More PC Entrants in Smart Phone Business?

What's the difference between a smart phone and a standard PC? Not much, more PC vendors are hoping. Computer makers Acer and Dell are said to be developing high-end mobile phones to complement their successful laptop and desktop computer portfolios. Such a move would not only help to sustain growth during the recession, but also put them in a better position to counter the growing threat of rival Apple.

As successful as they have been, a move into the smart phone arena will be challenging, as other suppliers have found when entering the mobile device business for the first time. Not many "PC" suppliers have found the success Apple has had in the MP3 music player and smart phone markets. In fact, failure is more common than success.

Dell and Acer may be bolstered by the reasonable success Hewlett Packard has had with its iPAQ smart phone for reassurance. And Microsoft is an almost-perennial candidate for doing so.

They likely are more emboldened by HTC's success, though that firm has had the easier task of producing devices under its own retail brand, not making the leap into the mobile device area for the first time.

It seems that Dell has already produced prototype devices, based on the Windows Mobile and Android platforms, as part of a scheme to commercialize an iPhone-type device, complete with touch screen.

Consumer Sentiment Shift?

The important thing about the recession is to look for signs of change, for evidence of a bottoming, as the recession now has been formally working its way through the economy for 14 months. Though it is not definitive by any means, a shift in consumer sentiment already might be occurring. 

According to the latest ChangeWave survey of U.S. consumers, conducted January 5-9, there were signs that consumer spending may finally be stabilizing.  While overall spending still looks terrible, ChangeWave notes, the 90-day outlook is not quite as "horrible" as it was in the December 2008 survey. 

Fifty-seven percent of U.S. respondents said they'll spend less during the next 90 days than they did a year ago, but that's three points better than in the December survey. Another 13 percent said they'll spend more -- two points better than previously. 

Respondents were also queried on their current impressions of the economy and, once again, while things look bad, they don't appear quite as awful as they did in December. About 12 percent said they think the economy will improve in the next 90 days, three points better than in December. About 56 percent said they think the economy will worsen during the next 90 days, but a significant 10 points better than the December low.

Other sentiment indicators also show some improvement, according to the study.

Some five percent said they are very satisfied with the current state of their personal finances, up one point from the record low in December, while another 39 percent said they're somewhat satisfied, up eight points.

Twenty-six percent said they are now more confident in the U.S. stock market than they were 90 days ago, 13 points better than previously. Only 31 percent said they're less confident, a 25-point improvement 

The new data is important because the first step in the recovery is for a bottom to be reached. Changing sentiment is one such sign. In past recessions, peak unemployment claims have been an indicator as well, as significant layoffs are a lagging metric. Often, if not typically, the "bottom" is reached about 30 days after a month where "peak" layoffs occur. 

AT&T Wireline Revenue Now Led by Video

Here's what some might consider the key take-away from AT&T's fourth quarter results: "Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress for our company," says Randall Stephenson, AT&T chairman and chief executive officer.

There are other noteworthy take-aways, though. The video business now is leading wireline revenue growth at AT&T. It doesn't appear AT&T is doing as well as Verizon is in the broadband access area, though one must infer that from the "non-reporting" of digital subscriber line customer performance. 

Revenue growth was driven by 13.2 percent wireless gains and a 14.2 percent increase in wireline IP data, which include AT&T U-verse services and business offerings such as VPNs and managed Internet services.

Verizon can say the same, as it reported record growth in video and data services. Verizon added 303,000 net new FiOS TV customers and 282,000 net new FiOS Internet customers, the highest ever for the company.

It also posted a 14.3 percent increase in consumer ARPU in legacy telecom markets and  8.4 percent increase in revenues from business services. 

U-Verse digital TV growth accelerated. AT&T signed up 264,000 new U-Verse TV subscribers, its highest ever. Combined with Verizon's 303,000 new FiOS subscribers, it seems like the telcos took solid share from cable and satellite last quarter.

U-verse network deployment now reaches 17 million living units. 

AT&T added 2.1 million net wireless subscribers, down from 2.7 million in the fourth quarter of 2007. Verizon, added 1.2 million net subscribers during the fourth quarter.

Data = 44% of Verizon Wireline Revenues

The most-interesting tidbit from Verizon's fourth-quarter earnings was the news that wireline data revenues now are 43.6 percent of total wireline revenues. That of course is significant because Verizon and other telcos are working to replace slipping wireline voice revenues as their revenue mainstay.

And though wireless obviously is important, the landline results show the contributions broadband services can make for wireline providers, exclusive of wireless services. 

Wireline data revenues of $5.2 billion in the fourth quarter 2008 represented an increase of 10.9 percent compared with the fourth quarter 2007.  

Total broadband connections were 8.7 million, a net increase of 214,000 over the third quarter 2008.  This includes a decrease of 68,000 DSL-based Verizon High Speed Internet connections, which was more than offset by the increase in FiOS Internet customers.  The 8.7 million is an increase of 8.2 percent year over year. 

Broadband and TV products now account for more than 31 percent of consumer ARPU in legacy markets, compared with 22.7 percent in the fourth quarter 2007.  The ARPU among FiOS customers continues to grow and is more than $133 per month. 

Verizon: Strong 4th Quarter

Observers watching intently for some sign of how the recession is affecting communications services have a major new data point. Verizon Communications has reported what happened in its fourth quarter, and revenue growth accelerated.  There is lots more data required, but so far, the recession has not had a negative effect on Verizon. 

In fact, Verizon Communications continued to grow sales of broadband, wireless and strategic business services in the fourth quarter 2008. Verizon's total operating revenues grew 3.4 percent in the fourth quarter 2008, increasing to $24.6 billion from $23.8 billion in the fourth quarter 2007.  

After adjusting for the spinoff of non-strategic local exchange and related wireline business assets early in 2008, this represents an increase of 4.6 percent. 

Wireless organic growth totaled 1.4 million net customer additions. Verizon Wireless also continued to have low churn of 1.35 percent churn among all customers, and 1.05 percent among the company's retail post-paid customers. 

Average monthly revenue per customer increased for the 11th consecutive quarter.  Total service ARPU of $51.72 was up 1.4 percent year over year, reflecting strong growth in total data ARPU, which was up 27.9 percent over the same period. 

Verizon added 303,000 net new FiOS TV customers, compared with 226,000 in the fourth quarter 2007. 

FiOS TV sales penetration (sales as a percentage of potential customers) increased to 20.8 percent, compared with 16.0 percent in the fourth quarter 2007. FiOS TV service was available for sale to 9.2 million premises by year-end 2008.  This represented a 57 percent increase in the availability of FiOS TV - and, by extension, of "triple play" bundles of FiOS TV, Internet and voice services - since year-end 2007. 

Verizon added 282,000 net new FiOS Internet customers, compared with 244,000 in the fourth quarter 2007.

FiOS Internet sales penetration increased to 24.9 percent, compared with 20.7 percent in the fourth quarter 2007. FiOS Internet was available for sale to nearly 10 million premises by year-end 2008. 

Broadband and video revenues from consumer customers totaled nearly $1.2 billion in the fourth quarter 2008, representing year-over-year quarterly growth of 42.0 percent. 

Growing revenue from broadband and video services drove consumer ARPU in legacy Verizon wireline markets (which excludes consumer markets served by the former MCI) to $68.46 for the fourth quarter 2008, a 14.3 percent increase compared with the fourth quarter 2007. 

Verizon Telecom, which serves domestic consumer and small-business customers, and Verizon Business, which serves large-business and government customers worldwide, each had 2.3 percent year-over-year quarterly revenue declines, continuing the secular trend of voice line loss  This was the smallest decrease in 12 quarters, however. 

Total broadband connections were 8.7 million, a net increase of 214,000 over the third quarter 2008.  This includes a decrease of 68,000 DSL-based Verizon High Speed Internet connections, which was more than offset by the increase in FiOS Internet customers.  The 8.7 million is an increase of 8.2 percent year over year. 

Broadband and TV products now account for more than 31 percent of consumer ARPU in legacy markets, compared with 22.7 percent in the fourth quarter 2007.  The ARPU among FiOS customers continues to grow and is more than $133 per month. 

Wireline data revenues, which represented 43.6 percent of total wireline revenues, were $5.2 billion in the fourth quarter 2008, an increase of 10.9 percent compared with the fourth quarter 2007.  

That might one of the more-important developments. Where its wireless business had been anchored by voice, Verizon now has grown data to nearly 44 percent of total. 

Conferencing Apps Lead UC Deployments?

Conferencing applications seem to be lead unified communications applications, according to a survey of IT professionals surveyed on behalf of CDW Corp. 

CDW's poll found rich media conferencing strategies are emerging as a dominant approach to UC. Some 39 percent of respondents report their organizations are choosing that approach over telephony-centric approaches (32 percent), email-centric (18 percent) and instant messaging and presence approaches (11 percent). 

While the survey found that only six percent of organizations report their UC deployments are complete, it also uncovered gathering momentum for UC adoption, with 20 percent of organizations actively implementing UC and 33 percent actively planning for implementation. 

Seventy percent of organizations currently in the UC planning and implementation phases expect to complete their adoption within two years. 

Sixty-one percent of respondents identified increased productivity and 56 percent identified operating cost reductions as the most important benefits. Other benefits cited included more reliable communication (48 percent), improved cross-functional communication (44 percent) and more effective use of remote or mobile workers (41 percent).

Wireless Substitution, Cable Digital Voice Cost U.S. Telcos $23 Billion a Year

In-Stat researchers estimate North American cable operator digital voice service revenues will hit just under $10 billion during 2009, from an installed base of 23 million cable telephony households.

Cable telephony subscriber growth continues to be strong, with almost eight million new subscribers added around the world in 2008, says In-Stat. Growth in North America has been particularly strong.

Globally, cable telephony service revenues represented about $12.6 billion in 2008, up from $10.7 billion in 2007.

Total worldwide cable telephony subscribers reached 37 million by the end of 2008, and will rise to over 64 million by 2012, In-Stat projects.

So something on the order of $9 billion in annual revenue seems to be earned by U.S. cable operators in voice revenues that used to be provided by U.S. telcos. In fact, the revenue loss for telcos is greater, since most customers switch to cable for the lower prices.

If one assumes a 20-percent average discount, that's a loss of nearly $11 billion in lost U.S. telco voice revenue.

Assume there are 20 million U.S. households that have gone wireless-only, with a former average monthly bill of $30. That is about $7.2 billion in "lost" or "shifted" revenues. If one assumes a more-likely monthly bill of $50 a month, the lost revenue amounts to $12 billion.

In that case, wireless substitution and losses to cable operators are about equal contributors to telco voice line losses.