Internet Use Now Totally Mainstream

More than a third of U.S. consumers born before 1946 (seniors) use the Internet, according to Pew Internet and American Life Project. Pew also said that more than half of the younger members of this group (ages 62 to 71) are online.

Older users also use the Internet for the same reasons younger users do: to stay in touch with other people. Nearly six out of 10 U.S. Internet users 62 and older use search engines. Among other activities, almost one quarter of the group banks or pays bills online and one fifth are video gamers.

Multichannel video, PCs, game consoles, mobile voice and use of the Internet now are totally mainstream.

Use of digital video recorders is nearing that point, as are text messaging and MP3 players.

But there's still a ways to go with other innovations such as VoIP and mobile broadband. Unified communications is no where close to being mainstream. It typically takes three to seven years for a successful mass market digital innovation to reach 50 percent penetration of households.

The big exception is high definition television, which will reach--and surpass--that status virtually overnight as a result of government mandate in February 2009.

As for the thousands of other bleeding-edge applications, most will fail to gain widespread mass market adoption. That's always the case for digital consumer electronics.

67% Growth in VoIP Server Licenses

Whatever instability may be coming in some parts of the U.S. VoIP market, global growth--especially in Europe--is robust. The most recent analysis by iLocus shows 67 percent annual growth in VoIP server licenses sold globally, with traffic up 35 percent.

For the second consecutive year, Europe outpaced rest of the world in VoIP penetration. All major European operators--whether wireline or wireless--have a VoIP offering in place and have announced that they will be deploying IMS platforms.

The difference between deployments in the U.S. and European markets is the attitude and actions of incumbents. In the U.S. market, incumbents have not yet decided to make a major effort to sell VoIP; in Europe that already has happened. Because of carrier reluctance, challengers, especially the cable companies, have made significant market share gains.

What happened in Europe will happen in the U.S. market, however. At some point, AT&T and Verizon will decide to push VoIP aggressively, and the dynamics of the market will shift as much as they have in the fdial-up and broadband access markets, which initially were dominated by independent providers.

But fixed line replacement isn't the only place to watch for change. VoIP as a mobility and Web or enterprise application is early in its development right now. Though it might seem inconceivable, revenues from those sorts of applications will one day be significant. If that is not apparent it is simply because applications and business models in the mobility and Web and software spaces are seminal. Even Skype, as popular as it is, only represents two percent or so of global long-distance traffic, for example. So it will take some time before anybody notices.

Still, note that nearly 25 percent of mobile virtual network operators--wireless providers that do not own their own networks--already offering or testing mobile VoIP. By 2010 more than two thirds say they will have a mobile VoIP offering in place.

Scottsdale Muni Wi-Fi Shuts Down

Scottsdale's muni Wi-Fi network, operated by Wildfire Broadband, has gone out of business, according to the Scottsdale, Arizona-based East Valley Tribune. As has been the case for nearly all other municipal Wi-Fi efforts, the networks have failed to attract enough customers.

It is reason at this point to theorize that mobile broadband--both data cards for PCs and smart phones--arecannibalizing some of the potential demand. Some of the remainder of demand is satisfied by free Wi-Fi at coffee shops, hotels and other locations.

Wi-Fi is a great technology. It just might not be much of a service provider business.

BroadSoft Targets Mobility, Web

BroadSoft has announced compliance with the 3GPP Multimedia Telephony standard and launched BroadSoft Xtended, an initiative to open its functionality to makers of Web-based and productivity applications. At the same time, BroadSoft has created at developer program

The trio of moves might be viewed in several ways. Most significantly they reflect BroadSoft's belief that the next wave of growth will come from mobile applications and integration of core communications capabilities with all manner of Web and enterprise applications.

At some level the moves also signal that the significance of hosted communications is not limited to replacing legacy Centrex or phone systems, but is part of a larger move towards more sophisticated communications capabilities for many, if not most, Web and enterprise applications.

It's a tough market to quantify, but looking at the size of unified communications services is a part of the whole picture. Ultimately, some communications service revenue will shift from existing categories to "Web enabled" categories.

Beyond that, some of the value will be intangible, such as "stickiness" leading to lower churn or higher ad revenues. Over the near term, unified communications "revenue" will be hard enough to quantify. Web-based rich communications will be even tougher.

"The full-blown developers program and an online marketplace will enable service providers and end users to download applications that integrate BroadWorks with a wide range of productivity, personal, and social applications," says Joe McGarvey, Current Analysis principal analyst.

While the transformation of services to IP presents opportunity for BroadSoft, it also creates challenges. While the company is well-recognized as a leading provider of enhanced VoIP applications, its application suite is also considered by some service providers to be overkill for residential services, says McGarvey.

At the low end of the application server market, BroadSoft faces significant challenges from traditional telecommunications equipment makers, e.g., Alcatel-Lucent, Thomson/Cirpack, MetaSwitch and Sonus.

McGarvey says it will be important for BroadSoft to capture the middle ground of the application server market, where service providers are looking for some enhanced features but do not require the complexity of applications associated with PBX replacement.

To be successful in this space, BroadSoft needs to move down the complexity curve than it is for challengers to move up, McGarvey says.

To be sure, BroadSoft now finds itself challenged by a new set of competitors, including softswitch providers, which have been gradually increasing the breadth and sophistication of their Class 5 application offerings.

Ultimately, market success might not be as dependent on unique features as on ability to make those features available widely on mobile, Web and enterprise applications.

T-Mobile and Sprint: A Transformative Acquisition

If T-Mobile USA parent Deutsche Telekom does decide to attempt an acquistion of Sprint Nextel, and if that bid were to succeed, T-Mobile would emerge as the largest U.S. mobile provider by quite some measure.

Up to this point AT&T, Verizon Wireless and Sprint Nextel have held roughly equal shares of the market, and all three have had more than twice the market share of T-Mobile.

There are many regulatory, technical and even psychological issues to surmount, though.

Consider that T-Mobile and Sprint now operate three classic mobile air interfaces. Xohm will create a fourth. And then there's Long Term Evolution. Complexity means cost, and that's t0o many different networks to continue operating.

Still, Sprint's low stock price and strong Euro have to be driving some hard thinking about the feasibility of pulling such a merger together. Regulatory or other concerns might ultimately deter making of an offer, or scuttle a merger attempt.

But it would be a transformative move for T-Mobile.

VOD: First You Have to Find It

Before any form of on-demand media can be watched or purchased, it has to be found. That's been a growing issue even for linear media as channel counts have risen over the last two decades, not to mention user-generated video found only on the Web, or the growing range of on-demand video options.

In a parallel but almost-perfect metaphor, paper "viewing guides" have become dysfunctional. Even in the walled garden, linear programming, one screen world, there's just too much information, and too many choices, to display. And that means content isn't found.

Those of you who use the Netflix or Blockbuster DVD rental services, or simply try to find something to watch online, will understand the greater problems beyond linear-formatted TV. Search engines are helpful to the extent of locating pieces of content.

But trailers, sampling mechanisms, user recommendationsand recommendation engines and other sorts of processes are about the only way people can discover content they might enjoy.

Even in the walled garden, linear viewing world there are new efforts to aid the discovery process. ReelzChannel is a "media highlights" channel showing movie and TV clips, commentary and content-focused news.

The channel's research suggests its viewers purchase 24 percent more pay-per-view titles than non-viewers.

Also, in a recent study, 76 percent of users said they found out about a movie they had never heard of by watching the channel. About 21 percent watched a movie on premium services because of something they had seen on ReelzChannel. Another 16 percent ordered video-on-demand or pay-per-view titles, the company says.

Some 87 percent of those polled say ReelzChannel's “What2Watch“ promos were helpful when making a viewing decision.

Dead Company Watch

Azaire Networks, which sold a fixed mobile convergence security gateway product, has gone out of business, iLocus says. IPXstream/IPtelephony.org, a content and newsletter provider, also has gone under.

There always are periods of consolidation after big investment waves, and we are at the front of a winnowing process that already has claimed Pulvermedia and Verso.

Similar contraction cycles hit venture-funded CLEC and Internet firms between 2001 and 2003. Now it is VoIP's turn.

The next cycle, which will not begin for some time, is a similar weeding process for consumer-focused video start-ups.