FCC Ends RBOC Long Distance Restriction

The Federal Communications Commission has eliminated the old requirement that dominant local exchange carriers conduct long distance operations separately from their local access operations. The old regulations obviously don't make much sense in an environment where long distance has ceased to be a separate business, for the most part, and where all access providers routinely bundle access and long distance calling.

As a phase-in mesure, a&t, Verizon and Qwest agree to offer special rate plans tailored to consumers who use little long distance, for a period of three years. As most post-paid mobile calling plans all include bundles of calling including "local" and "long distance," the move allows the former regional Bell operating companies to reduce their overhead.

The change does not materially affect the way wireless and wireline calling is offered to the retail market. The issue isn't really long distance at all. Instead, the bigger issue is which servics, and how many servics, to buy as part of a single bundle, in the consumer market.

To encourage such behavior, Verizon recently increased the price of stand-alone FiOS broadband in some markets if isn't part of a voice or television bundle.

What does WiMAX Displace?

To the extent that mobile phone penetration is nearing saturation, while broadband access to businesses and homes also is close to saturaturated, at least as a technology supporting personal computers, one has to ask what customer demand WiMAX will cannibalize. Well, I suppose some people might argue WiMAX creates a new market, but the issue still is to envision what that new market is.

So far, it appears most observers other than Intel Corp. think WiMAX will supplant some other form of access.

Intel clearly sees WiMAX as a technology that changes demand for lap-top PCs. As Internet access has changed requirements for desktop machines, so Intel believes WiMAX will create new demand for mobile machines that are always connected.

But most service providers seem to view WiMAX as a technology that extends or replaces some other existing end user value or network. Sprint sees WiMAX as a technology that changes the mobile phone market by extending beyond third generation platforms, first augmenting and then replacing earlier generations of technology.

T-Mobile might view WiMAX as a technology that potentially displaces Wi-Fi hotspots. Cable and telephone companies see it as a threat to cable modem, fiber-to-home and Digital Subscriber Line services.

I wouldn't be so sure WiMAX ultimately will have most impact as a PC-affecting technology.

It seems to me more likely it will have much more significance as a mobile phone and mobile handheld device platform. There are all sorts of reasons why users aren't going to take advantage of mobile WiMAX from their PCs, including ambient light and furniture. Everybody can reach for and use a mobile in a pocket or purse.

Defanged Skype

For all the fear Skype and other IM-based and peer to peer voice applications and services have created in the broader service provider industry, Skype seems to have crested. Skype still has lots of registered users, but they don't seem to be calling and using Skype chat as much as they used to.

Remember the concern municipal Wi-Fi networks raised just two years ago? Telcos and cable companies were worried muni Wi-Fi would cannibalize cable modem and Digital Subscriber Line services. And dare we even mention Vonage and other independent VoIP providers.

In fact, the only threat that really has materialized is cable companies. At least in North America, cable companies have emerged as the most serious threat to wireline voice and broadband Internet access revenue streams. Everything else essentially has remained a flea bite.

On the video and audio content side, remember the hackles BitTorrent and Kazaa raised? Now we have iTunes, Joost and a legal BitTorrent working with content owners.

So what conclusions should one draw from all of this? Probably that "disrupting" powerful incumbents is going to be much harder than attackers once had believed. Bandwidth exchanges thought they'd reshape interconnection. Competitive local exchange carriers thought they'd capture a goodly portion of the wireline voice market. Independent DSL providers thought they'd catch the telcos sleeping. Internet Service Providers thought the same about dial-up.

Turns out incumbents have more resiliency than anybody might have thought.

Or Maybe Google Phone Looks Like This...

Who knows? The point is that Google probably has to get involved with handsets at some point, just as Microsoft now has to supply phones, to get other things done. Google wants to stimulate mobile search so it can sell more contextual ads based on location. Microsoft wants to sell more unified communications applications. Each might have to play in the device arena as part of a broader effort to meet a business objective. Voice is just something people expect a mobile to do, even if the supplier objective really is revenues built on mobile search and advertising.

GooglePhone? GPhone?

Since late 2006, there has been speculation that Google is prototyping a Google mobile phone, optimized to run Google apps, enable communications between Gtalk users and operate as a standard mobile phone as well. The speculation then was that a launch could occur in 2008.

The rumors are out again, suggesting a device that could sell in the $100 range, not to compete with the iPhone but rather low-cost PCs and other Web-capable devices. The device supposedly is powered by Linux, includes global positioning satellite capabilities, and of course will be optimzied to run Google Maps and other Google software.

Google is said to be showing the prototype to cell phone manufacturers and network operators as it continues to hone the technical specifications that will allow the phone to offer a better mobile Web browsing experience than current products, even the Wall Street Journal has reported.

Perhaps more surprisingly is the apparently-serious talk that Google might try an ad-support model. Maybe someday. That strikes me as requiring too great a change in end user behavior. People don't mind paying something for calling. A more logical approach is a simple flat fee plan for data network usage, including IP-to-IP calls using the data plan, and some for-fee charge for calls that have to terminate on existing mobile and wired networks.

There is a rumor about T-Mobile being a network partner, but that is curious since T-Mobile's data network would provide a horrible end user experience. Perhaps T-Mobile is thinking about a dual-mode approach with connectivity at T-Mobile Hotspots. Despite that, T-Mobile has the most to gain, as it needs to do something to break out of its fourth-place spot in the U.S. mobile market.

Such a GPhone or Google Phone would aim for the "Internet in your pocket" segment of the market, with a heavy emphasis on how it can be a platform for contextual advertising based on user location, not just past behavior. There's always some risk when a supplier tries to create a new segment in the device category. But Apple has done it with the iPod and now with the iPhone.

The Google Phone would have to pioneer another new segment in the handset category as well. That's always challenging. But mobile search is a big deal for Google, providing huge incentives to prime the market.

This image, by the way, is just one conception of what such a device might look like.

EarthLink San Francisco Network Now Toast

EarthLink will not be providing free wireless Internet access throughout San Francisco. As promised, EarthLink is not proceeding with any new muncipal Wi-Fi networks when it has to pay the full cost of construction, as would have been the case in San Francisco.

Under the original deal, EarthLink would have invested $14 million to $17 million to build the network. EarthLink also expected to be able to charge $22 a month for a premium tier of service.

San Francisco officials probably will issue another proposal request. And EarthLink conceivably could get additional sponsors. But it's getting tough to make the numbers work when tethered broadband rates now are so affordable. In cities where muni Wi-Fi networks are in operation, or have been proposed, it isn't unusual to find tiers of service comparable to Wi-Fi available for $10 to $15 a month.

Also, as video becomes a more important part of the Internet experience, muni Wi-Fi networks just aren't going to be able to keep up.

No Bidders Left for Chicago Wi-Fi

Chicago has failed to reach agreement with either at&t or EarthLink, each of which had proposed building a municipal Wi-Fi network for the city. Just a few years ago, backers were arguing a business case could be made for either ad-supported free service or for-fee service at rates of $20 a month. But that was before U.S. telephone companies got serious about broadband pricing and dropped access costs behow $20 for service very comparable to what muni Wi-Fi networks were supposed to offer.

at&t charges $20 a month for speeds of 1.5 megabits a second in Chicago and will provide connections half that fast for $10 to new subscribers. In other cities such as Houston, an 800 kbps connection can be purchased for about $15 a month.

In Lompoc, Calif., the city signed up fewer than 500 users out of a population of more than 40,000.

So it looks like we are nearing the end of the muni Wi-Fi craze. Though some networks, primarily for public safety and municipal operations, might still be viable, it doesn't appear that most municipal Wi-Fi networks will prove commercially viable outside high-density urban cores.

And even there, how hard is it to find a T-Mobile hotspot at a Starbucks?