80% U.S. Smartphone Penetration by End of 2012?

Is it possible 80 percent of U.S. mobile phones in use by the end of 2012 could be smartphones? The answer is "yes."

To get there, one would only have to assume that current use rates of mobile browsers are a solid indication of current smartphone use, that current rates of usage will grow at current rates of nine percent every quarter through 2011, and then will increase one percentage point faster during each quarter of 2012.


U.S. mobile users increased their use of browsers, downloaded applications and social networking at about a nine percent rate each during the first quarter of 2010, according to comScore. At that rate, by the end of 2010, 39 percent of mobile subscribers will use browsers, 38 percent will be using downloaded applications and 25 percent will be using social media.

If that rate continues throughout 2011, by the end of that year 55 percent of mobile subscribers will be using browsers, 53 percent will be using downloaded applications and 35 percent will be using social networking.

In an average month during the January through March 2010 time period, 64 percent of U.S. mobile subscribers used text messaging on their mobile device, up 0.6 percentage points compared to the fourth quarter of 2009.

Browsers were used by 30 percent of U.S. mobile subscribers, up three percentage points over the fourth quarter of 2009. About 29 percent of mobile users downloaded applications, up three percent from the fourth quarter of 2009.

Some 19 percent of mobile users used social networking sites and blogs in the first quarter of 2010, up three percent over the fourth quarter of 2009.

So the issue is what would be different about your life or your business if 80 percent of mobile users are on smartphones by the end of 2012, and those smartphones can download at speeds between 3 Mbps and perhaps 12 Mbps, and can upload at speeds from 1 Mbps to perhaps 5 Mbps.

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Algorithmic Trading Broke, Then Fixed, the Market

Yesterday the stock market dropped almost 1,000 points intraday before rebounding almost as quickly. Algorithmic (computer-to-computer) trading is blamed, but it might be worth pointing out that algo trading also fixed the market, just about as fast as it "broke" the market in an anamoly.

Right now, securities exchanges are looking at particular equities that might have been affected by the abrupt drop and are going to cancel the trades. The other thing is that few actual human traders actually were able to react quickly enough, one way or ther other. It appears execution platforms became overloaded and wouldn't place buy or sell orders in any case.

There also were liquidity issues. For every seller, there must be a buyer. It appears that in many cases there were no buyers to be had, so abrupt was the plunge. Liquidity, in other words, evaporated.

But algo traders apparently were able both to execute "sell" and then "buy" orders fast enough to clear about 600 points of movement within about five minutes. The conventional wisdom was that a misplaced large order triggered the abrupt declines, which triggered the other trading algorithms.

It might also be fair to note that those same automated trade programs also erased the anamoly within 30 minutes, which shell-shocked humand mostly gaped in awe at something most likely had never seen.

The sheer snapback of the price in such a short amount of time was not driven by fundamental traders (humans) who all of a sudden found “value” in the market with a trailing P/E. The only sort of quick analysis that provides that kind of price action are done by non-humans at quantitative firms, and they saved the market from something much, much worse.

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Sprint HTC Evo on June 6?

The latest rumor about availability of the Sprint HTC Evo is "around June 6, 2010." Reportedly the device will reail for about $200 on a two-year contract, and as much as $600 if you want to buy it without a contract.

Some policy advocates think such contracts impair consumer welfare because they make it hard for consumers to switch whenever they feel like it. One simply should note that any consumer can buy a device at full retail price if that is what they prefer.

Most consumers keep demonstrating, though, that they prefer $200 devices and contracts, compared to $600 devices without contracts. If you don't want a contract, don't buy one. Most consumers can figure out that a $200 subsidized phone provides real value.

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What Gets Cannibalized by iPad and Other Tablets?

As you might have expected, though lots of people think the Apple iPad is a gorgeous device, lots of people also think it is a bit pricey.

So far, iPad buyers are heavily skewed to 30-somethings and 40-somethings who presumably are well along in their careers and have both the appetite and the means to splurge on one.


Some technology observers have been predicting the demise of the netbook for some months, and with the launch of the Apple iPad, we get our first chance to see whether cannibalization is happening.

The basic line of thinking is that netbooks get squeezed between more powerful smartphones and tablet devices such as the iPad.

A new study from Morgan Stanley concludes that tablets in general will be a big threat to netbooks, as some have suggested.

Netbook sales growth has been significantly flatter lately. Sales still are increasing, just not at the rate they were before. Last July, growth was at 641 percent. In December, growth was 179 percent, and in January it dropped to 68 percent.

According to Morgan Stanley/Alphawise, the biggest product category likely to be cannibalized by potential iPad customers is netbooks and laptops. About 44 percent of potential iPad customers say they'll get it instead of a notebook or, presumably, netbook.

About 27 percent said they'd buy an iPad over a desktop.

To be sure, netbook sales were slowing before the iPad launch, so the slowing netbook growth rate can't be blamed completely on the iPad.

Still, it seems inevitable that netbooks and other cheap ultraportables will face competition from the iPad.

Product cannibalization potential

In Case You Missed the Market Craziness Today

It was a crazy day today, with a violent, sudden drop in U.S. equities, a swift 700-point retrace, and worries that what is happening in Greece will be happening in the United States in the future.

Consumers Spent More on Consumer Electronics Over the Last Year

The average U.S. household spent $1,380 on consumer electronics products in the past 12 months, an increase of $151 from last year, according to a new study released by the Consumer Electronics Association.

The average household spent 12 percent more on consumer electronics devices in the past year, which might be especially surprising considering a dip in most other consumer spending over that same period. Of course, sales took a dip in 2008 as well.

Individual consumer spending, as opposed to household spending, also was up 10 percent from the previous 12 month period, CEA says. The average adult spent $794 on consumer electronics in the past 12 months, up from $725 in 2009.

Women spent more on consumer electronics products than they did the year before but still trail men in overall spending. Women spent, on average, $631 on consumer electronics, up $73 from 2009. Men report personally spending $969 in the past 12 months, up $67 from the year before. The average household reports owning 25 consumer electronics products, up from 23 products last year.

CEA’s study also shows that video products continue to be the top devices consumers own, with HDTV ownership continuing to increase. About 65 percent of U.S. homes now own at least one HDTV, an increase of 13 percentage points from last year, making it the top industry growth driver of the past 12 months.

Consumers also are buying HDTVs as secondary sets. The average household now owns 1.8 HDTVs, up from 1.5 in 2009. HDTVs also are also the top product consumers say they want to purchase. About 23 percent of households say they plan to buy a new high-definition set in the coming 12 months.

Ownership of computers also continues to increase. Currently, 86 percent of U.S. households own at least one computer, making it the third most owned CE product category behind televisions and DVD players.

The popularity of netbooks, owned by 12 percent of U.S. households, and laptops, now owned by most households (58 percent), is helping drive the computer category.

"Third Way?" Between Title I and Title II? Are you "Sorta Pregnant?"

One might argue that there's nothing wrong with the Federal Communications Commission trying to find some "middle way" or "third way" between common carrier and data services regulation. FCC Chairman Julius Genachowski, for example, notes that "heavy-handed prescriptive regulation can chill investment and innovation, and a do-nothing approach can leave consumers unprotected and competition unpromoted, which itself would ultimately lead to reduced investment and innovation."

Nor are many likely to disagree completely with the notion that "consumers do need basic protection against anticompetitive or otherwise unreasonable conduct by companies providing the broadband access service."

Likewise, most probably would agree that "FCC policies should not include regulating Internet content, constraining reasonable network management practices of broadband providers, or stifling new business models or managed services that are pro-consumer and foster innovation and competition."

But there is likely to be fierce disagreement about the proposal to regulate broadband access service as a common carrier offering governed by Title II regulations, even though the chairman says the FCC would "forebear" (not impose) all of the obligations and rules that cover Title II services.

The difference is that right now, the government "may not" regulate terms and conditions of service. Under the proposed rules, the government only says it "has the right to do so, but voluntarily agrees not to" impose such rules. There is a vast difference between those two approaches.

The first is a clear "thout shalt not" injunction; the new framework is only a "we promise not to" framework. The chairman argues that this new approach "would not give the FCC greater authority than
the Commission was understood to have" before the "Comcast v. FCC" case.

A reasonable person would find that hard to believe. Moving any service or application from Title I to Title II has unambiguous meaning. One can agree or disagree with the change. One can hardly call this a "reassertion of the status quo." Between Title I and Title II there is a gulf that would have to be crossed. Never before have any Internet services been considered "common carrier."

A mere promise not to act, after the change has been made, will hardly satisfy those who believe Title I is the better framework. Those who believe Title II is the better way to regulate likely will find the proposal satisfying. That would be reason enough to suggest it is not a "third way." There is in fact no third way, except for the Congress to direct the FCC to regulate broadband access as a Title II service.

The problem is that what the "service" is changes over time, making difficult the task of clearly separating what "access" is from what an enhanced feature is. Nor is it easy to differentiate between a "business" access and a "consumer" access. If business access is covered, is packet shaping still permissible? Are quality of service measures still permissible? Are virtual private networks still allowed?

Should consumer services acquire the richness of business services, or should business services be dumbed down to consumer grade? And who gets to decide? Even if one is willing to accept that an ISP cannot, on its own, provide any quality of service measures, can a customer request them? Can a customer demand them?

These are tough questions and there must be scores more people could ask. The problem is that the Title I and Title II frameworks are binary. We do have alternate models in Titles III and VI, as I recall, though I suppose both of those titles would provide more freedom, not less, and Title II is a move in the direction of less freedom.

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Clearwire Emerging as a Wholesaler

Perhaps Clearwire did not initially think its business model would be anchored by wholesale wireless, but that seems to be shaping up as key to its future. Of the 283,000 net new subscribers added in the first quarter of 2010, 111,000 of them, or 39 percent, were gained by wholesale partners.

Most of the other major national wireless providers also have some wholesale operations, but none likely approach Clearwire's percentage. Clearwire’s network is behind Sprint’s 4G services as well as Comcast and Time Warner Cable wireless services. Then there is T-Mobile USA, which seems to need wholesale 4G capacity as well.

It might not be unreasonable to speculate that one reason Clearwire is preparing for a transition to Long Term Evolution, instead of sticking with its WiMAX air interface, is that T-Mobile USA might well require LTE capability in order to sign up.

"There was an agreement before that was really a commercial deal between Intel and Clearwire that would restrict us from using anything other than WiMAX up to, I think it’s February of 2012," said Bill Morrow, Clearwire CEO. "That deal is no longer in effect."

Now, either Intel or Clearwire can give 30 days notice and the deal is over. "So it does give us the flexibility that if we wanted to do a commercial launch of LTE or some other technology, that Intel would not be holding us back," said Morrow.

With less than a million total subscribers, it is too early to say how the retail versus wholesale customer mix holds up over time. Should Clearwire pick up T-Mobile USA as a wholesale partner, and as Comcast and Time Warner Cable gear up their wireless operations, it is not hard to envision wholesale growing to be a majority of customers.

FCC Goes for "Tactical" Nukes in Net Neutrality Fight; ISPs Will React as Though "Strategic" Weapons will Ultimately be Used

Federal Communications Commission officials seem well enough aware that proposed new "network neutrality" rules could lead to a reduction of investment in broadband facilities, which is why, reports the the Wall Street Journal, FCC officials are briefing market analysts who cover cable and telco equities before the market opens on Thursday, May 6.

The fear is that even before the rules have been announced, financial analysts will issue downgrades of cable and telco stocks as future revenue streams are jeopardized. Those analyst briefings will happen even before other FCC officials or congressional members are told how the FCC plans to proceed.

Chairman Julius Genachowski apparently plans to circulate a notice of inquiry to other FCC board members next week on his plans to reclassify broadband Internet access, provided by cable or telco providers, as common carrier services under Title II of the Communications Act.

That would put cable companies under common carrier regulation for the first time, something cable industry executives always have opposed, and will fight. Telco executives are hardly any more likely to support the changes.

The problem with the FCC's approach, which is to apply "some" Title II rules, but not all, is that there are no protections from future action that would simply apply all common carrier rules. The FCC wants to believe it can leave ISPs "sort of pregnant." They either are, or aren't, and can be expected to fight as though the outcomes were binary.

As often is the case, a natural desire for a "third way" is not possible. Title I or Title II is the issue. Forbearance rules or not, one or the other is going to apply. Get ready for war.

FCC Will Try to Apply Some Title II Rules to Broadband Access

Federal Communications Commission Chairman Julius Genachowski reportedly has decided to attempt Title II regulation of broadband access services, according to a report by the Wall Street Journal, despite some other reports that he was leaning against such rules.

We should know more on Thursday, May 6. Apparently the FCC will try to thread a camel through a needle, regulating only some parts of  broadband access using Title II rules, without applying every Title II provision that applies to voice services.

It does not appear the chairman will propose new wholesale access rules, but it isn't clear whether strict rules about packet non-discrimination will be sought, theoretically barring quality-of-service features from being offered. That seems unlikely, but much will depend on whether industry participants think the actual new rules open the way for further rules, down the road, that would be highly unacceptable, even if the new immediate rules are not viewed as burdensome. We shall see.

Clearwire Removes Obstacle to LTE Shift

Clearwire says it changed the terms of an agreement with Intel, one of its largest investors, that could eventually lead the way for Clearwire to switch to Long Term Evolution as its radio interface, ending its use of WiMAX. Clearwire and Sprint executives have said in the past they believe the two standards now are so similar it would not be difficult to adopt a unified air interface.

The new terms allow either Intel or Clearwire to exit the WiMAX agreement, which had until now forced Clearwire to use WiMAX through Nov. 28, 2011, with just 30 days notice. Those of you who believe Clearwire ultimately will switch to LTE can take that as a sign Clearwire might make the move before late 2011.

 CFO Erik E. Prusch reiterated the company's view that the overall ecosystem for 4G wireless was converging and as such, the market won’t have the technology wars in the future that it has seen in the past.

The technologies underlying LTE and WiMAX aren’t so far off as to make a transition from one to the other all that expensive in terms of the network costs, but devices that are currently running on the WiMAX network might need to be replaced if Clearwire implements a wholesale technology change on its radio network.

link to webcast

FCC Leaning Against Title II Regulation of Broadband Access

Julius Genachowski, Chairman of the Federal Communications Commission, apparently now is leaning away from any attempt to re-regulate broadband access as a common carrier service, a move that would have set off a political firestorm.

The Washington Post reports that the chairman "is leaning" toward keeping in place the current regulatory framework for broadband services but making some changes that would still bolster the FCC's chances of overseeing some broadband policies.

The sources said Genachowski thinks "reclassifying" broadband to allow for more regulation would be overly burdensome on carriers and would deter investment, a belief likely bolstered by the constant criticism Verizon Communications has taken from investors who have questioned Verizon's investment in fiber-to-the-home almost every step of the way.

Congress could "remedy" the situation by passing new legislation directing the FCC to take action along the lines of reclassifying broadband access as a common carrier service, but prospects for any such legislation are unclear.

Aside from the historic objections cable and telco industry segments have had to common carrier regulation of data services, both industries are widely expected to oppose in the strongest possible way any moves to limit their ability to innovate in the area of services and features for broadband services, especially any moves to prohibit any forms of quality of service features.

"Network neutrality" rules that prohibit any form of packet discrimination would effectively prevent the creation of QoS features guaranteeing video or voice performance, for example, even if those are features end users actually want.

Some policy advocates fear that Internet access providers will not voluntarily and adequately police themselves, but end user pressure has proven to be quite effective in the applications space, and even firms that have attempted some forms of network management have voluntarily agreed not to use some forms of management that essentially
"block" legal applications.

That isn't to argue that there are no dangers, but simply that market pressure and end user outrage have so far proven to be effective inhibitors of anti-competitive behavior. Even without title II common carrier regulation, the amount of end user and policy attention now paid to anti-competitive behavior in the Internet business would effectively encourage responsible ISP behavior.

Proponents opposed to "over-regulating" the developing business have argued that any abuses that do arise can be dealt with as they potentially occur, and that this is preferable to regulating in advance, or that the proper venue is the Federal Trade Commission or Justice Department, in any case.

Aside from all those issues, nobody really believes that anything but growth lies ahead for the broadband access business. 'More bandwidth" does not solve all problems, but does solve many of the concerns users or policy advocates might have about continued progress on the bandwidth front.

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98% of Fortune 1000 Firms Have UC Tests, Deployments or Plans

Only two percent of Fortune 1000 companies are not already in active pilot or deployment or are considering a unified communications implementation, a survey sponsored by Plantronics finds.

The only thing surprising in that finding is that there are any Fortune 1000 firms that are not using, planning or testing a UC implementation of some kind.

Given the wide range of UC applications, it would seem unlikely that any firms large enough to qualify for the Fortune 1000 list would not already be using some unified communications apps, whether they know it or not.

The survey suggests 34 percent of workers at such firms are road warriors while 29 percent are telecommuters (working mostly from home). As workforces become more distributed, technology that connects people and enables real-time collaboration becomes essential.

About 94 percent of those surveyed plan to roll out voice-related UC apps within the next 24 months while 66 percent of respondents plan to deploy desktop video within the next two years.

Some 45 percent of respondents said end-user training is key to help users understand basic audio and voice end-point functionality and to enable them to customize options and solve basic issues on their own.

Similarly, 48 percent of respondents said it’s critical to train IT on audio end-points, so they can educate users about end-points and resolve potential issues before they arise.

Employees who are accustomed to using traditional desk phones have very high expectations for audio quality. In fact, more than 50 percent of decision makers said end-points and audio quality are “extremely important” to the overall UC experience. If audio quality is poor when talking to customers, partners and other important audiences, users won’t adopt UC and deployments fail.

"More" TV Seems to be the Story

U.S. consumers seem to be buying more TVs even as they watch more online video. "More," not "either, or" seems to be the story.

Net Neutrality Would Reduce Investment, Says Frost & Sullivan

Network neutrality has the potential to significantly discourage broadband infrastructure investment, increasing the investment risk, Frost & Sullivan analysts say.

You won't be surprised at that conclusion if you are in the communications service provider business and have to work with investors, or are on the capital allocation side of the business, or ever have modeled expected returns from broadband investment under conditions where robust wholesale access is the rule, where competition is very heavy or where there is little opportunity to provide new revenue-generating services beyond simple access.

In a highly-competitive market, nvestments in access infrastructure are highly sensitive to expected subscriber revenue. Anything that reduces the potential new revenue can drastically affect the investment analysis.

In the presence of net neutrality, operators would likely reduce investment due to the increased risk. Where projects proceeded, consumers would ultimately pay the cost, as they always do.

Net neutrality acts like a tax on the Internet, Frost & Sullivan says. It imposes overhead on network operators, which, in turn, decrease network investments, providing less opportunity, not only for the operators, but also for those that use the operators' networks as well, analysts say.

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