Microsoft Online Video Initiative

Microsoft Corp. says it now has partnerships with Walt Disney Co., NBC Universal and Metro-Goldwyn-Mayer Inc. giving Microsoft the ability to sell online videos to Xbox 360 game consoles.

Yahoo Launches Mobile Developer Program

Yahoo has announced a new mobile homepage and an updated version of Yahoo Go, the company’s downloadable mobile program. It also is launching a developer platform that will allow outside applications to be built for both offerings. And no, Yahoo executives are not pitching the moves as a response to Google's Android and Open Handset Alliance initiatives.

The idea is to make the company’s mobile destinations a one-stop shop for wireless users, in part by by opening them up to third-party applications.

Vodafone Data Plan Prices Slashed

In what appears to be a major bid to ignite the mobile broadband market, Vodafone NL has reduced data plan bundle prices as much as 50 percent for domestic usage and up to 85 percent for international use in 42 countries. That sort of thing might ultimately have direct implications for U.S. high-speed mobile services as well. And the reason is that if it appears WiMAX or any other mobile broadband alternative is getting traction, incumbent mobile service providers have a potent weapon: pricing.

While no carrier would be thrilled about slashing its prices in the manner Vodafone has done, the fact remains that incumbent mobile providers have and texting revenues to prop up their revenue streams. Upstart mobile broadband providers will have less margin to drop their prices. Which leads one to wonder what will happen when Clearwire and Sprint fire up their new WiMAX network on a continental basis (assuming Sprint perseveres).

All discussion of technology advantages and attributes will become irrelevant if the pricing leadership changes in any significant way. Pricing also is key to creation of some potential new mobile Web business with different pricing and use cases than today's mobile devices provide.

In other words, will WiMAX develop as a cable replacement, 3G replacement or foundation for mobile devices other than phones? In the first or second cases, pricing policy is pretty simple: offer comparable service at lower prices. In the last case, the issue is whether a sustainable business can be built around non-voice devices: cameras, game platforms, music players, navigation, mobile Web. In that case, prices probably have to be quite aggressive.

So part of the equation and business model is whether a WiMAX network can be built cheaply enough, and operated efficiently enough, to offer such lower pricing. In any event, it appears at least some leading mobile providers aren't going to wait to find out.

And as this forecast from In-Stat suggests, most of the future WiMAX market is going to be mobile, not tethered.

Pre-paid Vodafone mobile users in the U.K. last summer also found themselves offered new lower pricing of £2 per Megabyte for mobile data rather than the original £7.30 per MB. While not a complete flat rate plan, it's a possible step in that right direction.

Which Road for Australia?

It isn't yet clear which road Australian regulators have in mind for that country's contestants. An inter-modal framework such as that used in the United States is one option. So is the intra-modal, robust wholesale access model prevalent in Western Europe. In Australia, it would be Telstra that builds the fiber-to-home network that other competitors would have wholesale access to.

At some point, the log jam has to be broken or consumers and businesses in Australia are not going to have access to the bandwidth they are going to need. Up to this point Telstra has been able to rely on wireless and new Internet access services to offset declines in voice revenue. But nobody really thinks that can go on forever.

Neighbor New Zealand already has opted for an "operational separation" regime that separates wholesale network operations from retail sales operations for all players in the market that want to take advantage of the wholesale access network.

How Much Bandwidth is Enough?

It sort of depends on what sort of end user you are, as this analysis by Motorola suggests. Power users require more than lighter users, to be sure. The issue for a network engineer, of course, is that a network has to be engineered for the needs of the most-demanding user, not the least-demanding user. Which suggests that the supply of bandwidth will continue to climb, though it isn't so clear that power users will escape the requirement to pay more money for the privilege.

Motorola thinks about six percent of users require 58 Mbps by 2010, while a quarter of households will require 40 Mbps service. About 44 percent of households will be able to get by with just 19 Mbps.

Unbundling Price Impact Unclear

The American Cable Association, which represents 1100 small, independent cable operators, has called for unbundling of cable channels, though the large cable operators and programmers oppose such rules. On the face of it, unbundling seems to offer an antidote to higher retail prices.

The thinking is that allowing users to pay just for what they want will drive lower prices. Oddly enough, it probably wouldn't. Once consumers start toting up the costs of discrete channels, and assuming most people have seven favorites, costs might be higher than what they are paying to receive lots of channels they don't watch.

Advertising is the reason. When cable channels are carried on the most-popular "expanded basic" tiers, they have a larger number of eyeballs to sell advertising against. Take away that access and advertising becomes a much-smaller revenue possibility, which then means programmers will raise their rates for carriage. So prices go up.

To be sure, smaller video providers do have to pay higher wholesale rates to get program access, but programmers counter that volume discounts account for the higher wholesale costs.

Smaller operators also object to "tying" policies that require carriage of lesser-viewed channels to get access to the most-popular, "must have" channels. The policy obviously is helpful to programmers, as they gain shelf space for niche channels.

Supporters of tying policies say program diversity clearly will suffer if tying policies aren't allowed. There are elements of truth to that claim. Lesser-viewed channels might be forced to on-demand distribution, which will reduce potential revenues, again compelling those channels to raise prices.

Distributors don't like tying policies since scarce shelf space gets eaten up by channels with low viewership.

Sometimes the obvious solutions actually produce results counter to what people think.

Verizon Fiber Gamble Pays Off?

As this Wall Street Journal graphic illustrates, shares of Verizon and at&t have outperformed the shares of leading U.S. cable companies over the past year. One suspects that a changed investor understanding of the value of broadband access is at least partly the reason.

Verizon executives, in particular, took lots of heat from the investment community for embarking on what was seen as an expensive and unproven fiber-to-home upgrade. Verizon's compatriots at at&t essentially were rewarded, at least in part, for taking a less-ambitious, less-costly upgrade tack.

The cable companies have been saying for decades that all telco fiber-to-home networks were uneconomic compared to cable's hybrid fiber coax alternative.

And though other forces are at work, investors seem to have warmed to the idea that the upgrades are value-producing, after all. If we have learned anything over the last decade or so, it is that bandwidth demand can change quite sharply, quite quickly, and always, so far, in the direction of more demand.

Getting caught shorthanded could be quite destabilizing.

Also, Verizon has shown that it is able to compete effectively for consumer dollars in the video entertainment area, while the FiOS service has drawn raves from users who have access to it. There might be nothing so churn-reducing as knowing there is one provider of fiber-to-the-home in one's service area.

The point is that Verizon executives were right to stick to their guns, despite the avalanche of criticism they received for building the FiOS network. In the competitive race with cable operators, Verizon might be positioned quite well.

It isn't that cable operators cannot push their upgrades further, by pushing fiber closer to customers. It is that they will face opposition from their investors for the same reasons Verizon got slammed. Investors get nervous every time the cable industry starts talking about the need to increase leverage to upgrade the networks in some serious way. And it wasn't so long ago that the HFC 750 MHz networks were described as "the last upgrade" cable ever would have to make.

It no longer looks that way.