Impatient at Broadband Adoption Pace? Don't Be

Americans are an impatient bunch, and pundits are even more unforgiving. We tend to want everything now, and seem to tire of complicated problems that take a while to solve. Consider broadband, which continues to be seen as a problem in some quarters. There still are calls to "national action" to fix the problem. History suggests there is no problem to be fixed.

Broadband reached 50 percent penetration of the consumer market in 10 years--faster than any number of other highly-popular consumer electronics innovations that do not seem to require "national action" to fix. The popular compact disk player took 10.5 years to reach 50-percent penetration. VCRs, another popular innovation in its day, took 14 years to reach half of homes.

Mobile phones took 15 years to reach half of homes.Color televisions took 18 years to reach 50 percent penetration. PCs took 18 years to reach half of homes. It is worthwhile to recall that prices for all these products initially were quite high, but dropped dramatically as volume rose.

Technology also seems to be the reason why any reasonable end user will tend to say their choices of devices, services, applications, as well as the prices they pay for those products and services, are measurably, sometimes dramatically lower these days than before the Telecommunications Act of 1996, which some contestants deem to be a failure.

Perhaps it is worth observing that end users--consumers and businesses--are far better off today than they were before the Act. That some contestants have fared better than others is undeniable. So perhaps another observation is in order. Despite any failures of the Act, users universally have more choices, more variety and lower prices in just about every segment of communications today, than they did in 1995.

So perhaps what has happened is that technology and open markets have outstripped all the particular policy regimes in a decisive way. It might be fair to say that success has occurred despite the Act. That there are many unhappy contestants is undeniable. But if the objective was an explosion of choices, better applications and lower prices, that has occurred.

That isn't to say a similar outcome couldn't have been obtained under some other set of policies. European regulators have pursed different courses. In a few cases, those different policies have resulted not only in higher broadband penetration, but also have provided higher bandwidth at lower prices. Japan and Korea come to mind.

Still, it probably also is worth noting that both those nations have domestic business cultures quite distinct from those of Europe, Africa, North America, South America and the rest of Asia. State-directed investment plays a significantly different role than elsewhere, and both nations are relatively compact and feature high-density housing. Both those factors, plus state-directed investment, mean both nations can do things that would be difficult elsewhere.

So it is true that U.S. broadband does not have the highest bandwidth or the lowest price among all nations. Those honors are held by small countries, generally with high-density populations (which means short access loops), or vigorous state-sponsored investment. In broadband, as elsewhere, scale makes a difference.

Wireless Bug is a Feature, But Not for Users

Sometimes "bugs" are "features;" the issue being "for whom" it is a feature. One end user "bug" is a bandwidth-saving feature for a mobile provider. Specifically, BlackBerry emails that strip out HTML links, saving as much as an order of magnitude (10 times) the bandwidth required if full HTML were displayed.

"If you are a Blackberry user, you are familiar with the fact that emails containing HTML links don’t display the graphics, but rather cause you to have to scroll down past that jibberish HTML text," says Seeking Alpha author Anton Wahlman. "It’s ugly and annoying, but those of us who are engineering-minded know the reason we have to suffer through this sub-optimal experience: bandwidth."

"By stripping each email of all of those colors and pictures, less bandwidth is utilized," says Wahlman.

This goes to the heart of Blackberry’s main argument to the carriers, such as T-Mobile USA and AT&T. Unlike other email-capable handhelds, Blackberries provide for a more predictable, and lower, bandwidth utilization.

Other devices, such as Apple's iPhone (AAPL), are making some people expect that email on the handheld will incorporate HTML just like it does on the PC.

Blackberry is supposed to be enabling that feature this summer. If there are more than 10 million U.S. Blackberry users, receiving probably 100 emails per day, or one billion emails, the amount of wireless bandwidth needed to support those emails will more than double the average size of the messages.

Fixing the "bug" will also mean eliminating a mobile network provider "feature."

IP VPN Prices Not a Commodity

IP VPN prices vary dramatically, by service provider, by country, and by class of service, TeleGeography finds. For example, while the median price of a 2 Mbps E-1 IP VPN port in London was USD 576 per month in Q1 2008, a comparable connection would cost USD 1,034 in Hong Kong, USD 2,871 in Beijing and USD 6,083 in La Paz, Bolivia.

The wide range of prices quoted by telecommunications companies for similar services within a given city suggests that telcos, too, are having a difficult time finding appropriate prices for their services. For example, in Beijing, prices for 2 Mbps VPN ports varied from just over USD 1,300 per month to nearly USD 5,000 per month.

The rate of price change also varies widely by market. The median monthly price of a 1.5 Mbps T-1 port in Atlanta fell 19 percent from USD 580 to USD 470 between the second quarter 2007 and first quarter 2008.

In contrast, the median E-1 port price in Dubai, one of the most expensive markets tracked by TeleGeography, fell only four percent, from USD 16,538 to USD 15,877.

"The tremendous range and variability of prices reflect that this market is neither transparent, nor commoditized," says TeleGeography analyst Gregory Bryan.

TW Telecom, AT&T Rebranding Costs

TW Telecom--formerly Time Warner Telecom--will have to spend between $6 million and $7 million to re-brand the 2,800-employee company. Of course, it could be worse. AT&T executives have not to my knowledge ever said what it actually cost to conduct a number of big rebranding exercises.

When SBC Communications was rebranded as AT&T, the cost was said to involve spending of about $1 billion. But that appears to be the most-affordable of recent efforts. When AT&T Wireless was rebranded as Cingular, the move is reported to have cost $4 billion. Some three years later, Cingular went back to AT&T, for possibly another $2 billion.

There have been other, arguably less-expensive rebranding efforts as well. There was the cost of rebranding BellSouth as AT&T, said to have cost as much as $2 billion. One has to assume the rebranding of Ameritech as SBC cost at least $1 billion. Add on the earlier rebranding of Pacific Telesis as SBC as well.

Add it up and rebranding probably has cost about $9 billion. Of course, some of that money would have been spent on the original brand names in any case, so it is not as though all of that was incremental spending.

Still, it's a huge expense. And then there's the brand equity partially represented on balance sheets in the form of good will. As they like to quip in the Congress, a billion here, a billion there; pretty soon it's real money.

T-Mobile 3G 20-City Launch in October?

CNet speculates that T-Mobile USA will include a Google Android phone as part of its nationwide 3G wireless network launch in perhaps 20 to 25 markets later this year, and perhaps as early as October.

T-Mobile reportedly plans to include the HTC Dream smartphone as one of its first 3G phones to launch with the network, according to reports.

T-Mobile started offering 3G service in New York City in May. And the company said at the launch that it would roll out the service in other top markets by the end of the year.

The Sony Ericsson Z780, a high-end Samsung cameraphone, and possibly the Motorola ZINE ZN5 also are reportedly to be offered.

Xohm Pricing Model

It's hard to say what might develop if and when the new Clearwire, incorporating Sprint Xohm and Clearwire assets, actually launches new unified offers. For the moment, as Sprint rolls out its WiMAX network in Baltimore, we should expect a la carte usage plans, much on the casual Wi-Fi model.

Sprint has said it will break with the traditional mobile model and offer service without contracts and termination fees.

So far, it seems as though monthly service will be priced around the going rates for comparable digital subscriber line and cable modem services.

Ofcom to Thread Fiber Through a Needle

Ofcom, the U.K. communications regulatory authority, will try to thread a needle this fall as it prepares to create a new framework encouraging fiber-to-customer deployment. On one hand, it wants to convince BT that a reasonable financial return can be earned if it deploys fiber-to-customer network.

On the other hand, Ofcom seems committed to a wholesale regime that allows competitors access to the network. And therein lies the problem. BT will want some assurance that wholesale rates resemble as closely as possible those it might get at commercially negotiated rates. That likely means relatively minimal price control.

BT's competitors will want healthy discounts that mirror what they currently can get for DSL infrastructure. Ofcom likely won't allow that, as such discounts arguably create too much uncertainty about rate of return.

That's a pretty tight needle to try and thread.