SunRocket, Vonage Not the Whole Story

As much as people think VoIP providers (other than cable) have got traction problems in the U.S. market, that is far from the case elsewhere. In western Europe, for example, independent VoIP providers are not only the market share leaders, but their share of market might actually be increasing, even though major incumbent telcos are actively in the market as well.

And where U.S. cable providers including Comcast, Cox, Time Warner and Cablevision are the new driving force for VoIP-driven POTS replacement, that is hardly the case in western Europe, where cable operators still have relatively slight market share.

Still, there is no denying the traction problem. According to analysts at TeleGeography, VoIP growth already has hit a plateau in the U.S. market. In western Europe growth rates not only have accelerated but might not hit a peak until 2008, says TeleGeography.

Hence the interest in VoIP 2.0, the integration of voice services with Web and enterprise applications, portals, email, documents, gaming and other end user experiences.

EarthLink, Helio, Muni WiFi

Given that Earthlink essentially admits it now is more than a bit unfocused, and that something has to be done about it, it is pretty easy to predict that Helio and the municipal WiFi initiatives have to go. Earthlink will keep dial-up as a cash cow. It does just fine in the Digital Subscriber Line business and VoIP is not bleeding either. That pretty much leaves losses at Helio, which doesn't appear poised to make major subscriber gains any time soon, or the municipal WiFi business, which is in roughly the same position.

And one has to assume Earthlink will ultimately be set up for a sale. In such scenarios, long-term investments that drain cash are a no-no.

Something has to go. EarthLink now expects a loss of $110 million to $140 million for the year on revenue of $1.23 billion to $1.24 billion. Back out municipal WiFi and Helio losses and that problem takes care of itself.

Earthlink had a second-quarter loss, due to mounting losses at its Helio wireless joint venture and lower revenue from dial-up services. Earthlink says its Helio cellphone business exceeded the 100,000 subscriber milestone in the quarter, but the unit's losses mounted. Helio, a joint venture with South Koreas' SK Telecom, posted a loss of $83.8 million on revenue of $33.2 million.

Earthlink had a loss of $16.3 million, or 13 cents a share, compared with a profit of $16.6 million, or 12 cents, a year earlier. Earthlink said revenue for the quarter fell 6% to $312.2 million from $332.1 million a year ago.

Sure, there were continued losses in the dial-up area, but that's expected. At the end of June, the company had 4.3 million dial-up and broadband subscribers, down from 5.3 million a year ago.

Earthlink is a profitable Internet access company if the wireless and muni WiFi iniatives are abandoned. If you assume the assets are positioned for ultimate sale, that's a clean story.

BroadSoft Aastra: Man Bites Dog

Aastra Intecom, a provider of PBX-BASED enterprise communications and contact center solutions for large enterprises, now has a strategic alliance with BroadSoft. Aastra, which supports hundreds of thousands of enterprise voice systems, will use BroadSoft’s carrier-grade BroadWorks VoIP platform as the foundation for new next-generation IP-PBX solutions it will deliver directly to large enterprises.

So here's the "man bites dog" angle: in the past, enterprise suppliers have offered a richer menu of features than a large enterprise could buy from a communications service provider. To my knowledge, this is the first time a major PBX supplier has turned to a carrier platform to enrich its enterprise offering.

Joost Chooses Level 3

Level 3 Communications has been selected by Joost to provide content delivery services for the new Internet television service. Under the terms of the agreement, Level 3 will provide Joost with network solutions including high speed Internet access and colocation services in North America and Europe. Level 3 has made a big commitment to providing CDN services and can claim, by means of its (former Vyvx)broadcast video services unit, to be supplying top U.S. cable and over-the-air broadcasters with a significant part of their overall backhaul and studio feed operations. The Joost deal will not make or break Level 3's CDN business or strategy. But it is a nice customer to have.

Both 40 and 100 Gbps Ethernet, It Appears

It appears the IEEE is going to proceed with 40 Gbps and 100 Gbps Ethernet standards. Which strongly suggests there also someday will be a 120 Gbps standard, since it maps nicely with the 40 Gbps standard server vendors prefer for short distance connections between switches and servers.

The next logical step for the 100 Gbps suppliers, which tend to favor that standard for long haul and wide area network transport, isn't so clear. Following the 1, 10, 100 paradigm would suggest 1,000 Gbps, but nobody is talking about that right now. Bandwidth in the 400 Gbps up to 500 Gbps range is the sort of "next step."

Growth By Acquisition Works for at&t

Growth by acquisition clearly has been working for at&t, which is probably why executives there will stay on course with the strategy. The company reported a whopping 61 percent increase in second-quarter profit after $140 billion in acquisitions almost doubled revenue. This is an old strategy many competitive local exchange carriers attempted in the early 2000s, largely without success. Of course, CLECs had different problems. Investors were pushing them to grow fast, and organic growth obviously wasn't going to work. There also were more providers than customers (that's a bit of an exaggeration, but not much of one).

It remains to be seen how well the contrasting Verizon and at&t strategies work out. Verizon essentially is betting its future on the superiority of its wired assets, while not neglecting its wireless assets. at&t arguably is investing in acquisitions that lean in the direction of wireless while economizing on its wireless upgrades.

Growth By Acquisition Works for at&t

Growth by acquisition clearly has been working for at&t, which is probably why executives there will stay on course with the strategy. The company reported a whopping 61 percent increase in second-quarter profit after $140 billion in acquisitions almost doubled revenue. This is an old strategy many competitive local exchange carriers attempted in the early 2000s, largely without success. Of course, CLECs had different problems. Investors were pushing them to grow fast, and organic growth obviously wasn't going to work. There also were more providers than customers (that's a bit of an exaggeration, but not much of one).