Mobile Backhaul Services $15 Billion in 2011

Telcordia analysts predict there will be a $15 billion wholesale transport revenue opportunity in the mobile tower backhaul market by 2011, based on new needs to get broadband backhaul to more than 200,000 wireless network cell sites in the United States. 

Satellite Pioneer Andy Werth Dies

Andrew (Andy) Werth, a satellite industry pioneer, died January 28.  He was 74 and lived in Washington, D.C. 

He co-founded a digital satellite communications company that eventually became Hughes Network Systems. Mr. Werth later became president of the company’s international division.

Andy was an avid cyclist, finishing one place short of qualifying for the U.S. cycling team in the 1952 Olympics, though he won numerous other events in his youth, including the New York State Junior Championship and the Tour of Somerville. A victory in a nine-day cycling event in Canada earned him enough prize money to pay for his first semester of college. He resumed cycling later in life, and won the Masters National Track Championship in 2000, 2003 and 2004. Until slowed by illness, he was an active member of DC Velo, a Washington-based cycling club.

Beyond that, what many of us always will remember is his mentoring and teaching, born, no doubt, of his genial and caring nature. Thanks, Andy. 

Mr. Werth was born in Saarbrucken, Germany on March 2, 1934, to a German father and a French mother. His family fled the Nazis, and by the time he was 10 years old, young Andrew had lived in four countries, learning a new language with each move. His fluency in many languages and ease with international clients helped him establish Hughes’ presence in 17 countries and build international sales to $1.4 billion by the time he retired in 2000. 

Mr. Werth, a graduate of Columbia University and an Air Force veteran, began his career at ITT Laboratories in New Jersey. Following the launch of Sputnik, he was assigned to do research in digital satellite communications in the late 1950s.

He left ITT for satellite operator COMSAT Corp. in 1964, and his first job was working on the Early Bird project team with the manufacturer, Hughes Aircraft Company. He soon transferred to COMSAT Laboratories, where he developed a series of high performance satellite modems and was awarded a number of patents in satellite communications applications. His work in the digital satellite communications was cited in 1982 when he was named a Fellow of the Institute of Electrical and Electronics Engineers, the profession’s highest award.

In 1972, Mr. Werth and a group of colleagues left COMSAT to form Digital Communications Corp. (DCC), a company that specialized in building sophisticated digital communications systems utilizing both terrestrial and satellite technology. 

The company prospered and was acquired in 1978 by Microwave Associates and became MA/COM Telecommunications, which was acquired by Hughes Electronics in October 1987, becoming Hughes Network Systems (HNS).

Mr. Werth was initially general manager of the satellite communications division. He later led international marketing and sales for a new satellite technology, very small aperture terminals (VSAT), that eventually became the backbone of the private satellite network industry, connecting millions of retail establishments, hotels, gas stations, and other users. 

Software-Based Telecom (Video in 5 Parts)

Voice has for decades been a "service" sold by the "the line" or as an "application" created by a premises switch. Now voice also is a feature of instant messaging, Web sites, enterprise applications and email. As a result, there now are multiple business models, revenue streams and applications that use the "voice" feature. This panel will examine some of the ways this is happening, and what it means for traditional providers of voice services.

Gary Kim, Editor-in-Chief, IP Business

Rodrigue Ullens, Co-founder & CEO, Voxbone

Trevor Baca, VP, Software Engineering, jaduka

Michael Veys, COO, JAJAH

Eric Reiher, Founder & CTO, Mobivox

Click on "Related Article" at the bottom of this post for the first of five parts. Click "Watch in HD" if you have the bandwidth. 

Voice Peering Drivers and Strategies: 7-Part Video

Gary Kim, Editor-in-Chief, IP Business
Carlos Da Silva, Americas Marketing Director, France Telecom
Paul A. Woelk, Sr Manager, Access Strategy, Sprint
Heather Olson, Regional Manager, Telecom Italia Sparkle
Rodrigue Ullens, Co-founder & CEO, Voxbone

click "Related Article" at the bottom of this post to launch the first video segment. Also, if you have the bandwidth, select "Watch in HD." It's better.

Mobile Broadband Supplemental, But High Risk of Substitution

A huge explosion in mobile broadband use in Europe over the next five years largely will be driven by consumers, and largely will complement, not supplant, wired broadband connections, predict researchers at Analysys Mason.

That said, a separate forecast by Informa Telecoms & Media suggests the potential for broadband substitution will remain high.

Analysys Mason projects148 million mobile broadband connections in Europe by 2014, when they will account for almost half of all broadband connections in the region.

The potential for fixed-line voice substitution also will remain high. About 40 percent of total mobile traffic was generated in the home environment in 2007, says Informa Telecoms & Media.

By 2013 it is expected to reach 58 percent, with about eight percent of total mobile traffic offloaded to fixed broadband. In 2008, the home environment likewise represented more than 43 percent of total mobile data traffic and will climb to 60 percent by 2013.

That's the danger for fixed services providers, particularly in single-person households, households of non-related persons and households where every person in the household above a certain age has a mobile.

Mobile use at home will represent about 40 percent of total mobile usage, while use at work will represent 30 percent of usage, with nine percent of calls initiated while users are moving. About 21 percent of calls will be generated from other public environments.

"In the same way that voice traffic has moved from old fixed line telephony service PSTN to mobile, there is reason to believe that a significant percentage of Internet traffic generation will move away from fixed personal computers to mobile devices including mobile handsets, mobile Internet devices (MIDs) and connected notebooks," says Malik Saadi, Informa principal analyst.

As more casual users adopt mobile broadband, they typically will do so as a complement to tethered broadband, usually opting for prepaid subscriptions rather than monthly contracts, Analysys Mason forecasts. Prepaid subscriptions will account for 59 percent of mobile broadband connections in 2014, up from eight percent in 2008.

New customers will tend to behave differently from early adopters and users who have substituted wireless for wired connections, many observers believe. Most significantly, use will be casual. So, at some point, continued growth of mobile broadband in the U.S. market likewise will require charging mechanisms better suited to casual users, who will not be inclined to add substantial fixed-fee subscriptions when their anticipated usage is relatively light.

T-Mobile Outage: "All Markets West of Mississippi River"

T-Mobile has a  BlackBerry email services outage in "all markets west of the Mississippi River," I am told by tech support. Sunday, Feb. 15, about noonish Mountain time.....

Apparently there also was a Feb. 3, 2009 outage on a more-localized basis on the AT&T network in  Houston, New York, New Jersey and Baltimore/Washington D.C. areas.

There are some reports T-Mobile and possibly some Sprint BlackBerry users had the same issue on Feb. 3, 2009 as well. Undoubtedly there will be finger-pointing, but it would seem to be a RIM issue if multiple networks had outages at the same time. 

58% of Mobile Use In-Home by 2013

About 40 percent of total mobile traffic generated in the home environment  in 2007, says Informa Telecoms & Media. By 2013 it is expected to reach 58 percent, with about eight percent of total mobile traffic offloaded to fixed broadband.

In 2008, the home environment likewise represented more than 43 percent of total mobile data traffic and will climb to 60 percent by 2013.

Mobile voice minutes of use in the home environment represented about 42 percent of total mobile voice traffic by the end of 2008. Mobile voice usage at home will gradually increase to reach 49 percent by 2013.

Mobile use at work will represent 30 percent of usage, with nine percent of calls initiated while users are moving. About 21 percent of calls will be generated from other public environments.

"In the same way that voice traffic has moved from old fixed line telephony service PSTN to mobile, there is reason to believe that a significant percentage of Internet traffic generation will move away from fixed personal computers to mobile devices including mobile handsets, mobile Internet devices (MIDs) and connected notebooks," says Malik Saadi, Informa principal analyst

Wireless and Broadband Grow, Wireline Shrinks, Ofcom Says

Fixed-line call volume and access revenues fell by two percent during the third quarter, the U.K. Office of Communications now reports. Total residential call volumes in the third quarter of 2008 were nine percent lower than in the third quarter 2007, while total business call volumes fell by five percent over the same period. The total number of fixed lines fell by 36,000 to 33.5 million during the quarter as well.

The number of residential and small or medium business broadband connections increased by 322,000 during the quarter to 16.9 million.

Total mobile revenue for the four largest mobile operators increased by 1.5 percent, quarter over quarter, Ofcom reports. Revenue from calls and other charges grew by 2.3 percent, though call volume declined by 0.05 percent, quarter over quarter.

Roaming call volumes increased by 11 percent year over year. The number of outgoing international minutes grew by 14 percent over the same period.

Core Switches on Blade Servers: Nokia Siemens

Core network infrastructure is moving along a path that will have software functions running on standardized hardware, such as blade servers. That's quite a change from a world where you could tell the difference between major brands of Class 5 switches just by looking at them.

So note that Nokia Siemens Networks now has a new strategy focusing on hardware-independent solutions for core networks. Nokia Siemens Networks has introduced a new, open hardware architecture, where Nokia Siemens software runs on off-the-shelf hardware blades.

The long-term goal for the strategy is to provide an open, multi-application, hardware-independent platform, where the same open hardware platform can be used for a variety of different network elements.

The switch means the MSC Server mobile softswitch, which is currently implemented on the Nokia Siemens Networks DX 200 hardware platform, will run on open and standard blade servers.

“This is the beginning of a major shift in the way we design our core network products,” says Michael Clever, Head of Next Generation Voice and Multimedia, Nokia Siemens Networks. “The future of control servers clearly belongs to pure software solutions that give network operators more choices to meet their hardware requirements.

Operating on blade servers should allow for smaller equipment footprint and smaller power draw than the proprietary approach.

The open hardware approach is already being applied to other Nokia Siemens Networks core network “control plane” applications, such as IP Multimedia Subsystem and the hiQ VoIP application server, which then can be combined with the MSS application.

Tweet, Tweet and More Tweet

As of December 2008, 11 percent of online American adults said they used a service like Twitter or another service that allowed them to share updates about themselves or to see the updates of others, say researchers at the Pew Internet & American Life Project.

Just a few weeks earlier, in November 2008, nine percent of Internet users used Twitter or updated their status online and in May of 2008, six percent of Internet users responded yes to a slightly different question, where users were asked if they used “Twitter or another ‘microblogging’ service to share updates about themselves or to see updates about others.”

Good thing the company just raised $35 million more in investment capital. It still is growing really fast.

Small Business Demand Remains Stable

Small businesses (zero to 500 employees) represent 99.7 percent of all firms, employ about half of all private sector employees, pay nearly 45 percent of total U.S. private payrolls and have generated 60 to 80 percent of net new jobs annually over the last decade, according to the U.S. Department of Commerce.

It's no surprise that smaller businesses therefore represent much of the underlying demand for communications and information technology purchases as well.

It's a darn-near sure thing that such businesses will represent the only new net private sector jobs for the balance of the year. So it is noteworthy that small businesses were able to add new employees in January 2009, according to actual payroll processed by Surepayroll, which handles payroll data for more than 20,000 small businesses.

There was a 0.3 percent increase in the average small business size between the December 2008 and January 2009 periods, meaning that the average small business grew in size in January.

Hiring growth has been relatively flat of late, with the last five months all being in the 0.2% to 0.3% range. But small businesses added employees every month of 2008, the SurePayroll data shows.

Of course, other data is not so comforting, if lethargic job growth can be called "comforting." A Gallup Poll survey suggests that small-business owners are cutting jobs. About 11 percent of respondents say they have increased the number of jobs at their companies over the past 12 months while 27 percent say they have decreased them.

On average small businesses are still creating more jobs than they are destroying, SurePayroll says. And some of the resilence can be explained by greater reliance on outsourced contractors. In fact, January saw contractors representing 3.78 percent of total payrolls, the highest level SurePayroll ever has seen.

But there are warning signs on the small company start-up front, however, which logically is a result of tight credit conditions.

"In prior recessions, small businesses have ended up being net job creators," SurePayroll says. "This is not likely to happen in this recession because fewer companies are being formed."

Perhaps the only good news here for providers of communication services is that potential small business demand remains a bit of a bright spot.

Charter to Declare Chapter 11 Bankruptcy

Charter Communications will file for Chapter 11 bankruptcy as part of a financial restructuring on or before April 1. Charter says it has reached an agreement with a committee of some debt holders to reduce its obligations by about $8 billion. 

The company had net debt of slightly more than $21 billion as of Sept. 30, 2008, so despite wiping out what remains of the equity value, and paring debt by $8 billion, Charter will still have to contend with as much as $13 billion of remaining debt. 

Controlled by Microsoft Corp. co-founder Paul Allen and based in St. Louis, Charter has about 5.6 million customers in 28 states.

The cable company has sold the most U.S. high-yield bonds of any company in the past decade, according to data compiled by Bloomberg. Allen bought Charter in 1998, amassed the company’s debt burden while building it into the fourth-largest U.S. cable provider. 

Charter has reported losses every year since going public in 1999. In some ways, Charter is less a victim of the current credit tightness and more a victim of the 2001 Internet and telecom crash, though, as the company has been struggling with high debt loads since that time. 

Carriers Move to More "Open" App Environments

The parlay initiative (www.parlay.org), which aims to create APIs enabling telecom service providers to work with developers and industry technology suppliers, seems to be bearing fruit. 

TDC A/S, the Danish service provider, is using open application programming interfaces and making those APIs available to third-party application developers.

TDC is using the service delivery platform marketed by Aepona Ltd., which has experience with this sort with Canadian carrier Telus Corp. TDC expects to be up and running by late summer of 2009.

Aepona also provides similar capabilities for France Telecom, KPN Telecom, Sprint Nextel Corp. and TeliaSonera.

The GSM Association is working with Aepona on a new initiative called Open Network Enablers API (OneAPI), as well.

Vodafone Group, Telenor, Telecom Italia and France Telecom's Orange France are part of the OneAPI initiative. 

Iridium Losts Satellite, Globalstar Also Has Issues

It had to happen some time, and now it has. Two satellites, an operating Iridium communications satellite, and a defunct Russian satellite, collided in orbit on Feb. 10, 2009, destroying both objects and creating 500 to 600 new pieces of orbital debris, adding to about 18,000 other orbiting pieces of "space junk" softball-sized or larger that routinely are tracked. 

Iridium, which owns a fleet of 66 low-earth orbit satellites, expects minor outages, and will move an in-orbit spare into position within 30 days. 

Iridium isn't the only satellite communications provider facing at least some issues. Frost & Sullivan compared performance of more than 1,000 calls on Iridium and Globalstar networks, from Northern California and Central Texas.

In initial testing, analysts found that more than 99 percent of calls placed through the

Iridium handset were successfully connected, compared to 51.3 percent of calls from the

Globalstar handset. 

Tests also indicate that 98.1 percent of calls on the Iridium handset and 36.2 percent of calls on the Globalstar handset were successfully connected and completed without being dropped during a three-minute period.

Globalstar admits it has  a problem with duplex communications (not simplex). "As previously announced, many Globalstar satellites are experiencing an anomaly resulting in degraded performance of the amplifiers for the S-band satellite communications antenna," Globalstar says.

"The anomaly is adversely affecting two-way voice and data services," the company says. "Customer service continues to be available, but at certain times at any given location it may take substantially longer to establish calls and the duration of calls may be limited."

Until the new second-generation Globalstar satellite constellation is operational, Globalstar is offering its Optimum Satellite Availability T-tool (OSAT) on its Internet site, which subscribers may use to predict when one or more unaffected satellites will be overhead at any specific geographic location.

Globalstar has launched eight spare satellites for its existing constellation with a view to reducing the gaps in its two-way voice and data services pending commercial availability of its second-generation satellite constellation, scheduled for initial launch in the second half of 2009.

Telecom in Uncertain Times, Multi-Part Video

Click the "related article " link below to get the video, in 7 parts on YouTube.

Today's telecom and cable companies face an increasingly complex and uncertain world in which continual and rapid change is the norm. But different providers face distinctly unique challenges. This panel will evaluate the ways contestants operating in different geographies and customer segments; with distinct business models and products; diverse regulatory and technology environments, evaluate where they are, and where they want to go.

We'll take a look at:

Which challenges contestants believe are most crucial
Which opportunities are most relevant
Which customer behaviors and desires offer the greatest upside
How contestants respond to the competitive environment
Where unique value can be created in their chosen markets
How core competencies can be leveraged to create more growth

Recorded at Voice Peering Forum (c) 2008 Stealth Communications

Huge Shift in Telecom Industry Supply Chains

Continuous Computing, a suppler of protocol-centric hardware, software and systems to telecom industry original equipment manufacturers, is introducing a solutions and services practice in response to demand for more prepackaged platforms from global customers.

The new practice will deliver customized, fully-integrated, application-level solutions to network equipment providers, especially in the wireless space, and including deep packet inspection capabilities.

The move reflects a change in global telecom operations and technology development, which require faster development at lower cost, at a time when virtually all service providers and equipment suppliers have fewer in-house resources to do so, says Brian Wood, Continuous Computing VP.

The new capabilities will accelerate the creation and delivery of carrier-class systems to service providers much faster, in many cases as much as 12 to 24 months faster, says Wood.

The demand for more prepackaged platforms also is part of a broader industry trend to focus on core competencies, while outsourcing lower-level or less-essential functions to business partners.

In part, that is a simple response to the fact that virtually all communications entities now operate with fewer in-house resources. But it also reflects a drive, across the ecosystem to add more value and differentiation.

“At all levels of the value chain, everybody is trying to add more value,” says Wood. “over the last two years we had been at platform level but now we are moving to the systems level.”

“OEMs are moving to software features while operators are moving to the marketing level,” he says.

“Everyone is moving,” Wood says, and the transformational change arguably is greatest for the equipment providers, who have to change the most as headcounts are orders of magnitude lower than in decades past.

There also is an industry-wide narrowing of the gap between enterprise solutions and carrier-grade solutions. Traditionally, enterprise products had a lifespan of two to three years, so costs had to be lower.

Telecom products had lifecycles more in the seven to 10 year range, and were hardened. So development cycles were longer and cost was higher.

These days, the gap is narrowing. Telecom equipment cycles are moving closer to the enterprise lifecycle as everything becomes IP based.

So there is less distinction between enterprise class and carrier class products. Obviously carrier class products require more redundancy, more cooling and other modifications of basic platforms to harden them.

But that is a truly big shift. Differentiation now occurs at the level of software, not hardware or protocols. And enterprise and carrier systems increasingly are produced on a common foundation.

Broadband Mapping: Studying Non-Problems

About $350 million of the version of the broadband stimulus package passed by the Senate will go toward mapping broadband coverage. Some will argue that it doesn't matter what "stimulus" spending goes toward, as long as the money goes to work immediately, is targeted and terminates once the recession is over, and there is sound logic there.

The issue, though, is whether there is a terrible problem requiring that we "study" this matter some more. If one looks at where the United States ranks in telephone penetration, for example, the United States ranks about 16th, as measured by the Organization for Economic Development and Cooperation.

One can quarrel with the methodology OCED uses, but for the moment consider simply the well-developed state of landline voice service. Does anybody really think the United States has a problem with wired voice penetration?

And if not, why is a "15th in the world" ranking for broadband access a problem?

A "back-of-the-envelope" forecast by economists at the Phoenix Center suggests that U.S. broadband subscription rates (keep in mind that we are talking about demand for the service, not its availability) will be about 75 percent of the telephone rate in 4.4 years, and broadband will equal the telephone subscription rate in 9.6 years.

There is a difference between "lack of supply" and "lack of demand." The OECD statistics for broadband penetration are a "demand" metric, not a "supply" metric. And yet even on that score the United States demand for broadband already is equivalent to wired voice.

Some things do need to be studied because there are problems of supply. But supply isn't really the issue for broadband. The problem is demand.

In fact, as wired voice demand continues to decline, at least in the consumer market, why would we not see calls for studies of why wired voice penetration is so "low"? The reason we don't hear such calls is because demand is shifting. There is no problem with "supply."

Mapping broadband might be a useful exercise for some. But mapping doesn't change the demand equation, which is the only problem broadband currently faces. One might argue that prices are too high, or speeds too low. But that is a problem only if supply is not being upgraded. And it is hard to argue that is not occurring at a rapid pace. In fact, broadband already has been adopted at rates that surpass nearly all key consumer products of the last 100 years. Only use of the Internet itself is a reasonable candidate for "fastest-adopted" innovation.

There are lots of problems to be solved. Mapping broadband, to pinpoint supply constraints, doesn't strike me as being one of them.

Telco broadband Now Shifts to Video

The telco broadband market experienced a significant downturn in new subscriber additions during 2008, according to iSuppli Corp. Of course, the reason is that the market is mature: most users who want broadband already buy it. As a result, the next several years will be about enticing customers to migrate to higher-speed tiers and enhanced services, principally IPTV.

In part, this will lead to a shift in lead product offering and a slower growth rate than broadband access had achieved. Some major telcos are pushing IPTV services more than Internet access, a product category in which there are entrenched incumbents. In the broadband access market, there were no incumbents to dislodge, so growth was not a zero-sum game. In the IPTV market, growth will come in the form of market share shifts, a tougher proposition. 

“New telco broadband subscriber growth saw a 9.1 percent decline in 2008 following double-digit gains during the prior five years,” says Steve Rago, iSuppli principal analyst. “Hardest hit was North America, with new subscriber additions in 2008 amounting to 3.1 million, down 56.1 percent from 6.5 million in 2007. 

"The world’s developed regions reached broadband saturation during 2008, while developing regions continued to grow," he says.  "Of these regions, Latin America experienced the strongest growth."

New Fiber-To-The-Home connections grew by 90 percent and new high-speed VDSL connections grew by 54 percent compared to 2007, iSuppli says. In the cable world, many European and American operators introduced DOCSIS 3.0, significantly increasing broadband access data rates.

The next round of growth therefore will not come in adding new broadband subscribers but getting them to upgrade to higher-speed and enhanced services. Analysts at iSuppli believe 2008 was a milestone in the growth of very-high-speed access networks, and expect accelerating growth in the category over the next several years.

Telco TV was a major driver of high-speed access upgrades during 2008, iSuppli says. Virtually every telephone company and competitive access supplier deployed or made plans to deploy television services during 2008, the firm says. Overall telco TV subscribers grew by 8.8 million to end 2008 at a total of 18.5 million.

Telco TV during 2008 transitioned from the early-adopter stage to the early majority stage, so sales volume should now start to ramp up significantly for several years. North American telephone companies added a net 3.3 million television subscribers in 2008, the company says.

Every Company is a Media Company

Smart businesses are beginning to produce content that’s less about their product and more about topics that their customers gravitate to, writes Rick Burnes, an inbound marketing manager at HubSpot.

Whole Foods publishes recipes and cooking videos. These companies are producing quality media, just like The New York Times or Discovery Channel.

Why? Every company, no matter what industry, is essentially gathering and distributing information, both to employees and external audiences, and trying to attract attention from prospective customers. 

Traditionally, this has been an "outbound" function using intermediaries such as media, trade shows, email blasts and direct sales, where companies reach out to potential customers.

These days, one sees use of webinars, blogs, Web site content, news feeds, videos and other efforts that invite potential customers to show up.  So every company now produces and distributes content. 

Market Doesn't Like Bank Bailout, Apparently

Judging by the plunge on the markets as Treasury Secretary Geithner spoke...

Verizon FiOS Challenges DirecTV as HDTV Leader

DirecTV continues to offer the most high-definition channels of any pay TV provider, but Verizon is catching up quickly with its FiOS TV service, according to Pike & Fischer. The firm finds that as of January 2009, DirecTV was offering as many as 104 channels in high-definition format. But that only beats Verizon's HD menu by one channel.

Comcast, the largest cable operator in the United States, has one of the smallest selections of high-definition channels, Pike & Fischer says. Comcast in some markets is offering less than 40 HDTV channels, although the company's marketing focuses on its large selection of HD movies, TV shows and other content available on demand.

Most providers examined in the study charge a premium price for HDTV service, usually less than $10 per month. But some, including Cablevision and Time Warner Cable, offer a substantial number of HD channels for free.

Qwest: Enterprise and Wholesale Drive the Business

Some will look at Qwest Communications International Inc. fourth quarter and full-year results and see trouble; others will see improvement. Irrespective of those judgments, it should be noted that for Qwest, business markets and wholesale are the majority of the business. 

Mass markets, which includes both consumer and small business revenue, represented about $1.4 billion worth of fourth-quarter revenue (and some portion of that is small business). 

Wholesale markets contributed $789 million. Business markets represented $1.1 billion.  In other words, Qwest one of these days relatively soon will be earning more money from wholesale and business customers than from consumers, as important as consumer markets may remain.  

Furthermore, revenue in business markets grew year over year, while mass market and wholesale revenue declined, with those declines attributable to voice services. 

In the fourth quarter of 2008, net income was $185 million, or 11 cents per diluted share, compared to $366 million, or 20 cents per diluted share, for the fourth quarter of 2007. Bad, eh?

Not if one considers the adjustments. The results include severance charges of $19 million, or one cent per diluted share, in the fourth quarter of 2008. More important, though, the earnings per share calculations reflect higher pretax income compared to the fourth quarter of 2007, offset by increased tax expense as the company recorded normal effective tax rates beginning in 2008. 

Income before income taxes in the fourth quarter increased 17 percent compared to the fourth quarter of 2007.

Revenue in the quarter was $3.3 billion, a decline of three percent compared to $3.4 billion

in the fourth quarter of 2007 and a decline of two percent compared to the third quarter of

2008. 

Adjusted EBITDA for the quarter was $1.18 billion, a four percent increase compared to $1.14 billion in the year-ago period and a nine percent increase compared to $1.08 billion in the third quarter. Adjusted EBITDA margin was 35.6 percent compared to 33.1 percent in the fourth quarter of 2007 and 32.1 percent in the third quarter. 

For the full year, net income was $681 million, or 39 cents per diluted share, compared

to $2.9 billion, or $1.52 per diluted share, in 2007. Full-year results reflect the same normal effective tax rate dynamics as the fourth quarter. 

Earnings per share results include net special charges of three cents per diluted share in 2008 and 20 cents per diluted share in 2007. Income before income taxes was up 13 percent after adjusting for onetime

items.

Total revenue for the fourth quarter of $3.3 billion reflects an eight percent year-over-year growth in data, Internet and video revenues, which was offset by a decline of nine percent in voice revenue and a 33 percent decrease in wireless revenues.

As Qwest tells the story, income before income taxes increased 17 percent year over year while EBITDA increased four percent. Enterprise data and IP revenue was up nine percent year-over-year.

Data, Internet and video revenue now 25 percent of mass markets revenue, a key measure of how well Qwest is replacing declining landline voice revenues with new and alternative revenues. Qwest's consumer broadband subscriber base increased nine percent year over year. 

Brighter Prospects for SaaS?

Historically, the transmission belt for new applications and communications technology has been that university researchers would come up with something new, suppliers would sell those innovation into the enterprise market, and then at some point the tools move into the mid-market, then finally into the smaller business entities, finally winding up as consumer tools in the final stage.

These days, there are different avenues. In many cases, innovations come out of universities, then go straight to the consumer market and then fairly quickly into the small business market, with enterprises and mid-market customers becoming aware of the trends only as individual "lead users" start to make use of the tools in their work roles. 

Of late, in fact, it is hard to point to any significant innovations that went enterprise first, with the exception of mobile email, which was driven by enterprise users. Everything else pretty much developed first in a consumer context, including instant messaging, text messaging, any-to-any email, social networking, blogging and wikis. One might get an argument about wikis, but some of us would consider wikis to have been popularized in the consumer space. 

So it is with software as a service, which most observers will say has gotten most traction in the small business and consumer spaces, and only now is being considered in the enterprise and mid-market spaces.

One has to assume the opportunities for such changes are enhanced by the challenges businesses and organizations now face, as potential buyers now are facing new questions about how they ought to be doing things. 

Are Telcos Toast?

There is a sentiment in some quarters that the telecommunications industry is too inflexible, slow moving and unimaginative to transform itself. Those criticisms are well taken. They could be right. But look at matters a different way. If executives know what business they really are in, they won't make the proverbial mistake the railroad industry made: thinking it was in the "railroad" business instead of the "transportation" business. 

In fact, a quick review of technology underpinnings of the communication industry should tell the story. AT&T once meant "American Telephone & Telegraph."

The telegraph, and the business it created was an 1840s invention. The telephone was a 1870s invention. AT&T made the transition. Wireless was invented in the 1890s. And though they were slow to enter the business, large "landline" providers now lead the wireless business. 

Radio broadcasting was invented in the 1920s, television in the 1950s. Telcos and cable companies now are distributors of audio and television programming, on both a "tethered" and "mobile" basis, and this role will grow. The geostationary satellite industry was created in the 1960s. AT&T remains a big player in the satellite communications busines.s 

Computer communications began in the 1970s. Large telcos pretty much failed at their first efforts to enter the "computing" industry. But in different ways, they now are re-entering the computing services market, as integrators, content delivery networks and, someday, players in "cloud computing" infrastructure.

Optical communications began in the 1980s and telcos and cable companies are major end users of optical communications.

The Internet originated in the 1990s and now Internet access is almost a "legacy" product for telcos and cable companies. The next wave of IP-enabled next generation networks has barely begun. But I am hard pressed, looking at history, to worry too much about ability to finesse the latest waves of technology advance. 

Is Content Really King?

There continues to be talk in the communications business about network infrastructure providers as "dumb pipes." That's a bit of an analogy to the "content is king" discussions that the video business periodically revisits. Put simply, there is a tension, in either communications or media businesses, between the value added by network services and applications, and the debate never seems definitively solved.

Consider the case of Time Warner, which is in both the "content creation" and "network delivery" businesses. Some financial analysts say the content assets are overvalued, compared to the cable assets.  Time Warner Cable trades at a discount to Comcast on price-to-earnings multiple, some note. 

To be sure, some analysts worry about increasingly effective competition from Verizon and AT&T. But Time Warner Cable still is adding net subscribers in a recessionary environment. Of course, these debates tend to run in cycles. 

Distribution was the focus of the entertainment industry for much of the past 15 years. The large entertainment conglomerates took advantage of looser ownership regulations and technological advances to acquire more television and radio stations, cable and satellite subscribers, and internet portals. Basically, that's an argument for the importance of distribution. 

Some think there will be a swing in the other direction, as content owners increasingly focus on distribution across all platforms. News Corp. and Time Warner now are now sellers of distribution assets, for example. 

That doesn't necessarily speak directly to the relative importance of distribution compared to content ownership, though. It might be closer to the truth to say that in a climate where capital is scarce, and viewership is changing rapidly, content companies need to stick to their knitting. 

Conversely, some of us make the argument that distribution remains vital, and in any case is a far-bigger business than content. In 2003, for example, Hollywood box office revenues were $11 billion in the United States and $25 billion to $30 billion globally. The global music industry earned $35 billion. Videogaming, consoles and all software represented $40 billion worth of revenue.

In contrast, U.S.telecom revenues pulled in $348 billion.

Content is sticky, content is a fairly large business, content is part of the business the telecom industry now is part of. But that's not the same thing as arguing "pipes" are commodity items with no ability to differentiate. In fact, those pipes remain highly-valuable, very-scarce assets supporting a huge applications business. Voice is declining in value, to be sure. But broadband and mobility apps have arisen to replace those lost revenues. And the new frontier is all sorts of other business models, ecosystem relationships and values. That isn't to say the transformation will be easy, or steady in its progress. 

So make no mistake: transparent optical transport and access are, in some ways, undifferentiated at the moment. But that does not mean the values, features and applications delivered over those pipes are undifferentiated or commodities. 

It may never be possible to determine, once and for all, whether "content" or "distribution" are "the" king of the ecosystem. One thing is clear, though. Distribution is a far bigger business, because it includes the large person-to-person, machine-to-machine and one-to-many and many-to-one communications functions. 

Will Recession Lead to Permanent Behavior Changes?

Nobody yet knows when the current recession will end, or what will happen to various industry segments during the recession. What is even less known is how consumer and business behavior during the recession might carry on in the form of new trends once the recession is but a memory.

Recessions can cause people to think more about the effective use of their assets. In bad times, users are forced to see if there are substitute ways of doing things that save money right now. But if the substitutes are good enough, people might not go back to their former preferred ways of doing things.

At a practical level, business buyers in many cases are taking longer to make decisions, so the time lag from proposal to acceptance is stretching out.

But there still is little, if any, concrete evidence that business or consumer users are abandoning key services ranging from broadband access to wireless to multi-channel video. In fact, the evidence so far indicates they are behaving as they have in the past: keeping services but delaying upgrades and adoption of new enhanced services.

What bears watching are signs some customers are behaving in new ways, such as canceling multi-channel video subscriptions in favor of Internet alternatives. A recent poll by researchers at the Yankee Group suggest that one percent of respondents actually have done so.

Then there is the impact of users dropping landline services in favor of mobility, or using Skype instead of their landlines or mobiles, switching to prepaid from postpaid mobile plans, buying hosted business voice in place of new phone switches or buying some forms of broadband access instead of others.

The point is that tougher economic conditions will lead some consumers to experiment with new behaviors that might become permanent changes.

Broadband Stimulus: Small Details, Big Difference

The revised Senate version of the "stimulus" bill has not yet been passed. Nor has it been reconciled with the House version. But there could be big differences. The revised Senate version funnels money through the National Telecommunications & Information Administration. The House version splits disbursements between NTIA and the Agriculture Department.

The difference? For a company such as Qwest Communications, the Agriculture Department funds would not be available, because of Agriculture Dept. rural loan program rules. The NTIA program does not operate under those rules, making Qwest eligible to apply.

Essentially, Agriculture Dept. rules ascertain eligibility on a statewide basis, while NTIA would fund on a community basis. As Qwest serves both urban and rural communities in each of its states, it has been ineligible for rural broadband loans that it might otherwise qualify for.

So the reconciliation process will be crucial.

About $6.5 Billion in Broadband Spending Still in S.1

The 778-page Senate version of the "stimulus" bill apparently calls for about $6.5 billion in tax credits for supplying broadband to rural or "under-served" areas. It is not yet clear what will happen when the Senate version of the bill is reconciled with the House version.

The House version includes more specific references to broadband speeds, while the Senate version deletes those references.

Earlier versions of the Senate bill had talked about providing tax credits for building new capacity in rural and underserved areas would be as much as 40 percent, but only for service operating at 100 Mbps or faster.

A 30-percent credit would be offered for service operating at 5 Mbps or better. The bill also seems to allow 40-percent credits for wireless service operating at 6 Mbps or better downstream and 30 percent tax credits for wireless service of 3 megabits per second or better.

It does not appear that those clauses remain relevant in the new revised Senate "stimulus" bill, and reconciliation with the House bill might reinsert them in some way.

The revised language could be quite important, though, as many investors might balk at the notion of building 100 Mbps service as a prerequisite for getting loans under the broadband program, which in the revised Senate version also would operate under National Telecommunications And Information Administration oversight, not shared with the Agriculture Department as in the House version.

What a chore it has been to read the revised bill, and the original bill before it!

Sprint Nextel Operations Outsourcing Imminent?

Sprint Nextel Corp. soon will announce it is outsourcing part of its network operations to Ericsson, removing about 2,000 to 7,000 employees from Sprint's payroll, reports the Kansas City Business Journal.

That move, which would indicate Sprint Nextel no longer considers some parts of its network operations to be so important they must be staffed in-house, could affect about a third of Sprint’s network employees.

Sprint spokeswoman Lisa Zimmerman-Mott denied the report, though.

Sprint has said it would cut 8,000 jobs by the end of March. Those cuts include the head of Sprint’s network, Kathy Walker. In addition, former Ericsson executive Sven-Christer Nilsson joined Sprint’s board in November, the Kansas City Business Journal reports.

Cusick estimated that outsourcing network operations would save about 25 percent of expenses in that area.

Congressional Budget Office Says "Stimulus" Plans Will Reduce Output in the Long Run

The Congressional Budget Office now estimates that by 2019 the Senate "stimulus" legislation would reduce U.S. gross domestic product  by 0.1 percent to 0.3 percent. H.R. 1, as passed by the House, would have similar long-run effects, the CBO says.

"Most of the budgetary effects of the Senate legislation occur over the next few years," CBO says.  Even if the fiscal stimulus persisted, however, the short-run effects on output that operate by increasing demand for goods and services would eventually fade away."

"In contrast to its positive near-term macroeconomic effects, the Senate legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals."

"In principle, the legislation’s long-run impact on output also would depend on whether it permanently changed incentives to work or save. However, according to CBO’s estimates, the legislation would not have any significant permanent effects on those incentives."

see http://www.cbo.gov/doc.cfm?index=9619.

$6 to $9 Billion for Rural Broadband Soon? Maybe Not.

Don't get your hopes up that the $6 billion to $9 billion in potential "economic stimulus" spending to support broadband in rural areas will have any near-term measurable impact, either as a way of getting the country out of its current recession, or getting more broadband to rural users. 

Analysis from the Congressional Budget Office now indicates it will take seven years to get that money spent, and, at best, about 60 percent of the money might be spent in the years leading to 2011. In other words, by the time most of the money actually gets spent, the recession is likely to be over. 

The CBO projected that much of the $6 billion in broadband grants geared to underserved and unserved areas will be spent between 2012 and 2016.

Praiseworthy though the effort to extend rural broadband is, the current proposal does not seem to support the goal of "stimulus," which is to put money to work right now. For starters, any grantees would have to put up 20 percent of any project's cost from their own, or other sources. One might question the ability to do so, under current tight credit conditions. 

Then there are "open access" rules that might affect 100 percent of any grantee's business. And there is no definition of what that means. Right now, any executive would have to factor in the impact of those rules on the whole business as the price of getting grant aid. Depending on how "open access" is defined, service providers might well conclude they cannot accept funding. 

"CBO anticipates that funds provided to the National Telecommunications and Information Administration to administer the broadband grant program would take longer to spend--seven years--because the new appropriations would far exceed the agency's 2009 funding of $17 million, and the legislation would require, in most circumstances, that grant recipients provide 20 percent of the project's cost from non-federal sources," the CBO says. 

So an agency geared to disburse $17 million annually would have to suddenly gear up to disburse nearly $3 billion, an increase of two orders of magnitude. If you've ever had any hand in running any agency that does this sort of thing, you know that increases of that scale simply cannot be handled effectively, that fast. 

Under the House-passed bill, about $6 billion for broadband grants and loans, the National Telecommunications and Information Administration would distribute $2.8 billion in broadband grants with $1 billion going to wireless broadband. 

The Rural Utilities Service is expected to administer the remainder through its broadband loan program. The Senate is working on a $9-billion version that would include tax credits. 

New Era of Discrete Apps?

Many changes are possible as we move into an era of Web-based applications, built and accessed as Web services. On the demand side, users will be accustomed to a new way of buying and using software. On the supply side, we will see different business models. 

Especially for communications-enabled business processes, we likely will see more reliance on something we might call "discrete applications," rather than the more-monolithic approach we have seen historically, where lots of features were purchased upfront with the buying of a switch solution, for example. 

That doesn't mean every application is efficiently provided discretely. Generally speaking, large scale tends to dramatically tip the scale towards platform-based solutions. Conversely, low volume tends to tip the scale towards hosted, Web-based approaches. 

That is a pattern we have seen for services such as business phone systems, carrier switches and server farms, for example. If a provider or enterprise has high volume and lots of users, buying and owning switches and facilities tends to make more business sense than leasing or renting services or capacity.

Conversely, small entities with relatively low volume demand almost always are better off renting capabilities rather than buying and owning their own infrastructure. 

Roughly the same sort of economic logic should come into play in a new era where more applications are built and intended for use by relatively smaller number of users than in the past. The example already is seen in the broad consumer market.

Consider even broadly-purchased applications and services such as multi-channel video services. In an older paradigm, a single provider might expect 70 percent penetration. In a competitive market, even a successful provider might expect to get just 30 percent penetration. 

That changes the economics of network investment. Where once a provider might build a whole network and expect to get customers at seven out of 10 homes, now a provider has to build a network where ultimate penetration is three homes out of 10. that means shared costs must be borne by a considerly smaller number of actual paying customers. 

In the Web sphere, roughly similar sorts of phenomena are at work: in the vast majority of cases, any single application will have a smallish number of users. The opportunity for any single application will be quite small, compared to an earlier era where most people used a small number of relatively-standard applications. 

The good news is that all of the tools and infrastructure we now have will support robust business models even at relatively lower levels of end user demand. So one of the other implications is that we may be entering an era of vastly-expanded use of "discrete applications," custom built in many cases using pre-built modules or "primitives."

That in turn presupposes new ways of packaging, pricing, marketing, delivery and support, new ways of discovering needs and building solutions to match those needs. This means more discrete apps and fewer of the monolithic sort, even though some apps will continue to be relatively monolithic because they have mass usage. 

Adoption, Not Availability, is the Broadband Problem

What broadband really needs--more than money to build more broadband-- is action on the demand side, says David McClure, U.S. Internet Industry Association president. The reason is that only about one percent of Americans actually cannot buy broadband access if they want to. 

"We can now reach 99 percent of all households in the United States with some form of broadband," he says. "We are in pretty darn good shape."

The issue some policy advocates seem to be concerned about actually is not "availability" but rather "appetite" or other issues. Some potential customers might want broadband, but do not own PCs. Others might want broadband, but can't afford to buy it. Many potential users do not use PCs. 

About 25 percent of the U.S. population does not use the Internet at all, McClure notes. "Worse than that, they don't care if they don't get it."

About 51 percent of the non-users say the Internet is not relevant to their lives, McClure adds. 

It is true that 66 percent of the U.S. population now has some form of broadband at home. But that is a different matter than "availability." Cable modem service alone reaches 19 out of 20 homes in America, for example.

About nine percent of users have a dial-up connection. Of these, the majority cite price as the reason they haven't switched to broadband. 

"Broadband in America is in wonderful shape and if you hear differently, it is a lie," McClure says. "Adoption is the problem, not deployment."

That doesn't mean we should neglect targeted investment in some areas where broadband really is not available or where coverage is spotty, he says. But there are several demand side issues that must be tackled to stimulate more usage. literacy is an issue. PC ownership and training are issues. 

Investments in “smart networks” to enhance the efficiency of the networks and provide for advanced products and services also would be useful. 

"Ask a 'public policy' advocate to name a place where broadband isn't available," McClure says. "They don't know any."

"U.S. broadband infrastructure is ranked fourth in the world and rapidly improving," he says. "U.S. broadband adoption is ranked at 15th in the world and not improving."

The important point is that "we are 15th in terms of adoption, not availability."

36% of Social Networkers Want Access from TVs

A recent survey of over 1000 households conducted by ABI Research found that 36 percent of those who currently use social media on a regular basis say they’d like to access their networks on the TV screen.

Younger consumers were more interested in engaging with their friends through chat and messaging, while middle-aged respondents were more likely to be interested in more passive social networking behavior such as checking status updates. 

The most popular potential application for those over 50 who expressed interest in TV social networking was being able to see what their friends were watching on TV.

Not a Good Day for Arizona Cox Customers

Both broadband access and voice seem to be down across much of the state.

Time Warner Cable Grows Revenues 8% in Recessionary Year

How does Time Warner Cable perform in a full year of recession? By growing revenues eight percent, or $1.2 billion, over full-year 2007, to reach $17.2 billion. Subscription revenues were up eight percent($1.2 billion) to $16.3 billion. Video revenues grew four percent ($359 million) to $10.5 billion, benefiting from the continued growth in digital video subscriptions and video price increases.

High-speed data revenues rose 12 percent ($429 million) to $4.2 billion, driven by continued high-speed data subscriber growth. Voice revenues climbed 36 percent ($426 million) to $1.6 billion.

The rate of revenue units added slowed later in the year, though. That is in line with past recessions, when customers delayed adding more enhanced services. 

Still, Time Warner faces a problem in its legacy video business that telcos face in their legacy voice business. Time Warner Cable is losing "basic video" subs, as telcos are losing voice line customers. Time Warner Cable lost 119,000 customers in that category when some analysts anticipated 27,000 to 46,000 or so basic cable customer losses. 

Keep in mind, though, that these losses would likely have occurred even without a recession, as market share shifts away from cable and to telco video services are a secular trend that was underway before the recession. 

60% of Workers Use Social Networking Sites

About 60 percent of working Americans (18 years old or more) used one or more social networking sites at end of 2008, according to Compass Intelligence. About 35 percent of working Americans say they use Facebook, while 29 percent say they use LinkedIn.

About 60 percent of working Americans not using social networking say they don't use them because "it's not a good use" of their time. 

Conferencing Now the Lead UC Application, It Seems

I've been speaking on, and running, panel sessions on unified communications for some time, as have many of my other associates who follow UC. I've noticed a shift early this year: people now are talking a lot more about conferencing, and less about integrating voice, instant messaging,email,  mobile and fixed services. 

What that suggests is that "what is selling" is conferencing. It might, or might not, suggest a certain sluggishness of buyer response to the more-traditional pitches. 

Jill Taylor, product marketing executive for Verizon Business, says  "conferencing is becoming the lead product for UC." That's a switch. 

Verizon Business is one of the first global service providers to integrate audio and Web conferencing services across multiple leading IM services, including IBM Lotus Sametime Unified Communications and Collaboration, Microsoft Office Live Communications Server  2005 and the Cisco Jabber XCP, says Taylor. 

"I don't know that it is the economic climate solely, but it plays there," she says. The idea is to use a presence-based client to escalate into an audio or a net session, making the meeting experience more intuitive, instantaneous and flexible, Taylor says.

Sametime, Lotus, Jabber are supported. Also some additional integration: leader can launch other features such as Web moderator, a call management tool that allows you to visually see who is on a call, record a session as well. Better integration from the desktop. Lots more intuitive. 

The push for Jabber conferencing came from the finance and pharmaceutical communities, which are key Jabber user verticals.

The new tools are available immediately for U.S.-based organizations and are scheduled to be rolled out internationally later this year, along with Verizon audio and net conferencing integration with Microsoft Office Communicator 2007. 

Also, Verizon Business is calling the new features "spontaneous collaboration." The linguistic shift is important. "UC" is a reasonable provider-side description. But it doesn't necessarily resonate with end users. "Spontaneous collaboration" is better. From an end user perspective, it better describes "something I can do."

More 3G, But Majority of Users Don't Use Broadband Features?

Use of smart phones with full HTML browsers that offer a true Internet browsing experience increased steadily in 2008, according to comScore. 

So mobile browsing  grew 34 percent during

the year. But users on 3G networks grew 43 percent from November 2007 to November 2008.

So the percentage of 3G users using the mobile Web did not change over 2008. In fact, the percentage of 3G users who do not use the mobile Web might have slipped a bit. 

More Data, Though Impressionistic, on Small Business....

It has been my contention over the last several months that no matter what enterprises might be doing, small businesses are behaving in quite different ways. Trent Johnsen, SMB Phone executive, says he is hearing from Canadian VARs and business phone specialists that business is pretty much where you would expect it to be, at this month of any year, and over the last several months.

Microsoft Response Point executives say they are hearing the same things from their talks with U.S. channel partners.

Curious, isn't it? There are indications, some impressionistic, some more structured, that small businesses in North America are behaving in counter-intuitive ways. Sure, they'll be careful.
But there is some evidence of consistency and stability in their hiring of people, expansion of business and buying of communications technology solutions.

Nobody's safe anymore!

It's actually very funny to watch a dinner table full of bloggers whip out their mobiles and start tweeting and posting when somebody at the table says "hey, any of you guys ever heard of this company? They've done some really savvy stuff."

First of all its a dark room and then all of a sudden the backlit screens come up. Then the thumb typing starts.

Nobody's safe anymore!

Just a Couple of Compliments....

I have taken some ribbing this week at the IT Expo (nice job, Rich) on account of my tanned complexion, earned at the Pacific Telecommunications Council and while giving a couple of keynotes for the Alaska Telecommunications Association meeting (Well, most of the ribbing came from Andy Abramson, I'd have to say...some people just thought I looked relaxed...)

I will say a couple of things about our Telco 2.0 panel at PTC, where I shared a stage with Network IP (Jaduka), MetaSwitch and IntelePeer.

First, I have maintained for some time (and reiterated from the stage) that Network IP is the most underestimated company in the IP communications space. As far as vision, they get it. As far as company effort to make that vision a reality, they are doing more than is apparent on the surface. I like "old time" telephone industry companies that grew up on voice and now are trying really hard to make sure voice is even more relevant in the future.

I believe Network IP/Jaduka will startle some people, soon.

I got a chance to work with IntelePeer again at the IT Expo, and likewise continue to be impressed with how much thought the company has given to "a la carte" approaches to voice and communications applications. If you knew the company five years ago, you might not recognize it today. But more important is the thinking behind ways new applications using voice can be created in non-monolithic ways.

Finally, at least one or two people might have been surprised to see MetaSwitch on the Telco 2.0 plenary panel. But, likewise, I have known this company for a while. It is among the firms firmly established in the "old" business that are working really hard to be even more relevant in the "new" business. I believe we will see further signs of that effort this year.

There are some people who continue to say that old legacy telco companies will not survive the world that is coming, or should not. Well, that remains to be seen. But I suspect some people underestimate their ability to change.

Human creativity and grit are not to be found only among the ranks of the bleeding edge "Web" companies out there. Lots of people in the old "legacy" business are quite capable of leading a transformation and transition to something that will look quite different.

I also will say that my time with the ATA members points out just how demanding this sort of work is. One has to adapt to the advanced technologies, while at the same time gearing those tools to be used by service providers and their customers who might not care a whit for the coolness and cleverness demonstrated at the leading edge.

Silliyo.com

Those of you who are technical, check this out, when you finally can. Courtesy of Thomas Howe. For those of you who don't think you can start a new company like the one you just left, in 48 hours.

BlackBerry and iPhone: Winning Hearts and Minds

There's good news and bad news about user affinity for BlackBerry, iPhone or other devices. The good news is that such devices have made an intangible product--communications--quite tangible. 

To the extent that users "love" their preferred devices, there is a real bond, of sorts, with the experiences that in turn drive revenue for service and application providers.

It might be better, from a service or app provider perspective, if the emotional bond were more directly related to the "service" itself. But I doubt few human beings are emotionally attached to the provider of their "bit stream." 

So far, mobile devices are the closest thing the communications industry ever has developed to fragrances, clothing brands, auto brands, golf club brands, or just about any other item for which there is an important and compelling human attachment. 

It is an important breakthrough, which service and app providers then must surround with additional features that make the experience even more entertaining, fun, useful or easy to use. There is some distance to go, to be sure. 

But one should not discount the importance of the breakthrough: for the first time, there is a personal, tangible, "fun" and engaging expression of the value of the communications service. 

People use telephones and PCs. But they now "love" particular devices. This is a huge and important change.  As furntiture, street addresses, certifications, degrees, customer references and other tangible elements are proxies for what a potential buyer can expect in terms of "quality," so now devices are becoming proxies for what users can expect in terms of "personal" communications. The difference? Getting beyond "utility" and approaching "brand affinity." 

There are revenue and margin implications, as there always are when a brand can establish itself as representing some key value. 

Most Important Consumer Technologies: Not PCs or Mobiles

Though we sometimes forget it, the devices we rely on most are not mobile phones and PCs, but cars, clothes washers and dryers, air conditioning and other mundane things we don't even typically think about as "technology."

Someday, though, mobile phones and PCs probably will  be in the category of things we use everyday but don't necessarily consider to be "technology."

Right now, even air conditioning in one's automobile and TV sets rank higher on technology "needs" than PCs or mobile phones, though. 

What iPhone Has Done for AT&T

If surveys of ChangeWave Research members are any indication, the Apple iPhone has paid big dividends for AT&T, essentially allowing it to overcome a perceived “satisfaction” and “dropped calls” gap compared to Verizon Wireless.

But there also are signs the “Apple effect” might be waning, as stated buyer intentions are trending back in Verizon’s favor, possibly suggesting a saturation of the obvious iPhone market as Verizon brings functional substitutes to market. 

The December 9-15, 2008 survey of 3,800 respondents shows a very-close market share between AT&T, with 31-percent share, and Veizon with 30-percent share. As you might expect, Sprint Nextel has not yet fully solved its churn problem, showing a 10-percent share decline since the last survey, with T-Mobile unchanged at 10-percent share.

But Verizon handily leads all the others in customer satisfaction. Some 49 percent of Verizon customers say they are very satisfied with their provider. About 30 percent say they are very satisfied with AT&T. About 27 percent of T-Mobile customers say they are “very satisfied.” About 25 percent of Sprint Nextel customers say they are very satisfied. 

But there seems to be some movement in the churn area. Verizon had been the clear leader among users who indicated they were going to switch providers, and were thinking Verizon was the carrier they would defect to, at least until the introduction of the iPhone.

Since news of the iPhone introduction, the roles have reversed and it is AT&T that has had the upper hand in the race to win defecting users. But Verizon seems to be gaining momentum again. 

About 27 percent of respondents still identify AT&T as the firm to which users are thinking they will move. But intention to switch to AT&T is down four percentage points  from September 2008. 

At the same time Verizon, reported by 22 percent of respondents as the carrier to which they are inclined to move, has gained three percentage points since September 2008, a net swing of seven percentage points. 

There is encouraging news for Sprint Nextel on the churn front, as five percent of respondents indicated they were inclined to switch to Sprint Nextel, a gain of two percentage points since the last similar survey. 

T-Mobile, though, seems to battling a headwind, as five percent of respondents indicated they were leaning to switching to T-Mobile, down two percentage points from the last survey.

Mobile Revenue Sources Shift to Data

Mobile data revenues are becoming a significant portion of overall service provider gross revenues, an important measure of diversification as voice continues to lose its status as revenue driver for the global mobility industry.

For a typical European operator, text messaging accounted for up to 80 percent of non-voice revenues in previous years, say researchers at Informa Telecoms & Media. But other data services are starting to show as a more-signficant revenue source. Operators such as Vodafone are seeing non-SMS services generating up to half of non-voice revenues, for example, Informa says.

Non-voice revenues totaled $157 billion in 2007, according to Informa Telecoms & Media, up from $116 billion in 2006. In the second quarter 2008 non-voice revenues surpassed $50 billion for the first time in any quarter. For 2008 as a whole they are expected to exceed $200 billion.

Revenues are heavily skewed toward emerging markets. Asia Pacific captured 39 percent of global data revenues in the second quarter, but the region is dominated by China, along with Japan and South Korea.
Europe was the second-largest region, with 25 percent of global revenues, followed by North America at 19 percent Other regions contributed just 17 percent of global revenues.

The United States, though, tops the world in mobile data average revenue per user. In the second quarter, data ARPU was $10 a month in North America, compared with a global average of just under $5.

More PC Entrants in Smart Phone Business?

What's the difference between a smart phone and a standard PC? Not much, more PC vendors are hoping. Computer makers Acer and Dell are said to be developing high-end mobile phones to complement their successful laptop and desktop computer portfolios. Such a move would not only help to sustain growth during the recession, but also put them in a better position to counter the growing threat of rival Apple.

As successful as they have been, a move into the smart phone arena will be challenging, as other suppliers have found when entering the mobile device business for the first time. Not many "PC" suppliers have found the success Apple has had in the MP3 music player and smart phone markets. In fact, failure is more common than success.

Dell and Acer may be bolstered by the reasonable success Hewlett Packard has had with its iPAQ smart phone for reassurance. And Microsoft is an almost-perennial candidate for doing so.

They likely are more emboldened by HTC's success, though that firm has had the easier task of producing devices under its own retail brand, not making the leap into the mobile device area for the first time.

It seems that Dell has already produced prototype devices, based on the Windows Mobile and Android platforms, as part of a scheme to commercialize an iPhone-type device, complete with touch screen.

Consumer Sentiment Shift?

The important thing about the recession is to look for signs of change, for evidence of a bottoming, as the recession now has been formally working its way through the economy for 14 months. Though it is not definitive by any means, a shift in consumer sentiment already might be occurring. 

According to the latest ChangeWave survey of U.S. consumers, conducted January 5-9, there were signs that consumer spending may finally be stabilizing.  While overall spending still looks terrible, ChangeWave notes, the 90-day outlook is not quite as "horrible" as it was in the December 2008 survey. 

Fifty-seven percent of U.S. respondents said they'll spend less during the next 90 days than they did a year ago, but that's three points better than in the December survey. Another 13 percent said they'll spend more -- two points better than previously. 

Respondents were also queried on their current impressions of the economy and, once again, while things look bad, they don't appear quite as awful as they did in December. About 12 percent said they think the economy will improve in the next 90 days, three points better than in December. About 56 percent said they think the economy will worsen during the next 90 days, but a significant 10 points better than the December low.

Other sentiment indicators also show some improvement, according to the study.

Some five percent said they are very satisfied with the current state of their personal finances, up one point from the record low in December, while another 39 percent said they're somewhat satisfied, up eight points.

Twenty-six percent said they are now more confident in the U.S. stock market than they were 90 days ago, 13 points better than previously. Only 31 percent said they're less confident, a 25-point improvement 

The new data is important because the first step in the recovery is for a bottom to be reached. Changing sentiment is one such sign. In past recessions, peak unemployment claims have been an indicator as well, as significant layoffs are a lagging metric. Often, if not typically, the "bottom" is reached about 30 days after a month where "peak" layoffs occur. 

AT&T Wireline Revenue Now Led by Video

Here's what some might consider the key take-away from AT&T's fourth quarter results: "Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress for our company," says Randall Stephenson, AT&T chairman and chief executive officer.

There are other noteworthy take-aways, though. The video business now is leading wireline revenue growth at AT&T. It doesn't appear AT&T is doing as well as Verizon is in the broadband access area, though one must infer that from the "non-reporting" of digital subscriber line customer performance. 

Revenue growth was driven by 13.2 percent wireless gains and a 14.2 percent increase in wireline IP data, which include AT&T U-verse services and business offerings such as VPNs and managed Internet services.

Verizon can say the same, as it reported record growth in video and data services. Verizon added 303,000 net new FiOS TV customers and 282,000 net new FiOS Internet customers, the highest ever for the company.

It also posted a 14.3 percent increase in consumer ARPU in legacy telecom markets and  8.4 percent increase in revenues from business services. 

U-Verse digital TV growth accelerated. AT&T signed up 264,000 new U-Verse TV subscribers, its highest ever. Combined with Verizon's 303,000 new FiOS subscribers, it seems like the telcos took solid share from cable and satellite last quarter.

U-verse network deployment now reaches 17 million living units. 

AT&T added 2.1 million net wireless subscribers, down from 2.7 million in the fourth quarter of 2007. Verizon, added 1.2 million net subscribers during the fourth quarter.