iPhone Sales to Double?

Apple is going to sell lots more phones (no surprise there) if AT&T does subsidize the new 3G iPhones, says Bernstein Research analyst Toni Sacconaghi, reported by Eric Savitz, Barrons columnist.

If AT&T does provide a $200 subsidy for the3G iPhone, bringing the phone’s cost for consumers down to about $200, where current models are priced at $399 and $499, sales might double, based on past precedent.

Sacconaghi notes that that sales of the Motorola RAZR doubled when its price dropped from $500 to $150 and doubled again when the price went to $100.

If AT&T average revenue per subscriber from the iPhone is in the mid-$90 a month range, compared to less than $60 for the average post-paid user, then AT&T has an additional $720 in revenue over the course of a two-year plan to offset the subsidy.

AT&T Launching Mobile TV

AT&T is launching its own mobile TV service, which should provide more pointers for Dish Network, also expected to launch its own service in the future.

AT&T's service requires specific device models costing between $200-$300, a TV-only data plan costing $15 a month (or $30 if a user also wantsWeb browsing). One device not supported is the Apple iPhone, which for many is reason enough not to bother.

It is doubtful AT&T expects much immediate success. Verizon does not seem to have seen healthy uptake for its Vcast service so far.

Qualcomm, which provides the technology to support the Verizon service, says only that so far the service has been a disappointment. Silicon Alley writer Michael Learmonth suggests that
perhaps 1.5 percent, or 820,000 Verizon subscribers, have ever watched TV on their phones.

In Europe, where several operators offer mobile TV, fewer than one percent subscribe.

Analysts at the Yankee Group say five percent of mobile subscribers are actually willing to pay for mobile TV, if the monthly price is $5.

As has been the case for other mobile services, sluggish uptake now does not mean the service never will be significant. Mobile service itself and texting took quite some time to become firmly embedded as a part of consumer behavior, at least in the U.S. market.

Still, some question whether there is much appetite for a limited selection of long-form TV shows in the mobile space. The issue there is whether the preferred delivery mode might not ultimately be some on-demand delivery. Content breadth is more important to users than lots of other attributes.

Right now, that thesis can't be tested as the programming selection is so limited. Only when the variety of programming is about as rich as any typical cable, satellite or telco line-up is can other possible barriers be tested, including price of the handset, price of the subscription and need for dedicated handsets.

And even those attributes can only be truly tested when there's enough ability to download or stream video "over the top."

Comcast Triple Pay Adoption 18%

About 18 percent of Comcast customers actually buy the triple play. And there seems to be some resistance to the notion, despite its fundamental importance for both cable and telephone companies these days.

Qwest executives, for example, have discovered they are leaving money on the table by not selling single play and dual play services more aggressively.

Comcast says it is going to do the same. The triple or quadruple play might be the fundamental packaging strategy.

That doesn't mean every customer is going to buy such a package. And there are lots of reasons why that could be the case. Lack of interest, lack of money, lack of one specific feature, inability to use subscriber identity modules, lack of availability of a specific handset or programming network, contract terms, sticker shock and lack of awareness all can be barriers to triple or quad play adoption.

Real-Time Services: Bandwidth is Not Enough

Real-time services are the future of private and public IP networks. Just as certainly, users are starting to recognize that raw bandwidth is not enough. Quality of experience hinges centrally on quality of service, typically requiring class-of-service mechanisms, virtual private networks and application-aware control of bandwidth parameters.

Thinking Phone Networks might provide an example. The Covad partner offers voice-optimized access and has increased its customer base using that feature by 200 percent in the past two years.

“We believe this expansion will continue as more nationwide customers appreciate the quality and reliability of Thinking Phone services made possible by Covad,” says Steven Kokinos, Thinking Phone Networks CEO.

Thinking Phone Networks’ customers utilize its voice services to connect multi-site
locations, remote workers, and home offices. The issue there is "multiple sites." It's one thing to assure bandwidth quality at a headquarters site. It is quite another to ensure that home office and distributed associates have that same level of access to quality bandwidth.

It isn't clear how well most users understand that, yet, but greater experience, followed by word of mouth and other "social" mechanisms inevitably will create a market for "real time services" bandwidth that is different from "best effort" access.

Covad’s "Voice Optimized Access" product provides the dedicated bandwidth Internet connection that powers VoIP services from more than 50 wholesale partners nationwide.

Subscriptions, Not Ads Drive Cable, Telco Video

There is a notion, incorrect, that advertising revenues will be a big contributor to telco revenue streams as those firms scale up the size of their video entertainment customer base.

Some of the understandable confusion results from glancing at cable industry statistics on overall revenue, including programming networks and cable operators.

While it is true that programming networks derive a huge chunk of their revenue from advertising, cable operators really do not benefit as much.

As this Time Warner Cable chart suggests, advertising actually is quite a small part of the overall revenue mix, and has dropped, percentage-wise, as newer businesses such as high-speed Internet access service and voice have grown.

It's a nice revenue contributor, to be sure. But arguably not more important than churn reduction and retention, in terms of overall revenue contribution. Certainly it is not more important than voice and high-speed data services, going forward.

Time Warner Cable Expects 9% 2008 Revenue Growth

Time Warner Cable expects its 2008 full-year growth rate in revenues to be approximately nine percent, from a 2007 base of $15.955 billion, and its 2008 full-year growth rate in operating income before depreciation and amortization to be in the range of nine percent to 11 percent, from a 2007 base of $5.742 billion.

Time Warner Cable also announced that it is increasing its expectation for full-year free cash flow growth, primarily due to a reduction in cash taxes resulting from the Economic Stimulus Act of 2008. The Company now anticipates that its full-year FCF growth rate will be at least 40 percent.

That's if the newly spun off company can get all its local franchises renewed, a time-consuming if necessary formality, and then does not have time to make any acquisitions in 2008. The odds of the company making it through 2009 without making a significant acquisition or two are fairly low, many observers think.

The company will have the borrowing power and the motivation to extend its footprint.

Qwest Launches 20 Mbps Access Service

Qwest has begun selling two new broadband service tiers for residential and small business customers. Qwest Connect Titanium offers broadband speeds of 12 Mbps downstream and 896 kbps upstream at a standard rate of $64.99 a month.

Qwest Connect Quantum providers 20 Mbps downstream and 896 kbps upstream.

Bundle and annual pricing incentives are available. The company is rolling out the service to 23 of Qwest’s top markets in ten states, reaching two million customers at the end of 2008.