Monday, December 24, 2007
Fairpoint Buy Rejected by Vermont Regulators
Fairpoint Communications, a provider of rural telephone service, has had its bid to buy some rural Verizon landlines rejected by the Vermont state government. Verizon and Fairpoint announced the deal, which consists of 1.6 million landlines in Vermont, Maine and New Hampshire, nearly a year ago.
The deal has also faced opposition from regulators in Maine. The Vermont Public Service Board's decision doesn't terminate the deal, but it forces the companies to reach a new agreement, which could mean lowering the sale price.
It's just another reminder of how much regulators shape and condition the telecom market.
Labels:
Fairpoint Communications,
Verizon
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
The Trouble with WiMAX
The "trouble" with WiMAX, I've maintained, has nothing to do with performance, or necessarily with network cost. The technology will work. The issue is how and where WiMAX fits in the business environment. In developed markets where lots of competition already exists, the issue is figuring out where WiMAX plays in the applications environment. As a fixed alternative to cable modem, fiber-to-customer or Digital Subscriber Line services, the issue is how big a market exists. As a mobile broadband platform, the issue is how it competes with 3G networks and Long Term Evolution, the GSM-based fourth generation network alternative.
There's less contention in rural areas or less-developed broadband environments. Where it is too expensive to deploy a terrestrial broadband network, WiMAX has a clear logic. Even there, though, there might be questions about how more-established mobile voice and 3G networks factor into the competitive equation. One certainly can argue that WiMAX will provide much more bandwidth than 3G, today. The issue is how long it will take to create robust revenue models for 3G services, let alone providing those services more effectively over a faster 4G network.
It is, in short, a business issue, not a technology issue. To be sure, one can argue that a new market for broadband-enabled devices other than mobile phones is coming to fruition. But the issue there remains whether WiMAX necessarily or primarily provides access to those devices in ways that 3G cannot, let alone 4G. One might argue that WiMAX has a shot at providing access to all kinds of consumer devices other than "phones." But one might also argue that such connectivity has to be much cheaper than anything we've seen so far.
WiMAX networks might be half as costly as a 3G network to build. But that's not enough. They also have to be less than half as costly to operate, or prices won't be low enough to entice users to pay for connections to cameras, music players, game or entertainment platforms, for example. Those functions also are enabled on 3G networks, in many cases, combining the text and voice functions with the very services WiMAX might enable.
WiMAX might not prove to have the market traction its supporters hope for, in other words, at least in developed broadband markets where there is robust competition from cable modem, DSL, fiber to home, 3G mobile, fixed wireless, Wi-Fi hotspot and satellite broadband alternatives. The difference could come if WiMAX becomes the mobile provider 4G platform or if mobile WiMAX access is priced well below current mobile rates, allowing customers to access enable more devices than they now do.
It is not unthinkable for users to consider simultaneous broadband subscriptions. But it does require a more-compelling value/price relationship. We can assume standard-issue mobile phones, increasingly of the "smart" variety and optimized for Web experiences. We also can assume greater penetration of wireless data cards to support notebook PC use in nomadic fashion. What is not yet clear is the potential demand for broadband-connected music players, cameras, game players, dedicated navigation devices or video players. How many different subscriptions are users willing to pay for?
There is some thinking that WiMAX will be used especially heavily by mobile PC customers, as WiMAX is seen as powering a good chunk of the access card business.
“In 2010, the forecasted WiMAX subscriptions in North America will represent two percent of that for mobile 2.5G/3G and 66 percent of the subscriptions for mobile data cards,” say Philip Marshall, Yankee Group vice president, and Tara Howard, Yankee Group analyst.
Yankee Group estimates the number of WiMAX subscribers will increase from 1.3 million to 7.8 million between 2006 and 2011 and that in 2011, 7 million subscribers will be using 802.16e technology. Some percentage of that use will be for fixed broadband access, of course.
Assume such forecasts are correct. The percentage of WiMAX subscribers relative to residential broadband subscribers in the North American market then will increase from 2.2 percent to 7.4 percent between 2006 and 2010. Whatever else one might say about this level of adoption, it certainly doesn’t represent some sort of full-blown challenge to cable modem, DSL or fiber-to-customer access technologies. In fact, WiMAX, if it is adopted as Yankee Group researchers now forecast, will be yet another ancillary or niche form of broadband access.
So in mature markets, the major upside opportunity for WiMAX is expected with mobile personal broadband services, with fixed and portable services gaining moderate early market traction. In some Asian markets, such as Korea, it is conceivable that WiMAX-based mobile broadband could succeed, despite the existence of robust 3G and mobile video alternatives.
Still, the ultimate role of WiMAX in the wireless market is debatable, says a recent Organization for Economic Cooperation and Development report. “Large supporters such as Intel have a vision that WiMAX will change the way we all access the Internet in a matter of years,” says the report.
“Detractors claim that the economics of large-scale WiMAX networks are simply not justified,” the OECD report suggests.
Mobile WiMAX technologies may have the most profound impact in some urban areas because they could fill a connectivity void between 3G data networks and Wi-Fi, though.
Ultimately, this will not be a matter of technology, but of commercial issues and creation of new niches. It's hard to see GSM mobile operators going with WiMAX as a full-blown replacement for 3G, when LTE is coming. And it isn't simply a matter of technical performance. Smooth migration paths are important for large carriers. WiMAX might be too abrupt a transition for many. That might not be the case in undeveloped broadband markets, where a fixed broadband capability is reason enough to deploy it. Mobile broadband is a tougher matter, though.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Right and Wrong, But for the Wrong Reasons
In its story on "Technology in 2008," The Economist makes three predictions, one that will not happen in 2008, one of which could--but won't--happen and one which already happened. The three:
1. surfing will slow
2. surfing will go mobile
3. networks will go open
Oddly, the article predicts the Internet will clog because of spam. The article also says access pipes operate "symmetrically." If only it were so! The article is more apt when it says user-generated content, especially of the video sort, will stress the networks. "Gridlock" is the prediction. But it won't happen. Pipes are being upgraded and "reasonable use" policies are going to change. Traffic shaping is coming and access pipes are getting bigger. "Surfing" isn't going to slow.
The article is correct in noting that wireless access is coming. But the article implies that it is the 700-MHz auctions that will drive the change. Keep in mind, these are predictions for 2008. There is no way any new network using 700-MHz spectrum is going to be operating in 2008. And the tier one mobile providers are doing everything they can to convince more users to buy data access plans, with modest success so far. It's coming, no doubt about it. But it's been coming for years.
Use of data cards, browsing plans and email access plans will grow incrementally, and at a faster rate, to be sure. But there's no "big bang" coming in 2008. The trend began years ago.
In predicting that we'll see more "openness" in mobile networks, the article is on track. Perhaps the article focuses a bit too much on open operating systems and not enough on unlocked phones and access, but of the three predictions, this one is most nearly correct. But a new operating open network in the U.S. market at 700 MHz, in 2008. Absolutely no way.
Web services are going mobile and open, no doubt. But neither trend is specific to 2008.
Labels:
3G,
4G,
LTE,
WiMAX,
wireless broadband
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Sunday, December 23, 2007
Motorola Details WiMAX Progress
Motorola says it increased to 15 the number of contracts for commercial WiMAX networks and demonstrated the historic first live mobile WiMAX 802.16e handoffs between continuous WiMAX cells supporting voice, data and multimedia applications during WiMAX World USA in Chicago.
The company also increased to more than 57 the number of WiMAX engagements in 38 countries worldwide, including 44 active trials.
Motorola says it is on track to support the Sprint Xohm soft launch in Chicago by year end 2007 and is on schedule with deployment for the planned commercial launch in the second quarter 2008.
The company also says it has completed the deployment of the first 802.16e commercial WiMAX network in Pakistan for Wateen Telecom and has completed the first phase deployment of two additional commercial WiMAX systems in France and Germany.
Senza Fili Consulting says WiMAX is due for some growth.
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Is VoIP Significant?
Some years ago, many observers were convinced VoIP would be "disruptive" to the global telecommunications industry. There's much less certainty now. In fact, one might ask: is VoIP mostly a better way to do voice, or just a new way? Mobile clearly is a new way, and might be disruptive in many ways. So is VoIP. But "different" isn't the same thing as "disruptive."
The global industry made a transition from analog to digital switching, as it earlier made a transition from mechanical to electronic switches. New services and efficiencies were gained in each of these transitions. But one can question whether the differences were transformational.
Likewise, most of the U.S. competitive local exchange carrier industry thought it was doing something revolutionary in buying its own Class 5 switches to compete with incumbents. As it turns out, that wasn't hugely disruptive.
These days, most tier one carriers earn only about 20 percent of total revenues from consumer voice, and not significantly higher percentages even if enterprise voice is included in the total.
The point is that "voice," though still hugely important as an end-user value, is less and less the revenue driver for the global industry. So VoIP is in many ways a much-better way to use voice, but such a smaller part of total revenues that it cannot strategically change industry dynamics, one way or the other, so long as a transition away from reliance on voice revenues is predictable.
There are precedents for that as well. Long distance revenues have been declining, in terms of revenue per minute, if not volume, for decades. But the industry had time to transition away from long distance as a driver of profits.
At this point, it certainly looks as though VoIP is more nearly the latest enhancement to basic voice, rather than a disruption. If anything, it is mobile that represents the big "disruption."
The global industry made a transition from analog to digital switching, as it earlier made a transition from mechanical to electronic switches. New services and efficiencies were gained in each of these transitions. But one can question whether the differences were transformational.
Likewise, most of the U.S. competitive local exchange carrier industry thought it was doing something revolutionary in buying its own Class 5 switches to compete with incumbents. As it turns out, that wasn't hugely disruptive.
These days, most tier one carriers earn only about 20 percent of total revenues from consumer voice, and not significantly higher percentages even if enterprise voice is included in the total.
The point is that "voice," though still hugely important as an end-user value, is less and less the revenue driver for the global industry. So VoIP is in many ways a much-better way to use voice, but such a smaller part of total revenues that it cannot strategically change industry dynamics, one way or the other, so long as a transition away from reliance on voice revenues is predictable.
There are precedents for that as well. Long distance revenues have been declining, in terms of revenue per minute, if not volume, for decades. But the industry had time to transition away from long distance as a driver of profits.
At this point, it certainly looks as though VoIP is more nearly the latest enhancement to basic voice, rather than a disruption. If anything, it is mobile that represents the big "disruption."
Labels:
business VoIP,
disruption
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
at&t Says It Will Provide CDN Services
Earlier this year Level 3 caused a stir when it said it would enter the content delivery network (CDN) market with a radical pricing model: essentially offering the quality of service features at no incremental cost to what customers expect to pay for simple IP transit. And if you think about it, that's precisely what a CDN does: provide QoS features on top of dumb pipe. All of which should have, and did, raise fears about the health of the CDN market.
After all, if a contestant says it will give customers for free, what they today pay for, that's disruptive. Most recently, at&t itself said it was getting into the CDN business as well. Which should have caused another shudder: remember Northpoint, Rhythms Netconnections and Covad? They were the three independent providers in the nascent Digital Subscriber Line broadband access market. Of course, when the incumbent telcos decided broadband access was a business they had to "own," they simply moved to do that.
So are Level 3 and at&t a threat to market-leader Akamai? Right now it's hard to say much, beyond the obvious fact that competition is increasing in the space. One issue could ultimately be the size of the market opportunity, the reason for that being that a smallish market will favor specialists, while a large market will favor the larger telcos.
And it is not necessarily simply because scale economies might kick in. It is more a matter that large telcos tend not to do well in market segments that are small. Small markets never get the attention they might deserve in a large organization. So unless the market gets fairly sizable, a large telco simply will not invest enough to keep pace with smaller specialists.
So how big is the market today? As it turns out, that's a guesstimate of sorts.
Some things are hard to count. Unified communications software is an example. People who track these things like concrete measures: ports, servers, licenses sold. So how do you track "presence" features that simply are embedded in the basic functionality of an IP PBX?
Other markets aren't quite that hard to track, but still are fuzzy because mutltiple revenue categories get lumped together in the reporting. Streaming media services, as distinct from application acceleration, provides an example of that sort.
Dan Rayburn,StreamingMedia.com EVP, provides a reasonable way of current approaching the U.S. market size, though. Working backwards from benchmarks, Rayburn suggests the market for CDN services (but not P2P apps) currently is less than $800 million.
Internap's 2007 revenue is about $24 million. Limelight Networks generated about $105 million for 2007 and about $95 million of that was earned in the U.S. market.
Akamai probably generates $400 million to $450 million of its $625 million total revenue comes from their CDN services. Rayburn further guesses that U.S. CDN revenues amount to $300 million.
Level 3 wasn't in the market for much of the year, but might have earned $2 million or so.
VeriSign might have earned about $8 million for the year in the U.S. market.
Mirror Image, CacheLogic, Panther Express, CacheFly and Advection.NET taken together will do about $20 million in the U.S. market.
EdgeCast, CDNetworks and BitGravity combined did about $5 million for the year. Again, these are new services that didn't have a full year of operation to measure.
PEER 1, NaviSite and Ignite Technologies together collectively generated about $8 million.
All other smaller regional service providers providing small and medium sized businesses outsourced video delivery services sold under $20 million in 2007.
Labels:
Akamai,
att,
CacheLogic,
CDN,
Internap,
Level 3,
Limelight Networks,
Mirror Image,
VeriSign
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
Can iPhone Overtake BlackBerry??
Now that I've had a chance to look at Research in Motion's most recent quarterly results, which were robust, one can make a comparison between what RIM did, and what 9to5mac.com expects Apple to announce it has done. Namely, 9to5mac.com expects Apple to announce sales of five million iPhones in February.
RIM sold 3.9 million Blackberries in its most recent quarter across more than 100 carriers and 13 product lines. It isn't an apples-to-apples comparison. The two companies have different quarterly "endings," RIM finishing Dec. 1 and Apple Dec. 31.
Plus, it isn't clear what time period the five million iPhones were sold over. 9to5mac.com does not indicate a belief that all five million were sold in one quarter, and one suspects that isn't the case. Make it 3.5 million or so devices in the quarter.
What is interesting is how well Apple would have done, should it report anything like five million devices over even two quarters, given its early status in the market.
Apple has been selling one model of a GSM iPhone in four countries with just four carrier partners; while RIM, with a huge head start, is sold by more than 100 carriers, and features 13 different product lines.
Labels:
Apple,
BlackBerry,
iPhone,
Research in Motion
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
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