Alteva, Frontier, Windstream Show Transformation Success, and Limits of the Strategy

Alteva is not alone among rural telcos by embracing a growth strategy built on business customers, rather than consumers. Windstream and Frontier also have chosen to do so. And you might well be surprised at the degree of success each of those firms has achieved, at least on the revenue sources front.

“UC revenues increased 21 percent over the last 12 months and now contributes 53 percent of consolidated revenues,”, said David Cuthbert, Alteva CEO. “Users or seats on Alteva's hosted platform at the end of the second quarter increased by over 15 percent from the installed base at the end of the first quarter.”

In other words, revenue growth now is driven by the hosted voice communications business, not the traditional telephone business.

Consolidated revenue was $7.4 million for the second quarter of 2013, an increase of over eight percent  from $6.9 million in the same period of the prior year. UC revenues, net of eliminations, were $3.9 million in the second quarter of 2013. In other words, the new revenue sources provide 53 percent of total revenues.

Telephone revenues, net of eliminations, were $3.5 million in the second quarter of 2013, down from $3.6 million for the same period of the prior year and down from $3.8 million in the first quarter of this year.

Alteva, a provider of hosted or cloud-based unified communications or hosted PBX service (depending on your preferred terminology) in 2011 was bought by Warwick Valley Telephone Co. for $17 million.

Gross margin also has changed because of the weight of UC application revenue. In the first six months of 2013, Alteva says it added over 30 percent of the installed UC base of users that had been accumulated for the past eight years. As a result, the UCaaS (unified communications as a service) recurring revenue from seats in service has driven consolidated gross margin to 57 percent of revenues, said Cuthbert.

Warwick Valley, based in Warwick, N.Y., provides telecommunications services in southern Orange County, N.Y. and part of central New York and northwestern New Jersey, as well as a competitive local exchange carrier business, USA Datanet.

There are a couple of lessons here. Sometimes a business is in secular decline because demand for its product is declining, much as any product you might think of also has a product life cycle.

That will have uncomfortable and nevertheless real implications for rural telco business strategy. There simply are times when a business is destined to decline, if it sticks to its current product line.

Sometimes that business is destined to decline, if more slowly, even when it adds major new product lines. Think of the transition from selling voice only, to selling triple-play packages.

And one traditional problem for rural telcos is that there simply aren’t that many potential customers in a service territory, even if a provider gets almost all the potential customers as actual customers.

Warwick essentially made a choice to harvest its original business--being a rural telco--and recreate itself--through acquisition--as a hosted communications provider.

One might be tempted to suggest that this is a growth strategy for all or most or many other rural telcos. And there lies the other lesson. What works for a few firms will not work for most firms, because the new markets are not big enough to support hundreds to thousands of suppliers on a sustainable basis.

So one other lesson is that transformative measures must be taken early, before the opportunity is foreclosed or made hugely more risky because one is entering a crowded or saturated market.

In other words, what a few might succeed in doing to transform their businesses cannot work for all members of the same class.

Still, the uncomfortable reality is that, for nearly all rural telcos, sooner or later, a business exit is necessary, either by sale or transformation. Sale will be the most common outcome.

If the Windows Operating System Were a House, It Would Look Like This

From here. It reminds me of the much older "if operating systems were airlines, which I actually continue to find much funnier:

What if Operating Systems Were Airlines?

DOS Airlines

Everybody pushes the airplane until it glides, then they jump on and let the plane coast until it hits the ground again, then they push again jump on again, and so on.

OS/2 Airlines

The terminal is almost empty, with only a few prospective passengers milling about. The announcer says that their flight has just departed, wishes them a good flight, though there are no planes on the runway. Airline personnel walk around, apologising profusely to customers in hushed voices, pointing from time to time to the sleek, powerful jets outside the terminal on the field. They tell each passenger how good the real flight will be on these new jets and how much safer it will be than Windows Airlines, but that they will have to wait a little longer for the technicians to finish the flight systems.
Once they finally finished you're offered a flight at reduced cost.  To board the plane, you have your ticket stamped ten different times by standing in ten different lines. Then you fill our a form showing where you want to sit and whether the plane should look and feel like an ocean liner, a passenger train or a bus. If you succeed in getting on the plane and the plane succeeds in taking off the ground, you have a wonderful trip...except for the time when the rudder and flaps get frozen in position, in which case you will just have time to say your prayers and get in crash position.

Windows Air

The terminal is pretty and colorful, with friendly stewards, easy baggage check and boarding, and a smooth take-off.  After about 10 minutes in the air, the plane explodes with no warning whatsoever.

Windows NT Air

Just like Windows Air, but costs more, uses much bigger planes, and takes out all the other aircraft within a 40-mile radius when it explodes.

Mac Airlines

All the stewards, stewardesses, captains, baggage handlers, and ticket agents look the same, act the same, and talk the same. Every time you ask questions about details, you are told you don't need to know, don't want to know, and would you please return to your seat and watch the movie.

Unix Airlines

Each passenger brings a piece of the airplane and a box of tools to the airport. They gather on the tarmac, arguing constantly about what kind of plane they want to build and how to put it together. Eventually, they build several different aircraft, but give them all the same name. Some passengers actually reach their destinations. All passengers believe they got there.

Wings of OS/400

The airline has bought ancient DC-3s, arguably the best and safest planes that ever flew, and painted "747" on their tails to make them look as if they are fast. The flight attendants, of course, attend to your every need, though the drinks cost $15 a pop. Stupid questions cost $230 per hour, unless you have SupportLine, which requires a first class ticket and membership in the frequent flyer club. Then they cost $500, but your accounting department can call it overhead.

Mach Airlines

There is no airplane. The passengers gather and shout for an airplane, then wait and wait and wait and wait. A bunch of people come, each carrying one piece of the plane with them. These people all go out on the runway and put the plane together piece by piece, arguing constantly about what kind of plane they're building. The plane finally takes off, leaving the passengers on the ground waiting and waiting and waiting and waiting. After the plane lands, the pilot telephones the passengers at the departing airport to inform them that they have arrived.

Newton Airlines

After buying your ticket 18 months in advance, you finally get to board the plane. Upon boarding the plane you are asked your name. After 6 times, the crew member recognizes your name and then you are allowed to take your seat. As you are getting ready to take your seat, the steward announces that you have to repeat the boarding process because they are out of room and need to recount to make sure they can take more passengers.

VMS Airlines

The passengers all gather in the hanger, watching hundreds of technicians check the flight systems on this immense, luxury aircraft. This plane has at least 10 engines and seats over 1,000 passengers. All the passengers scramble aboard, as do the necessary complement of 200 technicians. The pilot takes his place up in the glass cockpit. He guns the engines, only to realise that the plane is too big to get through the hangar doors.

BeOS Air

You have to pay for the tickets, but they're half the price of Windows Air, and if you are an aircraft mechanic you can probably ride for free. It only takes 15 minutes to get to the airport and you are cheuferred there in a limozine. BeOS Air only has limited types of planes that only only hold new luggage. All planes are single seaters and the model names all start with an "F" (F-14, F-15, F-16, F-18, etc.). The plane will fly you to your destination on autopilot in half the time of other Airways or you can fly the plane yourself. There are limited destinations, but they are only places you'd want to go to anyway. You tell all your friends how great BeOS Air is and all they say is "What do you mean I can't bring all my old baggage with me?"

Linux Airlines

Disgruntled employees of all the other OS airlines decide to start their own airline. They build the planes, ticket counters, and pave the runways themselves. They charge a small fee to cover the cost of printing the ticket, but you can also download and print the ticket yourself. When you board the plane, you are given a seat, four bolts, a wrench and a copy of the seat-HOWTO.html. Once settled, the fully adjustable seat is very comfortable, the plane leaves and arrives on time without a single problem, the in-flight meal is wonderful. You try to tell customers of the other airlines about the great trip, but all they can say is, "You had to do what with the seat?"

U.S. Licensed and Unlicensed Use of White Spaces Hangs in the Balance

As the U.S. Federal Communications Commission prepares rules for repurposing some broadcast TV spectrum (TV white spaces) no longer used, one key issue is the method of licensing. 

Some believe the best way to commercialize the TV white spaces spectrum is to auction most of the frequencies. Others believe it is vital to preserve significant amounts of that white spaces spectrum for unlicensed use, using the prior example of Wi-Fi as an example of innovation that should arise.

As always, there are huge commercial implications. As always, major users of licensed spectrum will prefer a licensing method. As always, many others think the greatest amount of innovation will occur if an unlicensed model is used.

Given the huge commercial implications, many believe only portions of the spectrum actually will be available on an unlicensed basis. 

There are valid arguments for both points of view (licensed versus unlicensed access). A licensed approach will help mobile service providers; an unlicensed approach will help all sorts of innovators and entrepreneurs, with mostly indirect economic benefit, as with Wi-Fi.

Some think the best outcome would be a mix of licensing, with significant amounts available on an unlicensed basis. 

Since most broadcast TV spectrum tends to be used in bigger markets, the amount of available white spaces spectrum will be most limited in dense urban areas, and most abundant in rural areas where there are fewer people.

So one key issue is how much usable spectrum might be available on a nationwide basis, consistently enough to provide incentives for services, devices and apps to be created that are usable everywhere. 

Innovation without permission is how some would describe the advantages of unlicensed approaches to use of spectrum. 

Some might say it is clear both mobile services based on licensed spectrum, and Wi-Fi style services, apps and devices based on unlicensed spectrum are complementary and strategic ways to clear and commercialize new frequencies. 

About 66% of Mobile Data is Offloaded to Wi-Fi

By 2016, perhaps 80 percent of all mobile device data consumption might happen over some offloaded network mechanism, according to Wik Consult. 

In 2013, offloaded mobile data might represent nearly 66 percent of all data consumed by a mobile device.

What those sorts of statistics indicate is that service providers whose business models are based on use of licensed spectrum now also are relying on third party facilities, and unlicensed spectrum as a rather integral part of their own branded services.

Some might say that further indicates the role of shared or unlicensed spectrum could be increased without necessarily harming the interests of licensed service providers, though the way shared or unlicensed spectrum is used could result in new forms of access competition.

"Multiple sources indicate that as much as 80 percent to 90 percent of Android smart phone and tablet mobile traffic is already being off-loaded to private Wi-Fi, within the end-user’s home," the authors of a study on mobile traffic offload say. "Particularly noteworthy is a new study by Informa and Mobidia that finds that at least two-thirds of mobile data for Android phones is already being off-loaded to “self-provisioned” Wi-Fi, which equates roughly to private Wi-Fi."

The report suggests that service providers gain when users offload traffic because they do not have to invest so much in network facilities. The authors estimate such savings in 2012 for the EU-27 nations to be as high as 35 billion euro, and the projected savings in 2016 as high as 200 billion euro.

“Based on our current assessment, drawing on all of these sources and others, we now believe that a majority of traffic that would otherwise be present on the macro cellular traffic is already being off-loaded, primarily to Wi-Fi in the home,” says Wik Consult.

The report does not recommend much new effort to free up additional unlicensed spectrum, beyond coordinating Wi-Fi spectrum across national borders. The report is more unambiguous about the need for additional licensed spectrum, calling for "more spectrum to be made available, either on an exclusive or a shared basis."

The report also suggests that mobile networks will have a role to play in at least two, or possibly all of the Digital Agenda for Europe goals.Those include, by 2013, supplying basic broadband to all Europeans; by 2020, supply speeds of 30 Mbps and by 2020, supplying half or more European households with services faster than 100 Mbps.

It is currently unclear what the relative impact of licensed and licence-exempt small cell technologies will be over the longer term, since the former is in its infancy; however, there appears to be a broad consensus in the industry currently that the two will largely complement rather than compete with each other.

Feedback from wireless network operators indicates that licensed and license-exempt spectrum are seen more as complements to one another rather than substitutes.

As always, licensed spectrum is preferred by tier one service providers because they can better control quality of service.

FCC Says It Will Not "Automatically" Allow Verizon to Substitute Mobile Service for Fixed

In the wake of Hurricane Sandy, Verizon has had to decide how to restore service to some affected areas that previously had fixed network service, but would be quite expensive to rebuild that same way, compared to use of Long Term Evolution network service, for example. 

The issue is whether, when a carrier has a universal service obligation, it has at least some ability to fulfill that obligation using an access network that matches the required service and application profiles, but uses a network access technology that is suited to the circumstances.

As any network economist will attest, in hard to serve areas, such as those with low density, mobile and fixed wireless or satellite networks can be built faster, and operated at lower cost, than a fixed and wired network. 

The issue is whether such obvious facts of network economics are allowable, especially at a time when the economics of wired access networks are declining. 

The Federal Communications Commission now says it will not "automatically" grant the request by Verizon to do so. 

The issue is whether mobile service can be a substitute for a fixed line service. 

Telekom Austria Wants to Buy Serbia Broadband

Telekom Austria wants to buy cable operator Serbia Broadband, a deal that might cost as much as  1 billion euros ($1.3 billion), and illustrates a number of key trends in the European telecom market.

As now is clear in virtually every developed telecom market, organic growth, when it can be obtained, is very difficult. That always makes rational a search for growth by acquisition. 

Such acquisitions also often tend to make more sense "out of region" than in domestic markets.

Also, it also sometimes makes sense to diversify into complementary or other strategic assets, as in this case where a telco (fixed and mobile) wants to buy into a cable TV broadband asset. 

Telekom Austria owns mobile operations in Serbia,Croatia and Slovenia and is looking to add fixed-line assets in the region as well. 

What is noteworthy, at least in part, is the choice of a cable TV asset rather than a "telco" asset. That is at least partly a recognition that a cable TV network is, by definition, a broadband access network. 

NSA Spying: How Can We Trust Anything You Now Say?

In the wake of newly revealed scandals about the extent of National Security Agency spying, a reasonable person would be permitted to say he or she no longer believes, or trusts, the NSA or the executive and legislative or judicial branches of government that supposedly police such spying. 

"The three pillars of American trust have fallen," the Electronic Frontier Foundation says. "It's time to get a full reckoning and build a new house from the wreckage, but it has to start with some honesty."

A government that loses the trust of its people is in trouble.

Is Square "Western Union?"

Square, the mobile payment service, has been fined  $507,000 by Florida’s Office of Financial Regulation for operating a payment service without a money transmission license.

In other words, Square is being regulated like an entity used to send funds from one person to another, such as Western Union. Some of us think that is crazy. Square is a retailer cash register. 

But never underestimate the abiliy of an increasingly-overweight administrative state, and its legions of bureaucrats, to come up with new ways to control the lives of its citizens and impose new taxes (oh right, those are just "fees," not taxes) by fiat. 

Square is not a money transfer service, such as Western Union. It is a cash register. 

TOT Delays 3G Expansion in Thailand

TOT, the Thailand-based mobile service provider, has delayed plans for an expansion of its third generation network, because of funding concerns.

TOT’s 3G network includes 4800 base stations. The proposed THB30 billion network expansion would have added 15,000 more base stations.

But the Thai government, whose approval is required, wants TOT to spend THB38 billion. 

TOT also has announced plans to expand its Wi-Fi network to 150,000 hotspots by the end of 2014, as part of the ICT ministry-backed Smart Thailand program.

TOT already has deployed 10,000 Wi-Fi hotspots while a total of 120,000 hotspots have been deployed by other agencies as part of the initiative. 

Some 20,000 TOT hotspots are planned for Bangkok, with another 130,000 to be deployed nationwide.

Google Fiber in Provo Prices Same as Kansas City

Google Fiber in Provo, Utah will be priced the same way as Google Fiber in Kansas City. People will be able to sign up for free 5 Mbps download/1 Mbps upload service, with the offer guaranteed for seven years.

Symmetrical gigabit access is priced at $70 a month.

When bundled with Google's video entertainment service, the dual-play package will cost $120 a month.

Using a Drone-Mounted Camera to See what a Surfer Sees "In the Water"

If you've ever seen a picture of a surfer (the ocean kind), shot from shore, you have one view of what's going on, but you can't see what the surfer sees while on the wave. 

Sometimes you see a head-mounted camera shot, and that gives you a different sense of what the rider is experiencing. 

But here's something I have never seen before, namely a video camera apparently mounted on some sort of drone, that is shooting from above the rider and along the ride itself. 

As somebody who used to spend lots of time in the water, this is closer to what the rider sees: how you know the wave is moving over shallower water and is going to wall up, or moving over deeper water, and about to reform. 

In the former case, you need to drive faster to make the section, or you'll be in the soup (the white water).  In the latter case, you need to cut back, to ride the most-powerful part of the wave (the curl). 

It's fun. A great way to waste about three minutes. 

Skype Will be Native Part of Windows 8.1 Start Screen

A decade ago, many observers might have argued it would be provocative if a major over the top communications app was made a basic part of the Windows operating system, since that would make communications a basic part of the PC operating system. 

But it now seems nobody will protest when Skype becomes part of Windows 8.1, eliminating the need to download a client.

Insrtead, Skype will be "front-and-center" as a native part of the Windows 8.1 experience.

That shows how much the communications market has changed. Communicating using an over the top messaging app simply is a daily part of Internet experiences for many people. Microsoft doesn't really have to worry about angering its business partners by building Skype right into the operating system. 

"Communicating, connecting and sharing should be a seamless part of every Windows experience," Skype says. 

International telephone traffic grew five percent in 2012, to 490 billion minutes, according to TeleGeography. 

However, as call volumes continue to grow, so do the challenges facing the international long-distance industry. But as any industry excecutive can tell you, calling volumes are different from calling prices. 

International migration, the rapid uptake of mobile phones in developing countries, and steady reductions in international call prices, especially in the form of flat-rate and free calling plans, have contributed to traffic increases. 

Nevertheless, recent volume growth rates are well below the 13 percent average annual increases in volume that carriers could count on to offset price declines over much of the past 20 years, TeleGeography says. 

So while international phone traffic growth is slowing, traffic from voice and messaging applications like Skype is growing faster. Cross-border traffic using Skype grew 44 percent in 2012, to 167 billion minutes. 

This increase of nearly 51 billion minutes is more than twice that achieved by all international carriers in the world, combined.

Moreover, if Skype’s traffic were added to the volume of international phone calls, international voice traffic would have grown 13 percent in 2012, in line with historical trends. 

This suggests that the "lost calling volume growth" has been displaced by Skype calling. 

Technology Adoption Rates Show Danger of Getting to Market "Too Early"

If you are familiar with the notion of "hype cycles," you will have some idea why important new technologies quite often take longer than expected to reach critical mass, often said to be the point where 10 percent of households or users have adopted the innovation.

Being late to get into a market can be dangerous, but being too early might be the more prevalent mistake. 

Though the tablet might be the fastest-growing consumer appliance of all time, most devices and appliances take quite a long time to reach ubiquity. 

Consider smart phones, which many rightly consider to be among the faster-growing devices of all time. IBM Simon, with its rudimentary touch screen, in 1993. It didn’t catch on. 

About 2002, personal digital assistants started to have the ability to make and receive phone calls. 

RIM shipped its first BlackBerry about that time. 

In late 2006 only 715,000 smart phones were sold, though, representing just six percent of U.S. mobile phone sales. Up to that point, the smart phone was spreading not much faster than personal computers had done, according to Technology Review.

Still, keep in mind that It took landline telephones about 45 years to get from five percent to 50 percent penetration among U.S. households, and mobile phones took around seven years to reach a similar proportion of consumers. Smart phones have gone from five percent to 40 percent in about four years. 

But it likewise took about 11 years for use of mobile phones to reach 10 percent penetration, so it took about 18 years for use of mobile phones to reach about half of people in the United States. 

Since it took about eight years for smart phone penetration to reach 10 percent of people, and then another seven years to reach half of users, it took about 13 years for smart phones to reach half of U.S. consumers. 

And that has been about the fastest adoption rate of any appliance, in the U.S. market. 

Global adoption of mobile phones in the developing world has been stunningly rapid, as well. 

In 1982, there were 4.6 billion people in the world, and not a single mobile-phone subscriber. 

Today, there are seven billion people in the world and six billion mobile cellular-phone subscriptions. In other words, the world has gone to about 86 percent penetration in about 30 years. 

From the standpoint of human progress, that is fast. From the standpoint of any single company, that is a long time. 

And that is worth keeping in mind. Most truly important consumer technologies take time to reach ubiquity. Would-be market leaders have plenty of time to misjudge market progress, and fail before “ubiquity” is attained.

Content Owners Will Decide Whether Apple Really Has "Cracked the Code" on Internet TV

Steve Jobs famously said shortly before his death that he had “cracked the code” on how to change the TV experience. 

But is it possible Jobs mostly had the insight that a combination of more convenient hardware (tablets or smart phones), easier navigation (no remotes), easier access (seamless integration of Internet and linear TV sources) and the ability to buy programs one at a time for 99 cents would create a dramatically new experience?

It’s hard to say. Perhaps we will understand as early as September 2013; perhaps we will have to wait longer. At least so far, content owners seem unwilling to consider licensing content show by show, as iTunes suppliers now license songs one by one. That suggests the wait for a disruptive TV assault, by Apple or anyone else, is going to a bit longer in coming.

No matter what innovations Apple can create in displays, interfaces and navigation or remote control substitutes, television still is about the content. And without access to a new way of buying programs, the other advances, though incrementally more pleasing, are unlikely to create a breakthrough.

So what we are left with, for the moment, is simply a glacially slow movement away from subscription TV services sold by cable and satellite, market share gains by telcos, but a slight and slow dip in overall market demand.

One might argue that high-definition TV and digital video recorders have been incremental improvements. The ability to display Internet sourced video is another incremental improvement.

Consumers also long ago also signaled a clear preference for flat screen technology and bigger screens. But some might argue 3D has flopped. Interactive TV proved to have almost no demand.

At the same time, Netflix and other streaming services are showing promise, though largely as an incremental complement to linear television. Mobile consumption is growing. Tablet consumption is growing faster.

But nothing so far suggests a major shift in television experience or content distribution is ready to begin in a big way.

The predictable changes we now expect to see are small market share gains by telcos, every quarter, at the expense of cable TV providers, with satellite provider share roughly stable.

That was the story in the second quarter of 2013, according to IHS. AT&T U-verse and Verizon FiOS (with some small additions by independent telcos) added a net 398,000 video accounts during the second quarter, up from 304,000 net adds in the second quarter of 2012.

The U.S. video subscription business as  while lost a net 352,000 subscribers in the second quarter, according to IHS.

In a market with nearly 95 million to 104 million subscribers, that really isn’t such a big deal. That’s a market shrinkage of about one-tenth of a percent, to three-tenths of one percent.

So we might be past the peak of multichannel video subscription rates, if not yet revenue. But the present rate of decline is not alarming, though indicative of the long term trend.

It might not matter so much which provider segments are growing, and which are shrinking. The most important single fact is that the overall market is very slowly shrinking.

That suggests content owners are not yet ready to abandon current distirbution models. And without major changes in licensing, it is doubtful Apple or any other firms can revolutionize television.

Baltimore to Explore Own Internet Access Network

Baltimore is hiring a consultant that would help the city develop a plan for expanding Internet service provider options for businesses and residents. For the moment, the only expectation is a study that provides options, such as creating greater incentives for any would-be ISPs to create a facilities-based new network.

Presumably, the study also will explore options for anchoring such a new metro network with fiber Baltimore could lay to support its own internal operations, or other initiatives to lure a few anchor tenants that could build on such a network. 

Baltimore was among cities that had bid to become a site for the first Google Fiber operation.
And Verizon has decided not to upgrade Baltimore with FiOS. 

In all likelihood, Baltimore will find it must hope for some sort of public-private partnership to "spot build" new facilities in Baltimore, as so far, the financial return for a full citywide build appear quite daunting. 

PCs are for Work, Other Than That, People Will Prefer Tablets, Smart Phones

Perhaps some executives in the PC industry actually believe they can build a PC that entices people to part with their smart phones or tablets. Some of us think that is a fool's errand. 

Some might say devices such as the Chromebook are designed for affordable browsing. Some of us would not agree. Browsing is what people prefer to do on other devices, when they are not working and producing large amounts of content. 

That probably has implications for the use of all the devices. A "work" device is not necessarily as "personal" a device as a smart phone, or as much fun as a tablet. Some devices (think of most devices in your kitchen or livingroom or bedroom) just have to work. You don't think about them too much. They aren't necessarily personal statements, as your clothing or jewelry or fragrance most likely are. 

And that's the issue with PCs. There's no such thing anymore as "web-centric" users. That's everybody, doing everything. 

When the PC was the only computing device, people might have been more attached to them. These days, the PC increasingly is something you use when you have to work. Most other things you'd prefer to do on a tablet or smart phone. 

That likely has implications for how much people are willing to spend on a work appliance, if they are spending their own money. 

Lenovo Sells More Smart Phones, Tablets than PCs

Lenovo says it is becoming a "PC Plus" company. In its most recent quarter, Lenovo ’s  sales of smart phones and tablets surpassed PCs for the first time. During the first quarter, Lenovo became the world’s fourth largest smart phone supplier and recorded the fastest growth among the top five vendors, growing 132 percent. 

In China, Lenovo is now the second largest smart phone company, the company says. 

One might point to several elements of that story. The rise of computing devices other than PCs, the shift of technology supply in the direction of Chinese suppliers and a concomitant retail pricing pressure on existing suppliers are some of the themes one might point to.

Another apparently non-related item, namely Cisco's most recently quarterly report, points to another broad theme, namely a shift in global technology leadership from broadly diversified firms to specialists. 

Nobody yet is suggesting Cisco is going the way of Nortel Networks, one of a handful of firms that once lead global telecom infrastructure sales by supplying a broad range of products, but went bankrupt. 

Still, these days, being a supplier of lots of infrastructure products, with a coherent fit between thenm, is a much-tougher feat. 

In today's market, most firms have found it much easier to focus on a segment: mobile, fixed network only, switches and routers, radios or optical transmission. 

Sooner or later, Cisco might have to respond to critics who say it operates in too wide a range of businesses. And that will mean a smaller Cisco, one might argue. 

DoJ Opposition to US Airways, American Airlines Merger has Telecom Implications

The unexpected lawsuit by the Department of Justice to block the proposed US Airways merger with American Airlines reminds some of us of merger strategy in the U.S. telecommunications business.

In the past, when a merger wave is about to break out, it has been better to be the first such combination, not the last. The reason is that, for all the oversight issues, it has been easier to be the first to move, rather than the last to move. 

After clearing a number of other similar transactions, DoJ now seems to have concluded that the merger wave has gone far enough. In 2008 DoJ had approved the merger of Delta and Northwest Airlines. In 2010 it approved the merger of United and Continental. 

In terms of share of domestic seats sold in September 2013, Delta Air Lines has 22 percent, Southweset Airlines has 21 percent, United Airlines has 17 percent, US Airways has 12 percent while American Airlines has 13 percent. 

Granted, the profit is in the overseas routes, but those earlier mergers, which dramatically reduced competition, seem to be bumping against an analogy to the "rule of four" that many telecom regulators apply to mobile competition.

And that rule is that four competitors are required. In the airline industry, it appears DoJ deems four to be insufficiently competitive. 

1 Regulator or 28? Competition or Investment? Are the Questions are Connected?

Should the European Union have only a single telecommunications regulator, or keep 28 national regulators? That appears to be a live question now that rival “proposals” are floating around the EU.

Neelie Kroes, the EU telecommunications commissioner, has proposed an arrangement that some would think is more policitically feasible, namely keeping the 28 national regulators in place, while nevertheless removing restrictions that hinder cross-border operation, cooperation and ultimately mergers.

However, in a document obtained by the Financial Times, Joaquín Almunia, EU antitrust executive, called for a more-radical plan of abolishing the separate national authorities and replacing them with a single EU telecommunications office.

Fair-minded observers might say each plan has merit. Many service provider executives might agree that a single, continent-wide market would be more efficient, easier to navigate, at less cost.

But observers might also say there will be much more political opposition to the one-regulator plan, than to plans to harmonize and liberalize cross-border operations, while keeping the national regulators in place.

So the Kroes plan might arguably have the advantage of faster implementation. It might be hard to envision national governments potentially giving up the revenues national spectrum auctions might raise, nor the ability to customize national universal service plans between their own urban and rural areas, for example.

On the other hand, policymakers still appear “conflicted.” They still seem to want to promote competition by maintaining low-cost wholesale access to dominant carrier networks.

On the other hand, policymakers also want those dominant carriers to make huge new investments in next generation networks that will subject to the same low-profit, competition-enhancing arrangements that make those investments risky to stupid.

It isn’t so obvious that one regulator or 28 cooperating authorities is necessarily the better plan. Simplicity is good. But so is speed of implementation. And both sets of proposals seem to have the same objective, namely rationalizing operating environments and paving the way for mergers and consolidations that will produce fewer, but stronger, providers.

Under any set of circumstances, service provider executives and policymakers might well agree that current scale of operations for most service providers is not optimal. They need to get bigger.

Most EU policymakers also must address the risk and high costs of building next generation fixed networks, without addressing investing firm ability to capture adequate financial returns.

Nobody Knows What Will Happen to Service Provider Revenue Once Major Video Cord Cutting Happens, Really

Adult broadband users with an Internet-connected TV are twice as likely as those with non-net-connected TVs to be “highly inclined” to cancel their current subscription video service, according to a new report from The Diffusion Group (TDG Research).

Those findings likely would not come as a surprise to anybody who normally watches developments in the video entertainment business. It is a trusim that a person cannot become a user or customer of any product unless that person is physically able to purchase or use.

So it should not be a great surprise that when able to view Internet-delivered TV on a big screen TV, some users might decide they can do without a video subscription. Without the ability to view Internet-delivered video, a person has no option to consider whether that experience is a reasonably workable substitute for a video subscription.

To be sure, most people probably would simply augment what they already do, and add some Internet sourced TV to their broadcast TV or video subscription or other home video sources such as Blu-ray players.

But perhaps seven percent of consumers, at any given time, might be interested in abandoning their video subscriptions for some sort of over the top or broadcast TV alternative, TDG Research suggests.

Some 8.8 percent of connected TV users say they are highly inclined to cancel their current subscription TV service in the next six months, compared with only 3.5 percent of non-net-connected TV users, TDG Research says.

Virtually no executives whose firms are major providers of subscription video services would argue it makes no difference to their revenues were widespread abandonment of subscription TV to be replaced by widespread viewing of over the top alternatives.

On the other hand, assuming they are not forced to offer low-cost “unlimited” service where there is no matching of usage to retail price, watching more over the top television is going to create demand for orders of magnitude more bandwidth.

So yes, service providers will lost a big chunk of video revenue. But they will gain a big chunk of Internet access revenue. Or so the logic might suggest.

The stumbling block, and it is a serious problem, is a shift of rival major competitors to something like Google Fiber’s pricing and usage plans: unlimited usage of a 1 Gbps symmetrical Internet access service, for $70 a month.

That would wreck most tier-one service provider revenue models, in the event of a major drop in video subscriptions, and an equally big shift to over the top services using Internet delivery.

There is one more huge issue as well. In addition to spending more for Internet access, consumers will still be paying for the TV programs or channels they want. When all the costs are added up, it is not entirely clear that the total cost of ownership will be dramatically less than what they already pay.

The conventional wisdom is that cable companies and telcos will be savaged on the revenue front when a widespread shift to over the top delivery begins. That isn’t necessarily the case.

Much depends on consumer demand. Heavier video entertainment users might find it costs less to keep buying linear TV services. Moderate users might find net costs roughly the same. Lighter users, though, probably would be best positioned to achieve savings.