CTIA Reports Gains, As It Always Does

Almost nothing is more predictable than the CTIA reporting that revenues, subscribers and wireless data increased over the last six-month period. In fact, many of us cannot remember a six-month period where that has not happened. So it is that the CTIA says wireless data service revenues increased 25.7 percent from the last half of 2008 to reach more than $22 billion for the last half of 2009, CTIA-The Wireless Association says.
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Wireless data revenues now represent more than 28 percent of all wireless service revenues. The number of data-capable devices has grown to 257 million units, up from 228 million at the end of 2008.

About 50 million of these devices are smart phones or wireless-enabled PDAs and nearly 12 million are wireless-enabled laptops, notebooks or aircards.

More than 822 billion text messages sent and received on carriers’ networks during the last half of 2009, amounting to almost five billion messages per day at the end of the year.

As of December 2009, the industry survey recorded more than 285 million wireless connections. This represents a year-over-year increase of more than 15 million.

Also, wireless penetration is now equal to more than 91 percent of the U.S. population, CTIA says.

Other highlights of the survey include wireless customers using more than 1.12 trillion minutes in the last half of 2009, up 38 billion from the last half of 2008—and breaking down to 6.1 billion minutes-of-use per day. Wireless service revenues for the last half of 2009 amounted to almost $77 billion—up from a little more than $75 billion in the last half of 2008.

AT&T Now Sells Triple-Play Bundles With Mobile Voice, Rather than Landline Voice

AT&T now allows consumers to buy a $99 triple-play bundle that allows customers to choose wireless as their voice option, rather than a fixed landline voice service.

The not-unexpected move shows both the appetite end users have for such packages, as well as AT&T's decision that now is the time to put more emphasis on gluing wireless users to the landline services, and less emphasis on using broadband and television to slow the rate of wireline erosion.

That isn't to say the original impulse is no longer important. It remains important for many customers. But the new bundles reflect the growing demand for wireless voice in triple-play bundles, rather than fixed line voice service.

AT&T "U-verse Choice" bundles start at $99 a month for three AT&T services, including U-family; U-verse High Speed Internet Pro (up to 3 Mbps downstream); and a choice of AT&T Nation 450 wireless voice or U-verse Voice 250 home phone.

Other packages featuring faster broadband speeds and more wireless or home phone calling minutes or more TV channels for $127 to $150 a month.

Where U-verse service is not available, customers can bundle DirecTV service with broadband and voice.

Twitter Users Want News, MySpace Users Do Not, Unless it is Celebrity News

Twitter is a social networking medium, but it also is a news distribution mechanism, it appears. A new stydy by Chitika shows Twitterers mostly consume news while MySpace users want games and entertainment.

Click the image for a larger view.

Facebook also is a news site, but less so than Twitter is. About half the traffic (47 percent) that Twitter generates falls into the news category. In fact, Twitter users’ interest in the news genre surpasses that of Facebook users by nearly 20 percent, which would appear to make it the number-one social network for news-focused users.

MySpace users, on the other hand, seem to have no interest in news whatsoever. Instead, MySpace members seem to prefer video games (28 percent) and celebrity and entertainment content (23 percent).

more detail here

Free E-Book on Cloud Computing

Light and Electric, Thomas Howe's consulting company, has produced an e-book on cloud computing, featuring essays by 20 "thought leaders."

The idea was to capture thinking about where are in early 2010 and where we might be over the next several years.

Howe says that "in the not-so-long-ago past, the thought leadership for communications belonged to those large service providers, vendors and media outlets, as they were the only entities with the practical authority to comment on or effect changes large enough to matter."

That isn't exclusively the case anymore.

The e-book is free and available for download directly from this site: http://cloudcommbook.squarespace.com/get-the-book/.

In addition, for a nominal fee to cover printing and delivery, it is also available in tree-killing hardcopy edition, and bit-killing Kindle edition.

National Broadband Plan: Where Does U.S. Rank? Where Can it Rank?

A six-spot gain to 9th place in international broadband rankings would be a successful outcome for the Federal Communications Commission’s National Broadband Plan, says the Phoenix Center.

Historical trends suggest the United States will likely move to 13th in broadband adoption by 2012 even without significant policy changes, however.

The new Phoenix Center study, "Evaluating Broadband Stimulus and the National Broadband Plan: Establishing Expectations for Broadband Rankings", uses a variety of standard econometric techniques to determine where the United States is expected to rank given current trends, and where the United States should rank if the National Broadband Plan and federal broadband stimulus are successful.

“As we point out in our prior research, relying upon the OECD’s flawed methodology as an
accurate metric of a country’s broadband performance is fraught with peril,” says Phoenix Center
President and study co-author Lawrence J. Spiwak. “However, as some policymakers continue to
use the OECD’s methodology as the definitive broadband metric, our analysis establishes a
performance metric by which to assess the success or failure of new broadband interventions using
the OECD’s rankings. In so doing, we hope that our analysis can make a positive contribution to
the debate by establishing a standard by which to measure the success of new policies.”

Many observers point to U.S. rankings on global indices of broadband penetration, cost or speeds as evidence that the United States is lagging behind other nations. But comparing very-large countries with very-small countries, with different population densities, government policies, household sizes and incomes is difficult.

For example, the United States ranks no better than 15trh in global measures of telephone density. But nobody really suggests the United States has a fixed-line voice availability problem. In fact, most observers say demand for that product is declining.

So where does the United States currently rank on per-capita measures of broadband penetration? 15th, as it turns out; precisely where it has long ranked in terms of fixed-line voice line penetration. If one is not a problem, why is the other?

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Service Providers Now Will Have to Contend with Decades of Belt-Tightening

As if forecasting telecom, cable and Internet spending were not hard enough, it is about to become much-more uncertain, for reasons most of us probably could never have expected: a decades-long suppression of end user consumption to re-balance structural deficits.

Developed countries with big budget deficits--including the United States--must start now to prepare public opinion for the belt-tightening that will be needed starting next year, John Lipsky, says International Monetary Fund first deputy managing director.

Gross general government debt in the advanced economies will rise from an average of 75 percent of gross domestic product at end-2007 to 110 percent of GDP at end-2014, even assuming that temporary, crisis-related stimulus steps are withdrawn in coming years.

Reducing the ratio to the pre-crisis average of 60 percent by 2030 would require raising the structural primary balance -- before interest payments -- from a deficit of about four percent of GDP in 2010 to a surplus of about four percent of GDP in 2020 and keeping it at that level for the following decade.

That clearly implies an eight percent swing in balances, before interest payments.

Lipsky also says the scale of the adjustment is so vast that less-generous health and pension benefits, government spending cuts and increased tax revenues are needed.

The drops in government services to individual citizens and businesses could be unprecedented, some therefore suggest.

The obvious danger is that the U.S. Congress seems hell-bent on making the problem worse by continuing to spend as though it had the means to pay for its spending. The IMF has for decades both scolded and disciplined developing nations unable to balance their budgets.

Now it appears the United States, for the first time, is headed that way as well. The ramifications are not entirely certain, but slower economic growth is likely and social strife virtually inevitable.

It is not immediately certain what all of this fundamental change will mean for providers of communication and other services to businesses and consumers, but it probably will a mixed impact.

If one assumes consumers will have less disposal income, one would expect pressure on overall revenues and profit margins. But consumers will also have to make choices about discretionary spending, and past behavior suggests that communications and entertainment services are high priorities.

All indications are that broadband access will become, with mobility, anchor and foundational services, the key issues for service providers being the cost of delivering those and other services, as well as creating a sustainable new role in the revenue chain for application usage.

It is not so clear what will happen to demand for today's packaged multi-channel video services. So far, mobile and online video usage seems incremental to other existing forms of video consumption, but much depends on what content owners decide is in their best long-term interests. Major change in distribution methods is possible, but not likely in the short term.

But businesses also will be forced to operate more frugally, which could have a variety of effects. In the recent recession business revenue dropped, except for providers taking market share.

The upshot is that most consumers will have less to spend, though. That could send the United States and other developed nations into a downward spiral where muted consumer activity undermines GDP growth.

The point is that our historical experiences with post-recession recoveries will be stressed in new ways this time around, specifically because the macro-economic stresses are so novel. The United States never before has had to be told by the IMF to adopt austerity measures, and people have not had to live through such a period.

But we are about to. And means everybody who tries to forecast revenue for telecom, cable and Internet companies, as well as others in the ecosystem, must face increased uncertainty. That doesn't necessarily mean the underlying assumptions will change. They might not. But it is not clear at the moment what could change, and we might not know for several years what the nature of those changes are.

Reuters article

Get Ready for a Test of Social Cohesion, Says Moody's

It isn't immediately clear how soon debt service will become a major business issue in the United States, but it is clear it will be. Moody's analysts, looking at sovereign debt loads in the United States, say there is no way to "grow" our way out of the problem.

“Growth alone will not resolve an increasingly complicated debt equation,” Moody’s says. “Preserving debt affordability” (the ratio of interest payments to government revenue) “at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.”

Note the phrase "at levels that will test social cohesion." What Moody's means is that, to keep its credit rating, given the fact that economic growth, even robust growth, would not grow tax revenues enough to take care of the problem, the federal government likely will have to cut spending, though it also will try to raise taxes.

And that is going to lead to protests, anger and unrest.

But there will not be a choice. If the United States does not act to preserve its credit rating, it will be more costly to borrow money, driving the debt burden even higher and threating yet another round of downgrades.

Such a downgrade also would force an immediate reduction in debt-financed spending. And that is precisely what the United States currently is doing: spending more than it raises in taxes and borrowing to support the shortfall.

Moody’s says the United States and other major Western nations, particularly Britain, have moved “substantially” closer to losing their current ratings. The ratings are “stable,” but “their ‘distance-to-downgrade’ has in all cases substantially diminished,” Moody's says.

source

Weaker Market for Fixed Line Services Due in Part to Housing Market Changes

As if fixed-line providers of entertainment video, voice and broadband did not have enough problems, it appears there are fewer households to sell services to, these days.

Lower housing starts and a severe job market are obvious reasons why uptake of new services has been challenged.

But it appears there are other demographic changes at work as well. More young people, for example, are living longer with their parents than once was the case.

Also, more people in their 20s have moved back in with their parents. That is important as younger people represent one of the biggest groups of "single person" households. If there are fewer of those sorts of households, there are fewer potential occupied homes to sell services to.


A 2009 Pew Research survey found that among 22- to 29-years-olds, one-in-eight say that, because of the recession, they have boomeranged back to live with their parents after being on their own. That suggests as many as 12.5 percent of those 22 to 29 have removed themselves from the ranks of households with a possible need for fixed line communications or entertainment services.

Those trends, in turn, seem to have been driven by the recession's impact on younger workers.

According to a Pew Research Center analysis of Bureau of Labor Statistics data, as of 2009 some 37 percent of 18- to-29-year-olds were either unemployed or out of the workforce, the highest share among this age group in nearly four decades.

In 2000 there were about 42 million people living in multi-generational households. In 2008 there were 49 million, and one suspects that number grew in 2009.

National Broadband Plan is Mostly a "Grab Bag" of Proposals

There were few, if any surprises, when the Federal Communications Commission finally released its proposed "National Broadband Plan," whose centerpiece is an effort to free up about 500 megahertz of spectrum for wireless access. A modest amount of incremental spending for rural broadband is proposed. '

Perhaps the real story here is a recognition that not much really can be done, or perhaps ought to be done, about the existing fixed-line broadband access market, except to encourage existing providers to upgrade speeds.

National Broadband Plan Suggests Wireless Future

There are some fairly-significant implications one might draw from the Federal Communications Commission's proposal for National Broadband Policy. First of all, the plan explicitly relies on private capital and private firms to get the job done.

There are some important tweaks to funding of services rural high-cost areas, and a bit of new spending in other areas. But those are a gloss. The heavy lifting clearly is going to have to be done--or left undone--by private capital and existing service providers.

People can continue to advocate for, and support, alternative ways for getting things done, but there is at this moment no sense that radical changes in industry structure are possible. Some might argue that the country would be better off with a robust wholesale infrastructure, retail provider model, but that is not on the table.

The other really-significant implication is that the future will belong to wireless. In fact, the really-big proposal is to reallocate 500 megahertz of wireless spectrum away from TV broadcasting and to wireless communications.

In fact, though any of us might grumble that prices are too high and speeds too low, the FCC's own data suggests that "access" actually is not a problem, even restricting the definition to fixed networks.

The FCC says 78 percent of U.S. homes already have access to two broadband service providers. About four percent have a choice of three providers. Another 13 percent have at least one provider. Only five percent of homes do not have at least one fixed services provider. And, again, those estimates do not include two satellite broadband providers and between one to four mobile broadband providers as well.

Separately, the FCC notes that 77 percent of U.S. households already can buy service from three wireless broadband providers. Another 12 percent of homes have a choice of two mobile broadband providers, while none percent of homes have at least one mobile broadband service provider. Only two percent of U.S. homes cannot buy mobile broadband service.

For a variety of reasons, the FCC plan implicitly acknowledges that the current fixed broadband duopoly is about as good as it will get, and that, going forward, mobile broadband is the new battleground.

The FCC probably is completely right in that assessment. Mobility is the one industry segment that would have relatively little trouble attracting lots of new capital investment, and mobility is the one segment of the whole communications business that is exploding globally, not just in the United States.

Mobility is the segment where innovation already is the fastest, where new applications and devices are proliferating most rapidly, and where consumer interest and new adoption is highest.

Like it or not, the FCC always works within a political context. It has to work within the constraints of what is possible, and the emphasis on wireless is a clear reflection of those constraints. The FCC is smart enough to understand that, so long as private capital and private firms must drive the bulk of national investment and service provision, the agency must work within the constraints of the capital markets, which clearly signal that the perceived upside, and therefore investment interest, lie in wireless and over-the-top applications, not more wired infrastructure.

Make Sure You Keep Watching for about a Minute and a Half, You'll be Rewarded

Now this is truly clever, really.

Google Nexus One: Lessons to be Learned?

New sales data on the Google Nexus One smartphone has most observers concluding that Google has failed with its launch. Flurry notes that the Nexus One has shipped about 135,000 units in 74 days, where Apple shipped a million iPhone units in its first 74 days while the Verizon Droid sold a bit more than a million units in its first 74 days.

"Google Nexus One may go down as a grand, failed experiment or one that ultimately helped Google learn something that will prove important in years to come," Flurry notes.

But the sales curve might suggest something about the distribution channel more than anything else. Droid's sales suggest it is not the Android operating system which accounts for the low sales.

More likely the low sales are the result of a combination of changes in the typical distribution system. Most users buy their devices from carriers, most often preferring a discounted handset with an accompanying contract.

Google has been selling only unlocked devices, and only from a Web site, at full retail price. One could have predicted that would not be popular.

Also, Google initially started out with email support only. Given the history of consumer unhappiness with mobile service provider customer service, that also could have been predicted. When people have a problem, they want to talk to a live person, and they want to talk "now."

Also, though some policy advocates have been loudly calling for sales of unlocked devices as a consumer choice value, most consumers care less about unlocked devices and more about customer support. In an unlocked device scenario, it isn't clear whether it is Google, the handset vendor or the carrier that has the issue causing the problem.

Consumers may have issues with contracts, but they also prefer lower phone prices and the assurance that if there is a problem, the retailer will take responsibility.

What Google's experiment mostly shows is the value and power of an integrated distribution model, with clear responsibility and good customer service support. Unlocked devices do not generally resonate, and neither do full price handsets, especially when customer experience after sale is so poor.

Flurry post

Except for Wireless, National Broadband Plan Much Ado About Almost Nothing

Oddly enough, the proposed National Broadband Plan is light on new spending and puts primary emphasis on wireless, while mixing in a bit of a grab bag of existing and vexing voice-related issues. The goal of getting 100 Mbps service to 100 million U.S. homes by 2020 appears to be just that, a "goal," not a requirement.

Some people would call that a mistake, but the Federal Communications Commission is not unmindful of some basic facts, including the requirement that the investment heavy lifting must be done by private industry, and that means raising lots of investment capital from private sources.

Those sources already have made clear their fears that too much tinkering with broadband regulations, especially regulating broadband access as a common carrier service, will choke off investment.

The single-biggest substantive proposal is the plan to make 500 megahertz of new spectrum available for wireless communications by reallocating spectrum presently used by TV broadcasters.

It might be close to heresy, but if you look out 10 years, the business case for investing lots of money in fiber to home facilities is starting to look worse, not better. Many policy advocates call for much-higher speeds and lower costs at the same time. That's not a convincing scenario for investors who would have to take a chance on loaning money in that sort of market.

Also, to the extent that entertainment video has been a big part of the business case, not many observers would believe the future is as bright as the past has been. With voice also under pressure, it may not make as much sense as it once did to invest too aggressively in fixed broadband. Broadband still is the foundation service for fixed networks in the future.

But that is a different issue from the separate issue of how much investment ought to be made, because it is unclear how much users are willing to pay for really-fast service, or how much incremental revenue might actually be created by new applications that require really-fast broadband.

$17.5 Mobile App Sales in 2012

Mobile App Stores: A Closer Look from Plugg Conference on Vimeo.

A study conducted by mobile analyst Chetan Sharma and sponsored by GetJar suggests the market for paid mobile apps should grow to $17.5 billion within the next three years, implying a value greater than CD-based apps in 2012, when apps sold on physical media are projected to be $13.8 billion.

App downloads will leap from slightly more than seven billion in 2009 to nearly 50 billion in 2012, representing an annual growth rate of 92 percent, the study also suggests.

According to the study, by 2012, off-deck paid-for apps will be the biggest revenue generator, accounting for almost 50 per cent of all apps revenue.

In 2009, on-deck apps available from mobile operators accounted for over 60 percent of all apps revenue, but this will fall significantly to just under 23 percent by 2012.

The average app selling price for apps in North America was $1.09, significantly higher compared to that in developing markets such as South America ($0.20) and Asia ($0.10).

According to the study, revenue opportunities in Europe are set to grow from $1.5 billion in 2009 to $8.5 billion in 2012, while in North America the figure will rise from around $2.1 billion to around $6.7 billion in 2012.

Currently, apps are most popular in Asia, with the region accounting for 37 percent of global downloads (free and paid) in 2009. North American downloaders spend the most money on apps, accounting for over 50 percent of global app revenue.

Advertising and transactions are a growing portion of the way applications are monetized, though purchase fees will represent most of the revenue for the near term.

Recession Not the Issue, Structural Is What Challenges Telcos

The global telecom industry performed pretty much as it always does during the recent recession. Basically, revenue growth continued at low single digits, overall. As always is the case, some industry segments fared better than others, but consumer demand for communications and entertainment video services was steady.

Some might wonder whether some clear signs of consumer frugality will affect growth rates for some time to come, but even that is not the big issue.

The big issue is that wired communications is an industry with a cost structure too high for expected revenues over time, so cost cutting must continue and network operations must become even more efficient than they have, up to this point.

Ovum researchers point out that "the economic downturn hasn’t resulted in the downward pressure on telco top lines that many expected."

But Ovum researchers also point out that "revenue growth is in decline for many mature market operators, and slowing for those in emerging markets."

“Market saturation, increased competition and regulatory intervention on roaming and termination rates won’t disappear just because the economy picks up”, says Ovum Principal Analyst Clare McCarthy.

Telcos are cutting operating expenses and capital investment. They are also accelerating employee early retirement programs and stockpiling cash. Many telcos in fact are emerging from the downturn with healthier balance sheets than when they entered, as well as significant cash balances, Ovum says.