might characterize the Palm user as someone whose unique application is the "organizer."

One might characterize the BlackBerry user as oriented to email, and the iPhone owner as oriented to Web-delivered applications.

Looked at this way, the Changewave data might suggest that the value proposition for the email-focused remains steady, but that the value of "organizer" functions is receding, while mobile Web is growing. We also have seen the introduction recently of devices organized around social networking and navigation, so the number of smartphone niches addressed by particular devices seems to be growing.

The Palm Pre and Motorola Cliq are among new devices pitched at the social networking niche. Garmin's nuvifone is perhaps the best example of a navigation-focused smartphone. So the obvious big question is how the growing raft of Android-based smartphones will contribute to the proliferation of devices with a lead application mode.

How demand for the Droid will shape up is hard to say at the moment. Some fragmentary data suggests that Droid users access the Web even more than iPhone users do. But its turn-by-turn navigation features might also emerge as a key drawing point.

Mobile Ad Audience Grows, Number of Resisters Also Grows

Mobile ad spending is poised to grow 27 percent to $2.1 billion in 2010, according to the Mobile Marketing Association. The good news is the audience for mobile marketing is growing. The bad news is the audience is still relatively small and confined to a limited segment of the arket, say researchers at BIGresearch.

That means there is a high probability of turning off potential consumers. Consumers who like mobile marketing tend to be young men. They are mobile phone-centered and more likely to use social media.

People who don’t like mobile marketing tend to be slightly-older women who are not as centered around their mobile phones or users of social media. Receptive consumers have an average age of 39 while non-receptive consumers have an average age of 46.

About 23 percent of receptive consumers are regular users of MySpace, compared to 10 percent of non-users. About 13 percent of receptive consumers regularly use Twitter, while just 3.5 percent of non-receptive consumers say they regularly use Twitter.

Since June of 2008, the percentage of people who don’t like mobile marketing has ncreased, BIGresearch says. About 66.8 percent of 2,200 survey respondents say they don’t like text ads.

Some 60.2 percent don’t like voicemail ads. About 60 percent say they do not like video ads. By itself, those sorts of reactions are to be expected. How many of you would actually say you like receiving, hearing or viewing most ads?

Android People Heavier Web Users than iPhone People?

The Motorola Droid is the latest smartphone to be touted as a poential  “iPhone killer.” I'm not among those doing so, not for any lack of confidence in the Droid so much as a belief that the iPhone is not just a smartphone.

Like other Apple products before it, and like some other popular consumer products, the iPhone already has carved out an "experience" and "emotional bond" that cannot be broken by a substitute product.

Still, the Droid seems to be the sort of product that will advance the use and adoption of Web content to a connected device, especially for users whose Web experiences are heavily Google-mediated.

Significantly, Nielsen data from the third quarter of 2009 already suggests Android users are heavy mobile Web users, maybe even more so than iPhone users, who, up to this point, have been the heaviets mobile Web users.

But there is still plenty of room in the market for devices that are optimized around a lead application. The iPhone might have been the best example to date of a device really optimized around Web access as BlackBerry has been optimized around mobile email and other devices are plumbing the "turn by turn navigation" app, for example.

In the fourth quarter of 2009, perhaps 40 percent of all new devices sold will be smartphones of one sort or another. By 2011, smartphones will represent the majority of phones in use, Nielsen forecasts.

"Projecting Nielsen data out through 2010, we see smartphones crossing 50 percent of the market by the middle of 2011, roughly equal to 150 million users," says Jerry Rocha, Nielsen Online Division senior director.

Sabi the War Hero Dog

Okay, I love labradors....labradors that defy death, get lost for 14 months and then get to go home is even better.

Verizon Grows Annual Revenue 5x More Than Average

Verizon's revenue growth over the last year tops, by a substantial margin, revenue growth for nearly all other service providers among the 30 largest in the world.

Annual revenue growth of about 1.6 percent is the average, says TeleGeography.

Verizon grew revenue by 10 percent. Vodafone, China Mobile and Deutsche Telekom were the other stand-outs.

Despite Shocking Unemployment, Consumer Demand for Communications Holds Up

There's a sobering statistic in the latest research from Centris about consumer spending on communications and video service consumption: 27 percent of households reporting at least one member who lost their job in the last six months.

Most of the other findings seem consistent with other surveys taken over the last two years, though. The issue now is whether recession-induced behaviors will change as we exit the recession.

About eight percent of U.S. households said they were likely to cancel their Pay TV service in the third quarter of 2009, unchanged from the second quarter of 2009. Keep in mind that a typical churn rate for video services is about two percent a month, so those findings are relatively consistent with typical disconnect plans, and most churners simply sign up with alternate providers.

Some 18 percent of households said they were likely to cancel their home phone service and replace it with a currently-used cell phone. That is an underlying trend that might have accelerated during the recession, but was in place already.

Fully 75 percent of respondents said they would not likely downgrade their Internet access service. Virtually all other studies show high resistance to cutting back, or cutting off, Internet access services.

Nearly half of all households have contacted their current TV service providers shopping for discounts and lower-priced packages, though.

If past patterns show themselves, consumers should start spending more on enhanced services of all sorts, including premium video entertainment and mobile services, as the economic recovery takes hold. The wild card are services such as wired voice, which have been under pressure for other reasons unrelated directly to the recession.

Video Now Driving Bigger Access Bandwidth Packages, says Compete.com

How much Internet-delivered video is being consumed by users of sites such as Hulu.com or Netflix.com? According to compete.com data, Hulu.com traffic has grown 210 percent over the last year.

"If Hulu.com continued this growth trajectory for another year, we could see it break into Compete.com’s top 50, surpassing unique visitor traffic to sites like the NYtimes.com and Netflix.com," says Matt McGlinn, Compete.com writer.

From September 2008 to September 2009, Netflix.com’s volume of unique visitors viewing movies and other content online increased 163 percent, says Compete.com.

The good news for Internet service providers is that these trends will keep driving end users to buy access packages featuring higher amounts of bandwidth, says McGlinn.

Will Click-to-Connect applications Replace IVR?

Yes, says Sorell Slaymaker, Unified IT Systems VP. The reason is that most consumers initiate their contact to a business using the web and then switch to some other channel only if the web does not solve whatever need, issue or problem needs to be solved.

Compared to using a phone for initial contact, "web with click to call" can store information, so it does not have to be rekeyed. The equivalent of cookies is not available when initiating a session using phone methods, he argues.

The other advantage is the ability to push content while talking, he says. Visual communication is richer and quicker than audio communication, and putting the two together optimizes the efficiency and effectiveness of communication.

Does "Open Access" Lead to More or Less Consumption of Broadband?

Samuel Clemens famously quipped that there are "dies, damned lies and statistics." Something like that seems to be at the heart of conflicting analyses of the impact of widespread open access requirements on consumer buying of broadband access services.

The Berkman Center for Internet & Society suggests robust open access regulation increases consumer buying of broadband while analysts at the Phoenix Center says the opposite is true.

The interpretation matters. Good public policy requires decisions that are based on facts, as difficult as it may be to determine precisely what the "facts" are. The wrong "fact base" will lead to policies that could harm the intended public policy goal.

http://www.fcc.gov/stage/pdf/Berkman_Center_Broadband_Study_13Oct09.pdf

http://www.phoenix-center.org/perspectives/Perspective09-05Final.pdf

Hardware Sales Flat, Software up 4.8%, Telecom up 2.3% in 2010, Says Gartner

Providers of information technology solutions likely will have to emphasize customer retention more than customer acquisition in 2010 and 2011 because of a sales environment that will remain challenging, says Richard Gordon, Gartner Research VP. That said, sales of IT hardware and software will grow about 3.3 percent in 2010, about in line with telecom service provider revenue growth of 3.2 percent.

Enterprise hardware sales, for example, will show zero growth in 2010, compared to 2009, Gartner forecasts, in part because hardware lifecycles have lengthened.

Software sales, on the other hand, should grow 4.8 percent, says Gartner.

Motorola Seeks to Sell Set-Top Unit

Motorola is looking for buyers for the part of its business that makes cable television set-top boxes, and is seeking about $4.5 billion, the Wall Street Journal reports.

For anybody who has been in the cable TV industry any length of time, the potential sale brings back memories of a company headquarters in Hatboro, Penn. and known as "Jerrold." Few companies have roots in the U.S. cable industry as deep as Jerrold did, in its later incarnation as General Instrument representing one of the two big names in the old cable TV business, in addition to Scientific Atlanta, whose assets now are part of Cisco.

The big attraction for any buyer is the chance to become a major player in the cable TV infrastructure business overnight.

Logical potential buyers would include the ranks of any number of major electronics companies who want major exposure to the U.S. cable TV industry.

It makes you realize just how long it has been since you were in the cable business.

Metered Internet Access Plans Coming?

Time Warner Cable CEO Glenn Britt says in a CNBC interview that the question of how consumers pay for their broadband is "an evolving thing." Britt still does not believe the existing flat rate for unlimited usage pricing plans are going to exist universally, indefinitely.

Verizon EVP Dick Lynch also has noted that Verizon would have to consider some form of tiered or metered bandwidth in the future.

One might argue that such plans will be available, with a premium price. But many, if not most other plans likely will move to some pricing format more nearly resembling the way people now buy buckets of wireless minutes or text messages. Consumers nearly universally dislike true metered usage plans, but have shown a level of comfort with "buckets." That suggests buckets will be the path forward for broadband services that must take some account of drastic bandwidth consumption patterns imposed by video content.

Some idea of the need for such plans, sure to be initially unpopular with some consumers, is the cost of continually providing more bandwidth, with modest increases in new revenue. At least some independent service providers have argued for years that fiber-to-home investments cannot be justified in tradtional "five year return on capital" criteria.

In that view, operators need to invest in FTTH "to keep their businesses," essentially. Yankee Group analyst Vince Vittore says that sort of refrain was current at the most recent Fiber to the Home conference.

Cable competition is a primary motivator in that regard. But experience so far continues to show that the financial return from an FTTH network is not assured nor easy. Nobody expects a return on invested capital in five years, as once was possible for many types of network investments.

Nor does anybody seem to believe it is possible to earn a return on FTTH networks based principally on incremental revenue from optical access, or even from providing video entertainment services. One need look no further than that to discern the industry emphasis on new applications, services and revenue.

Usage that is more closely tied to actual usage will happen. That doesn't mean it will be as strictly metered as electricity or water. But think about wireless buckets of use and one can conceive of metered service plans that consumers do not find inherently objectionable.

T-Mobile USA Moves to 7.2 Mbps, Plans 21 Mbps

There are times when being late to market is actually a benefit. The latest entrants in any technology-based market have access to the latest technology, and can build their business plans around that fact. There are other times when it's a bit difficult to characterize a particular competitor's position.

That is where T-Mobile USA now sits, for example. T-Mobile USA was the last of the top-four U.S. mobile providers to build a 3G network, and it has uncertain plans for 4G. But the company is on track to have faster versions of 3G up and running before some of its major competitors.

The company had no 3G customers in the second quarter 2008, though it had acquired 3G spectrum. But the 3G network now covers 240 cities and passes 170 million people, with plans to extend coverage to 200 million people by the end of 2009, at which point nearly all major urban areas will be covered.

So here's where the "last shall be first" principle applies.T-Mobile is using the faster 7.2 HSPA air interface, running at 7.2 Mbps downstream, on all its 3G nodes by the end of 2009.

At least one of T-Mobile's primary competitors is upgrading less-capacious 3.6 HSPA networks to 7.2 HSPA, but will not have that conversion completed until the end of 2011.

Likewise, T-Mobile plans to upgrade even the 7.2 HSPA network to HSPA+, a 21 Mbps network. The company says it will start rolling out HSPA+ in 2010. T-Mobile says the upgrade will be a relatively low-cost and relatively easy upgrade.

Of course, the reason T-Mobile's position is complex is that it has not yet announced a specific method for deploying a 4G network, which will require additional spectrum.

Both AT&T and Verizon are building their 4G networks for substantial coverage by 2010, while AT&T will have substantial coverage in 2011. Sprint is banking on the Clearwire network for 4G.

Still, competition in the mobile broadband market might not primarily be about "feeds and speeds." Coverage, pricing, application stores and device exclusivity arguably are more important.

Nor is it yet entirely clear that 4G will offer an entirely new consumer marketing proposition, beyond "faster." European 3G networks languished for years with sluggish uptake because the compelling new services requiring a 3G network were not in place.

In the U.S. market, it has been the mobile Web that has driven an upsurge of 3G uptake. But that adoption was based in part on applications and capabilitiesm, in part on use of particular devices, which require use of the 3G network.

The question for 4G networks is what new value or application will drive uptake.

Perhaps no new discrete driver will be required. Maybe "more" will be sufficient. But as Verizon has so far discovered with its FiOS fiber to the home feature, consumers still need a reason to buy fiber access as compared to hybrid fiber-copper access.

Providers can be last or first. Either way, the applications and device capabilities will remain the drivers of adoption.

Only 1 More Broadband Stimulus Round

As expected, the U.S. Department of Agriculture’s Rural Utilities Service and the Commerce Department’s National Telecommunications and Information Administration say they are streamlining the American Recovery and Reinvestment Act’s broadband grant and loan programs by awarding the remaining funding in just one more round, instead of two rounds.

The agencies expect to begin announcing funding awards for the first round in December 2009. The original plan had been for three rounds of funding, and observers noted that this would be valuable for applicants as they would have a chance to see what got funded, what did not, and then tweak their subsequent proposals accordingly.

Now they will get one chance to do so, not two chances. But “stakeholders will have the opportunity to provide us with well-informed feedback on how the first round worked for applicants, the agencies will be able to make improvements to the process, and potential applicants will gain more time to form partnerships and create stronger project proposals, the two agencies say.

In a Request for Information released today, the agencies are seeking feedback on procedural and policy aspects of BIP and BTOP. While inviting general input on the programs, the agencies identified specific areas for comment.

In terms of procedural matters, for example, the RFI seeks input on ways to streamline the application process. The RFI also asks whether the agencies can better balance the public’s interest in transparency and openness with stakeholders’ legitimate interest in maintaining the confidentiality of proprietary data.

The RFI also seeks comment on how to best target the remaining funds. Commenters proposing a more targeted approach are asked to quantify the impact of their proposal based on metrics such as the number of end users or community anchor institutions connecting to service, the number of new jobs created, and the projected increase in broadband adoption rates.

The RFI asks whether to focus second round funding on projects that create “comprehensive communities” by installing high capacity middle mile facilities between anchor institutions that bring essential health, medical, and educational services to citizens.

The RFI also invites input on various other issues, including whether the definition of “remote area,” which is used to determine grant eligibility under BIP, is too restrictive, how the agencies can best ensure that investments are cost effective, and ways the programs might impact regional economic development and stability.

RUS and NTIA will utilize the feedback received in response to the RFI to set the rules for the second funding round, which the agencies expect to announce through a Notice of Funds Availability early next year.

The American Recovery and Reinvestment Act provided a total of $7.2 billion to NTIA and RUS to fund projects that will expand access to and adoption of broadband services. Of that funding, NTIA will utilize $4.7 billion for grants to deploy broadband infrastructure in unserved and underserved areas in the United States, expand public computer center capacity, and encourage sustainable adoption of broadband service. RUS will use $2.5 billion in budget authority to support grants and loans to facilitate broadband deployment in primarily rural communities.

Quantifying the Carrier Wi-Fi Hotspot Business Model

Customer retention--not direct customer fees--might be the biggest part of the carrier public hotspot busimess model, says Stephen Rayment, CTO, BelAir Networks.

"Churn reduction is where lots of the value is," is Rayment. Assume churn per month of two percent a month, which means a typical customer provides 50 months of revenue, he says.

Adding metro hotspot access can provide a 10 percent churn reduction, he adds. Assume the 10 percent churn benefit on a typical subscriber relationship of 50 months, meaning the typical account now remains active for 55 months. Assume a typical customer average revenue per user of $130 a month.

That suggests an extra $650 of subscriber revenue over the length of a relationship. For a service provider with 100,000 subscribers that works out to $65 million in extra revenue.

If the average customer value is $2,000 per customer, and that service provider can use public hotspot service to reduce churn 10 percent, it adds about $200 per subscriber in terms of equity value.

For a service provider with one million subscribers, that's $200 million in incremental equity revenue.

For a service provider with one million subs, making an investment of $40 million to cover all the high-traffic spots, there is a five-to-one return on investment.

There arguably could be other revenue contributors as well, though none likely approaches the value of enhanced retention. There might be an opportunity for a small amount of additional revenue. Some customers will be willing to be stand-alone hotspot subscriptions.

Service providers might make some money from other carriers by offering hotspot access to customers roaming into the local area. There could be some advertising upside or some commercial upside from providing services to public utilities or public safety organizations, he says.

Some service providers also might look at public Wi-Fi as a way to add some mobility features to their landline service.

Mobile providers also likely will find public hotspots a useful way to offload traffic from the 3G and 4G networks to the fixed network, Rayment says.

"The networks are just choking" because of heavy new smartphone traffic, says Rayment. "People really did not see this until the iPhone, but 3 in the U.K. market also saw skyrocketing demand when it started selling the iPhone," says Rayment.

Up to this point, aircards and dongles used for mobile PC connections have been driving new bandwidth demand on the 3G and WiMAX networks. But that is changing. "Dongles drove the initial demand, but will be overtaken by the smartphone," he says.

The point is that the business model for public hotspot networks frequently is indirect.