What Will Softbank Do?

Federal Communications Commission Chairman Genachowski has said the agency’s review of the deals between Softbank, Sprint and Clearwire was on a schedule “consistent with” its nonbinding 180-day transaction “shot clock,” which runs through May 29, 2013.

The chairman’s comments suggest to analysts at Stifel that he believes the FCC ultimately will approve the Softbank purchase of Sprint, as well as the Sprint acquisition of Clearwire.

That likely would take much of the wind out of Dish Network’s rival bid to buy Clearwire, though aggrieved shareholders might yet file lawsuits that would prolong the uncertainty.

Assuming the analysis of FCC deal approval is correct, the real speculation can begin. Up to this point, there has been some speculation that all the moves and counter moves were tactical, on the part of Sprint and Dish Network.

In that view, Sprint doesn’t really want to buy Clearwire right now, but only wants to block Dish and Clearwire from merging. Others might argue Dish doesn’t really want to buy Clearwire, but only to force Sprint to help Dish build its own network, or raise the equity value of Dish Network overall, before Dish sells its spectrum, or itself, to another firm, such as AT&T.

But assume Softbank really does want to acquire Softbank, and wants to use Sprint as part of a larger plan for U.S. market entry. That is a straightforward assessment with no complicated “real motives” required.

Assume Softbank wants Clearwire’s spectrum to make a big splash, in some disruptive way, when it enters the U.S. market. Assume Softbank stays “in character,” and focuses on software (applications) and low retail prices, as it has done successfully in Japan.

Recall that Clearwire’s primary value is that it owns so much spectrum, and already is a wholesale capacity provider.  So then imagine that Softbank decides to leverage that wholesale value proposition, to enable a Google, Amazon or Apple to create a nationwide LTE Internet access network.

That network still could offer voice and text messaging, if customers really wanted it, using Sprint. But the disruptive angle would be a fast, data-centric mobile network optimized around Internet apps and experiences.

One advantage could be a disruptive pricing scheme, leveraging low retail prices and a simple LTE data access value proposition.

"Low Cost" iPhone Coming in 2013

Despite repeated official denials that it was working on a lower-cost iPhone, a lower cost  iPhone is coming, perhaps as early as the summer of 2013.

Of course, in an Apple context, "low cost" is a matter of perspective. Some speculate the "low cost" device will cost less than $400 (the issue is how much less), and will be targeted at the prepaid smart phone market, and China and India, for example. 

Some believe Apple could set a non-subsidized lower cost iPhone price at about $329. 

Investors will worry about profit margin, but that might not be as big an issue as feared. The big issue is whether such a move would crimp Nokia's efforts in the affordable device market, Microsoft's attempt to gain more share, or Samsung's strategy for lower end devices. 

Galaxy S III, iPhone Users are "the Same"

Many early studies suggested Apple iPhone owners were "different" in terms of demographics. Early adopters were disproportionately wealthier, male and technology savvy, compared to buyers of other devices. Over time, those differences have narrowed.

Now a study by Consumer Intelligence Research Partners suggests iPhone and Galaxy S III owners behave the same way.
  
“Use for calling, texting, email, and Internet access was the same for both phones,”Consumer Intelligence Research Partners suggests. “Use differed only for gaming and photos, with iPhone owners using their phones somewhat more frequently for these.”

One might therefore argue that the Galaxy S III is, in many ways, a functional substitute for the iPhone, for many users, in the area of behavior, not simply device preference.

The study also confirms what you might have guessed, namely that smart "phones" actually are more often used for use of Internet applications or text messaging, than for phone calls. 

Phone use was only slightly more frequent than use of email, the study suggests. 

Verizon Messaging: Will it Show the Value of a Phone Number?

Verizon Messaging is a new multi-screen messaging service that extends "Verizon Messages" service to PCs, Android smart phones, and Android or iOS tablets. 

The advantages over third party messaging apps all hinge on integration of the mobile device phone number.Where a third party app has to be present on both sender an recipient devices, Verizon Messaging only requires mobile phone numbers on either end of the communication. 

In other words, senders only have to know that a recipient has a mobile number, and the message can be received on a PC or tablet, as well as the phone, without the need to know whether the recipient has loaded the right app on all of the receiving devices. 

Also, messages can be stored if the recipient devices are not "online" to receive them in real time. That is a difference from third party messaging services that require both sender and receiver to be online at the same time. 

Virtual Currency is "Currency," U.S. Treasury Decides

The U.S. Treasury has decided to apply  money laundering rules to "virtual currencies" such as "bitcoin." 

The move illustrates a principle. Very often, new Internet-based alternatives to legacy products and processes get created.

For a time, those innovations are ignored. As they start to become more significant, a regulatory rule tends to emerge, namely that if something "walks like a duck, and quacks like a duck, it is a duck."

In other words, the new form of a legacy product or process or function comes under the same regulatory framework as the original product or function. Virtual currency has gotten to that point.

The other observation is that new IP-based or Internet-based alternatives to legacy ways of doing things often are based on arbitrage of some sort. That typically allows competitors to get started. But the arbitrage opportunity rarely lasts. 

Regulators tend to move to level the playing field, in regulatory terms. And competitors respond. 

The Treasury says money-laundering rules apply to 'virtual currencies.'


The move means that firms that issue or exchange online "cash" will now be regulated in a similar manner as traditional money-order providers such as Western Union Co.

As a practical matter, that will mean more costs, as suppliers would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000.

HBO Go a High Speed Access "Enhanced Service?"

Broadband Internet service providers always are looking for ways to enhance their services and add value, to avoid a "commodity" approach. Could HBO GO, a streaming service sold by HBO, be such an example of a value-added feature?

It wouldn't be easy, as HBO's important cable, telco and satellite video distributors would not necessarily take kindly to HBO essentially making an end run around them. 

HBO's "HBO GO" online streaming service presently is available only to subscribers to video entertainment services who also buy HBO. 

But HBO continues to talk about the possibility it could be sold, perhaps as a feature of a high-speed access service, to customers who buy voice or broadband access from a  partner, but do not buy a video service. 

It would be a delicate balancing act, and it remains unclear whether the business model actually would work, HBO executives are careful to point out. 

HBO now is talking about an incremental fee of $10 to $15 on top of the customer's high speed access fee, for example. 

By extension, where ISPs have sold security services as an add-on to their access services, perhaps one day streaming video will be another type of add-on feature. 

Each Generation of Mobile Networks Has Required More Backhaul

There’s a very simple reason mobile backhaul demand is growing. By 2017, U.S. mobile data consumption will grow by 11 times the 2012 volume. The other issue is a change in network architecture. With each generation of mobile networks, the number of cells required to cover any area has grown.

That order of magnitude increase will create a market for consumer, enterprise and carrier small cells of about 21 million units, according to researchers at iGR.

What that could mean for mobile backhaul is fairly clear. The number of outdoor small cell backhaul connections deployed by service providers  is forecast by Infonetics to grow more than 100-fold from 2012 to 2016, according to Infonetics Research.

So an order of magnitude increase in mobile bandwidth consumption will lead to two orders of magnitude growth of service provider small cell sites.

What already seems clear is that many of those sites will require wireless backhaul. Smaller, cheaper radios will be needed. But lower cost backhaul connections also will be crucial. In some cases that will mean using consumer grade or business grade digital subscriber line or cable modem connections.

In many other cases unlicensed or licensed radio spectrum will be the connections of choice.

LTE Device Sales Grow 151% in 4Q 2012

Sales of 4G LTE devices were up 151 percent in the fourth quarter of 2012, according to Infonetics Research.

Infonetics expects the number of global mobile broadband subscribers (phone and mobile Internet dongles) to grow from 1.2 billion in 2012 to nearly three billion by 2017. 

Regulating IP Communications is Like Fighting the Last War

It often is said that generals always are ready to fight the last war, especially if it was a lost war. It's catchy, and probably wrong, but you get the point: it is awfully easy to view the future through the lens of the past.

So it also is easy to argue that it is time to stop obsessing over legacy voice regulation at a time when that part of the business actually is "dying."

More than 40 percent of U.S. homes have abandoned their landline phone service in favor of cable, VoIP and mobile.

By the end of 2013, according to USTelecom, less than 30 percent of U.S. homes will rely on a wired connection as their primary telephone service. 

Mobile service providers already are trying to get ahead of the game as well. AT&T, Verizon Wireless (and likely T-Mobile USA, soon) already have moved to a preferred retail packaging that bundles unlimited domestic calling and text messaging with a variable bucket of data usage that drives most of the account revenue.

They are doing so to protect voice and messaging revenues that are expected to begin a long, steady decline.

That is not to say every actor in the communications ecosystem will be happy about a rapid transition to all-IP communications and a new regulatory framework.

But the point is clear enough: we would be wasting time heavily regulating a service that is in"sunset" mode. We essentially made a similar, if smaller mistake when creating the Telecommunications act of 1996. The whole idea was to shake up the voice business.

The whole effort missed the fact that the Internet, mobile and IP communications were about to displace huge chunks of the old voice business.  The principle should now be clear: don't spend lots of time and effort "regulating" a service that is not driving communications in the 21st century. 

Email Isn't Dead Yet

There are three times as many email accounts as Twitter and Facebook accounts combined, according to Wrike.  And email represents 38.5 percent of mobile time spent on the Internet.

What is SDN Good For?

At least in some quarters, we are in a growing hype cycle related to software defined networks. As I simplistically understand it, SDN is about separating the "control plane" from the "data plane." 

In a probably over-simplistic way, that means putting intelligence in a headend or central office location, while using much-simpler, cheaper devices "out in the network" that only have to deal with "data," while the centralized controller does the computation that formerly was "out in the network."

The broad analogy will be familiar to those who once worked with "client-server" computing architectures. It isn't a case of "mainframe-dumb terminal" models, because the SDN clients are not "dumb" devices. But the big computation loads are handled centrally (control plane) while the many distributed data plane devices can work fast because they don't have to deal with local computing chores, and just handle the data.

As we typically do, there will be years of wrangling over "what SDN" really is, and how it is implemented. There will be many attempts to graft SDN onto the existing base of platforms that actually have intelligent devices scattered all over the network.

What probably will be lost is the "so what" part of the discussion, for service providers or their customers. 

Most lost in the discussion will be the end user benefit. But some might argue that's what we really should be talking about. 

It is perhaps not required that SDN be used to provide a user-defined set of policies relating to use of bandwidth. That could logically be provided other ways, including the use of intelligent devices scattered throughout the network.

But it might arguably be much easier, much faster, more dynamic and more affordable to supply end-user define policies on an SDN network than it is today. 

For service providers the advantages might be even simpler. SDN might enable "bandwidth on demand" in a reliable, robust, affordable way. 

But all that will likely be lost in the wave of hype we are about to start hearing. 

2 LTE Air Interfaces for China?

China Telecom's chief executive officer says China Telecom prefers the frequency division flavor of Long Term Evolution rather than the time division flavor chosen by its rival China Mobile. 

If China Telecom does opt for frequency division (FDD-LTE) rather than China Mobile's TD-LTE, it would mean the Chinese market would feature two distinct air interfaces for Long Term Evolution networks. 

Some might say that is not such a good outcome, as handsets might be incompatible. But the choice of FDD-LTE also would mean that China Telecom has immediate access to devices already developed for North American markets, where FDD-LTE is the air interface.

China Mobile already has committed to build its 4G network based on the TD-LTE standard. 

U.K.'s EE Launches Fixed LTE Service

U.K.-based EE is launching  a "4G fixed and mobile broadband service" in Cumbria, said to be one of the most rural areas of the United Kingdom.

The launch will offer many Northern Fells residents access to average upload and download speeds between 8 Mbps and 12 Mbps, with "headline speeds" over 20 Mbps.

The region, covering almost 100 square miles, also is said to contain the highest concentration of homeworkers in the UK.

The move obviously has implications. The Cumbria area is so rural that fixed networks are quite expensive, a situation not restricted only to Cumbria. The new 4G network will offer faster service than fixed networks can, in that area. 

In a sense, 4G LTE therefore competes directly with satellite broadband and terrestrial fixed wireless methods of providing Internet access. AT&T and Verizon, it is fair to say, will be testing those notions in the U.S. market, at some point.

In Europe, in some countries, mobile substitution already runs in the mid single digits to high double digits range, providing some indication of how much adoption fixed versions of LTE could attain.

To really do so requires a change in "universal service" regulations, though, allowing the providers to use any available and feasible technology to serve customers. 

Chrome, Android OS Will Not Merge, Google Chairman Says

Chrome and Android operating systems will remain separate products, although there could be more "commonality" between them, Executive Chairman Eric Schmidt said. 

Speculation about such convergence has been an obvious subject of speculation as tablets and phablets blur the lines between "phones" and "personal computers," raising the possibility that a common operating system could evolve out of the separate Android and Chrome environments.

It still is possible something like that might happen in the future, but the current thinking probably is that merging the two operating systems would result in a creation with too much overhead and "weight," making the resulting OS sub-optimal compared to distinct approaches optimized for the PC and smart phone-tablet environments.

YouTube Now Gets 1 Billion Users a Month

YouTube now has more than a billion unique users users:  every single month, representing about half of all Internet users globally. What isn't yet so clear, as with Android, is how widespread usage will lead to business benefits for Google, especially revenue. 

Current thinking probably revolves around advertising, a logical enough line of thought. But most media-related businesses have multiple sources of revenue (subscriptions, advertising, promotion and marketing services, research, conferences), so it is possible other sources ultimately could be important as well. 


And mobile and tablets figure into the discussion in a big way. For the first time, an entire generation has grown up watching content using the Internet, mobile, and social apps, consuming content when and where they want. 

Nielsen calls this group "Generation C" because they are not just defined by their age group, but by their connected behavior. In part, that means they watch on multiple devices, though in linear fashion. 

But the deeper  changes pertain to "sharing" behaviors. Generation C creates videos, and does not simply watch them. They share what they like and curate content for others. All of that means YouTube could have monetization opportunities of several types, eventually. 

At least some of those opportunities will flow from the use of mobiles with highly contextual location capabilities.