Telefonica Suspends Dividend, Share Buybacks

Telefónica will cancel the payment of all remaining dividends and share buybacks for 2012, an action that shows the stresses now experienced by businesses of all sorts in Spain, as a result of the economic and financial crises roiling Spain.


Telefonica's suspension of dividend payments is a risky step, as it would be for any public firm viewed as a "value" stock paying hefty dividends. The problem is partly a debt overhang that has to be rectified, plus a complete lack of revenue growth for the remainder of the year. 


The company said it now anticipates no significant revenue growth this year, compared with a previous expectation of revenue growth of at least one percent.  Telefónica said it will resume its dividend payments in 2013, with a dividend of 75 European cents a share to be delivered in two tranches, in the fourth quarter of 2013 and second quarter of 2014.


That of course assumes Telefónica can fix its immediate problems, namely controlling operating costs and getting debt to below 2.35 times operating profit in 2012. 


Telefónica's Spain operations, in the second quarter of 2012, saw revenue drop 13 percent year over year, compared with a six-percnet decrease for the European unit overall.


Perhaps most shockingingly, mobile phone usage revenue dropped 18 percent. You might conclude either that people indeed are not as attached to their mobile phones as once was thought, or that the Spanish economic crisis is so bad people have no choice, or that substitutes are being used, such as lower-cost services using "SIM-only" approaches. 

London Olympics Bans Personal Hotspots

Big, temporary events always pose a problem for access service providers. Because the large expected increases in access network use are temporary, it is difficult to add enough temporary capacity to cope with all expected demand. One way to manage expected congestion is simply to allow connections to slow, degrade and essentially create blockages.


So it is that, in addition to banning such obvious things as explosives and weapons from Olympic venues, attendees are advised by the London Olympics that personal wireless access points and and 3G hubs (smart devices such as personal hotspot devices or the personal hotspot functions of smart phones are banned from Olympic venues.


Android phones, iPhone and tablets are permitted inside venues, but must not be used as
wireless access points to connect multiple devices, the London Olympics says. 


The ban will be hard to enforce, but organizers say that, in principle, offending devices will be confiscated. 

Satellite Still Makes Sense in Rural Areas, Frontier Bets

The Frontier Communications Corporation wholesale agreement with Hughes Network Systems to create a branded, satellite-based broadband access service shows that debates over "which access network is best" miss the point. A range of networks "make sense" for different population 


Frontier will sell satellite-based broadband services, branded "Frontier Broadband, to what Frontier estimates are several hundred thousand households and small businesses within markets previously unserved or underserved by all broadband providers, including cable.


Notice that Frontier did not brand the service "Frontier Satellite Broadband." It is broadband, provided to some potential customers that Frontier cannot reach using its fixed network. 


As the mobile network provides huge value, even though raw speed is not as high as is possible on a fixed network, so a variety of technologies and networks make economic sense for urban, suburban, rural and isolated potential customers. No single network is "best" for every scenario. 


Still, each type of technology tends to be regulated using different rules. 


And it still raises regulatory hackles when contestants using different networks, and regulated under different rules, decide it makes sense to "cross the lines." That seems to be the case with the agency deals allowing Verizon to sell cable operator services, while cable operators can sell Verizon services.


Historically, the industry has seen strife over issues of which types of networks can receive funds from agencies that support rural communications, as well. Incumbent telcos have argued that it is unfair for competitive local exchange carriers or mobile carriers to receive support funds traditionally awarded only to fixed network telcos, even when the functional capability supplied by all of the contestants is precisely what the programs are supposed to support. 


Those debates are likely to become sharper in the future. 

Virgin Media Says 41% of New Customers Buy Broadband Access at 60 Mbps or Higher

Broadband customers on tiers of service offering speeds of at least 30 Mbps now represent 31 percent of its total broadband user base, according to Virgin Media. About 14 percent of all customers buy services at 60 Mbps or above. 


At least in part, that is because Virgin Media in April 2012 made 30 Mbps the entry level tier of service. 


Around 41 percent of Virgin Media new customers chose took speeds of more than 60 Mbps, while plans to double the speeds of four million users are well underway.


Virgin's experience confirms what most of you would suspect, namely that lower prices drive adoption of faster broadband access services. 


Virgin Media now sells service operating at 30 Mbps to 40 Mbps for £14.50 a momth. Also, says Virgin Media, the 30 Mbps service it sells is less costly than the 40 Mbps service marketed by BT.



Virgin Media services operating at 60 Mbps to 80 Mbps cost £18.50. Service at 100 Mbps costs £25.50 a month. 




Of course, Virgin Media's prices are lower than BT's prices, at each of the tiers. 

Amazon.com Launches a new Training Initiative

Amazon is launching a new, and as yet experimental, "Career Choice Program" for people who work at Amazon's fulfillment centers. 


The program is unusual. Unlike traditional tuition reimbursement programs, Amazon exclusively funds education only in areas that are well-paying and in high demand according to sources like the U.S. Bureau of Labor Statistics, and funds those areas regardless of whether those skills are relevant to a career at Amazon.


Many of our fulfillment center employees will choose to build their careers at Amazon. For others, a job at Amazon might be a step towards a career in another field. We want to make it easier for employees to make that choice and pursue their aspirations. 


For people who've been with Amazon as little as three years, Amazon is offering to pre-pay 95 percent of the cost of courses such as aircraft mechanics, computer-aided design, machine tool technologies, medical lab technologies, nursing, and many other fields.

Square Near a Deal to Value It at $3.25 Billion

Square, the mobile payments supplier, is close to raising roughly $200 million in new funding, with an implied valuation of $3.25 billion, the NYTimes reports.


The funding represents the company’s third significant capital raising round in less than two years. In 2011, Square raised $100 million, valuing the company at $1.6 billion. Several months before that, Square had an investment at a $240 million valuation. All told, the company’s valuation has grown by 13.5 times in less than two years.


You can make your own determination about the appropriateness of the valuation. 

Apple: the Company that Used to Make Computers

These days, phones and other portable devices are what Apple makes and sells. The really surprising number, for some of us, is the dominance of "phones" in the revenue picture. 

Can 4G be Successful in India Even While 3G Isn't Established?

If India's Reliance Industries (Reliance Communications) does move ahead and build a national Long Term Evolution fourth generation mobile network, it will have to leapfrog third generation mobile networks just getting established in the Indian market.


By some estimates the total number of 3G subscribers in India is just about two percent of the total number of mobile phone users. India has 893.8 million cellphone users according to TRAI (Telecom Regulatory Authority of India).


So the big gamble is whether Reliance can leapfrog a whole generation of technology. Reliance's 4G network would be the largest of any outside the U.S. and Japan. 


India is expected to have more 4G wireless subscribers in four years—37 million—than Brazil, Russia or Indonesia, according to consulting firm Ovum. 

Looking at the broadband access market broadly, about nine percent of India's 1.2 billion people now have Internet access. Virtually everyone expects mobile to be the way most people in India get Internet access.


But what is unknown is whether 4G can leapfrog over 3G, at a time when even 3G is a very new service in the market, and such a small number of users (three percent, by some estimates) have smart phones. 


In May 2012, 3G adoption in India had reached perhaps 10 million to 12 million users. 





But some might argue the proper framework is not "3G" users but "Internet users." 

India has added 69 million Internet users between 2008 and 2011 and now has 121 million Internet users with a population penetration rate of 10 percent.

According to Mary Meeker, Kleiner Perkins  Caufield & Byers partner, India has 39 million 3G subscriptions as of the fourth quarter of  2011, with four percent penetration rate and 841 percent year over year growth. 

Reliance Communications has 3.2 million 3G subscribers(Q4 FY12), Idea has 2.6 million and Airtel has about 9 million 3G subscribers. Vodafone has 35 million data subscriptions including both 2G and 3G subscribers, including perhaps eight million or nine million 3G subscribers, Meeker estimates. 

She doubts that BSNL, MTNL, Aircel and Tata Tele have 15 million 3G subscribers between them.

But mobile Internet usage surpassed desktop Internet usage in India during the April 2012 May 2012 period. So it might not be unthinkable to argue that 4G could indeed leapfrog 3G, especially if the market is Internet access, not "mobile" Internet access. 

Netflix Sees Cable as Bioggest Competitor

Netflix believes its biggest competition comes from video entertainment subscription providers, namely cable, satellite and telco video providers. Lots of people would say Hulu Plus or Amazon Prime as Netflix's biggest immediate competitors, and that would be logical. 



Netflix notes that it competes for consumers’ viewing time with a variety of video services, including linear TV, DVRs, over-the-top (OTT) pure plays, and authenticated streaming offerings of the video entertainment providers and cable networks (cable operators, satellite TV and telco TV providers, and "TV Everywhere" offerings associated with those providers).


"We have yet to see HuluPlus or Amazon Prime Instant Video gain meaningful traction relative to our viewing hours, but as we continue to build a domestic profit stream they are likely to increase their efforts to gain viewing share," Netflix says. 


Netflix also believes "Redbox Instant" by Verizon will have a tough time breaking into the ranks of the top three providers. 


Still, Netflix believes its "biggest long-term competition for viewing hours will come from MVPDs and cable networks, both directly and through their TV Everywhere offerings."


The operant word is probably "long term."

300 Mbps Access is Great, But not a Consumer Offer

Comcast is readying a 305 Mbps high-speed access service to counter Verizon's 300 Mbps FiOS offer of 300 Mbps, costing $205 a month. Though some consumers might actually be willing to pay that much, most will not. 


U..S. access speeds are about 5 Mbps, some studies have suggested. At some level, it might be useful to calculate "cost per megabit per second," though no consumer buys access using that metric, opting instead for an assessment of actual monthly recurring cost, and headline speed. 


At the moment, U.S. offerings, overall, cost about $3.33 per megabit per second, with huge differences between urban FiOS access and rural digital subscriber line price-per-megabit-per-second, for example. 


Over time, we should anticipate that users will spend more money, per month, on broadband, simply because speeds and caps are correlated. And as more entertainment video gets watched, users will need larger caps. 


Mobile access makes a difference, though, especially as more consumers might opt to use mobile broadband, either in place of fixed access, or as a complementary form of access. 


But one problem is that "nominal prices" are not "effective prices" when most consumers buy a triple play bundle including broadband access, voice and entertainment video.


In  2010, for example, Comcast reported a monthly total revenue per video customer of $129 a month. By correlating the number of revenue generating units (RGUs) Comcast had at the time, one might suggest that the video portion of the bundle cost about $71 a month; the broadband access about $42 a month and voice service about $36 a month.

• Video (22.8 million customers at $71.37/mo)
• High-speed internet (17.0 million customers at $42.07/mo)
• digital phone (8.6 million customers at approx $36.15/mo)

That rather suggests to some of us that most consumers are not likely to spend much more than $40 to $50 a month for high speed Internet access, with a tendency over time for higher prices. 

Content Consumption is Now the Top "Purpose" of a PC

"Games" now are the number two most popular tablet activity, surpassed only by accessing the Internet, a study by Frank N. Magid Associates has found.


In fact, the list of top activities conducted on tablets shows the evolution of the personal computer, one might argue. In the 1980s, when PCs first were adopted in significant value, it was the spreadsheet and financial analysis that created the driver for adoption by businesses.


A variety of other business uses then developed, including desktop publishing. PCs became useful for consumers for other reasons, but included the ability to work and communicate "at home."But the new consumer killer application seems to be content consumption.

Significantly, the top apps on smart phones aren't all that different from what is done on tablets, the study also found. 


Of course, mobile devices are multiple-function appliances to a greater extent than tablets or PCs. Even so, calling is only a percentage of total activities smart phone owners now conduct on their devices. 


The big change is that content consumption activities apparently had grown to represent about half of all the time spend interacting with, and using, a mobile device, in 2011, according to comScore. 


The point is that the "purpose" of using a computing appliance has changed. For the most part, people rely on "computers" for media consumption. 

European "Network Neutrality" Issues Different than U.S. Issues

Last year the European Commission concluded an initial study on the issue of network neutrality, with findings that suggest issues are different in the European market, than in the United States.


A subsequent Body of European Regulators of European Communications (BEREC) investigation of Internet traffic management practices found that the most frequently reported restrictions on EC networks were the blocking or throttling of peer-to-peer traffic on both fixed and mobile networks and the blocking of Internet telephony traffic on mobile networks.


The report estimated that between 20 percent and 50 percent of European Internet users have contracts that allow providers to restrict services.


That points up a key difference between U.S. and EC service provider practices. In the U.S. market, blocking of lawful Internet applications is prohibited by the Federal Communications Commission's "Internet Freedoms" principles. In other words, no service provider can block a user's access to a legal application such as VoIP or peer-to-peer apps.


That appears not to be the case in EC countries, where at least some service providers block mobile VoIP, for example. 


But network neutrality really is a complicated issue, including distinct issues such as blocking of legal apps, ability to manage traffic to preserve quality of service and whether managed services can be created. 


In the U.S. market, no outright blocking of lawful appllications, including VoIP or peer to peer services, is permitted. 


At the moment, different frameworks exist for U.S. fixed network broadband access and mobile access where it comes to traffic management. On fixed networks, no traffic grooming, even for purposes of alleviating congestion, is permitted. Mobile operators may do so.


On fixed networks, no managed services providing quality of service benefits are permitted, though such practices are lawful on mobile networks. 


But network neutrality rules often bump up against business model issues. There is not dispute about whether a TV or radio broadcaster, or a cable TV or satellite network, can optimize its content for delivery to end users. 


The new area of uncertainty is whether application and content providers should be able to do more, in the area of content delivery, for example, to optimize applications on behalf of consumers or application providers. 


As content delivery networks actually favor some content over others, so it is conceivable that either end users or app providers might want to pay for quality of service mechanisms. Though you might argue that is no different than app providers paying for content delivery services, such quality of service mechanisms pose competitive issues, some argue. 


Obviously, optimized content will have an advantage over non-optimized, "best effort" content. That isn't so much an issue for non-real-time services. But real time services suffer when there is network congestion. Any over the top voice or interactive video application, for example, is quite sensitive to congestion. 


At issue is whether any end user or application provider ought to be able to buy an over the top Internet application or service that uses optimization techniques to improve experience, just as app providers buy content delivery network services. 

Transparency is a contested part of thinking about network neutrality, the notion being that users are entitled to know what terms and conditions might affect their use of Internet access services. 


The other real complication is that virtually all networks now use Internet Protocol, and not just for "Internet" apps. Users and regulators accept that a managed service has to be "managed" for quality reasons. 


But such managed services might use IP mechanisms on either private or public networks. Precisely what a "managed service" is, or ought to be, is a growing area of contention. Users, suppliers and regulators might agree that a service provider ought to be able to use quality of service mechanisms when providing carrier voice, video or messaging services, for example.


What is more contested is whether over the top suppliers of such services should also have the ability to create quality of service mechanisms as well. 

How Important are Shared Data Plans?

Data revenue will grow to 65 percent of total U.S. wireless service revenue as voice declines to 35 percent in 2016, according to Hugues de la Vergne, principal research analyst at Gartner.


What might not yet be so clear is how the industry will get to that point, but different retail packaging likely will play a key role, even as more users adopt smart phones that almost automatically boost data revenue because devices have most value when an Internet connection is available, all the time. 


But nobody yet can be sure whether shared data plans offered by AT&T and Verizon Wireless will work as planned, namely lifting overall revenues while creating a usage-based data revenue model, while encouraging users to add tablets to their accounts for mobile broadband access. 


But some think the entire industry eventually will move in that direction, as was the case with some earlier packaging innovations, including the mobile industry's abolition of domestic long distance with AT&T's Digital One Rate, or the adoption of family plans for domestic voice and texting. 


As the number of devices with mobile network modems increases, consumers and small businesses in the U.S. will demand matching multi-device data rate plans, according to Gartner. 


The disagreement about adoption probably will not be decided, one way or the other, for some time. The reason is that the current structure of the shared data plans does not offer significantly better economics for users, compared to what they already can buy.


There are some marginal advantages and inducements to add tablet devices, for example, but the price advantage might not be so obvious to most users, or valuable. 


But Gartner believes multi-device rate plans will be a key driving factor in the expansion of U.S. data revenue from $81.4 billion in 2011 to $151.9 billion in 2016. 


One could get a rather robust argument at the moment about the importance of new shared data plans launched by Verizon Wireless and AT&T. Those two carriers clearly believe consumers want such plans, and also believe that the plans will boost revenue. 

Others are not so sure, or might even think the plans are unnecessary or less advantageous to consumers than more traditional plans. 

U.K. Customers of Three Increase Data Consumption 100% in 12 Months

In about a year's time, smart phone customers of U.K. mobile service provider Three have doubled their "average" data consumption to 1.1 Gbytes a month, Three says. 


That rate of increase is faster than for the U.K. audience as a whole, as Ofcom reports the overall volume of mobile data consumed in the United Kingdom has doubled in the 18 months to January 2012. 


By way of comparison, according to Nielsen’s June 2012 analysis of U.S. mobile phone bills for 65,000 lines, smart phone owners, especially those with iPhones and Android devices, were consuming about 435 Mbytes a month in 2011, roughly the same as in the United Kingdom.  


T-Mobile USA, meanwhile, reports that its users consumer about 760 Mbytes a month. 

Ofcom estimates that the average U.K. consumer now spends ninety minutes per week using a mobile to access the Internet, largely replacing their use of PCs and laptops for watching video clips and sending messages. 


Those of you with an engineering bent will realize what that means. Nothing stresses an access network like video.


Since mobile networks are more "bandwidth challenged" than the fixed networks, when users switch video viewing preferences to mobile access modes, mobile networks experience the "worst of all worlds" (the media type with the greatest bandwidth requirement is consumed on the networks with the least available bandwidth). 

And one might well expect consumption to keep climbing, as more users adopt smart phones, come to rely on mobile access to the Internet and as fourth generation networks are built, since faster access drives higher data consumption. 


A year ago, average consumption was about 450 megabytes. As you would expect, the growth has happened because of smart phone user behavior. About 95 percent of Three smart phone customers use data on a daily basis.



About 42 percent of respondents surveyed by Ofcom agree with the statement “my phone is more  important to me for accessing the Internet than any other device."


Levels of  agreement with this statement are highest among those aged 16 to 24 (51 percent) and 25 to 44  (48 percent). Levels of agreement have also increased over time, with 42 percent net agreement in 2012,  compared to 33 percent net agreement in 2011.


Ofcom reports that mobile broadband (data dongles or cards) now are used by about 13 percent of U.K. mobile users, while smart phone adoption grew from 27 percent in 2011 to 39 percent of U.K. adults,  representing 43% of mobile phone users.


Some 66 percent of U.K. users 16 to 24 and 60 percent of those aged 25 to 34 have a 
smart phone,

ATM and Frame Relay Gone by 2015

“By 2015, ATM and frame relay will virtually vanish, while private leased lines will be around a bit longer,” says  Michael Howard, co-founder and principal analyst of Infonetics Research. 


In large part, that is because replacement services such as Ethernet and IP VPNs are taking the place of frame relay and ATM.  “Despite some slowdown in Europe in 2011 and 2012, we see solid growth ahead for both IP MPLS VPNs and Ethernet services, together topping $81 billion worldwide by 2016,” Howard says. 


Global Ethernet and MPLS IP VPN service revenue grew a combined 13 percent in 2011 to just over $50 billion, fueled by surging data traffic, cloud services, and cost-cutting initiatives, Infonetics says.