ITU Issues Views on Recession Impact on Telecom

At a high level, nobody is completely sure consumer behavior in this recession will match behavior in past recessions, for any number of painfully obvious reasons. There also is some thinking that as broadband had not attained mass adoption status during the last recession, this will be the first test of demand elasticity for fixed broadband.

And nobody seems to believe that wireline voice will in any way be helped. There is probably less consensus on what will happen in the wireless business, but wireless service providers likely are among the best-placed industry segments during the recession, in part because of greater "flexibility in their cost structure and capex and fixed-mobile substitution," a new report by the International Telecommunications Union says.

And though broadband access demand is believed to be relatively inelastic, that almost certainly will not be the case for fixed voice.

"Telecom services are likely to come under further price pressure, as operators will fight for a more cost-focused customer, resulting in further erosion of margins," the ITU suggests. And that is going to favor mobile operators as well.

"The more flexible cost structure of mobile networks means that mobile operators are winning more of the lower usage end of the fixed services customer base," the ITU says. "This has happened in voice, and 2008 has demonstrated that mobile broadband can substitute for light-usage DSL."

For countries where data services are popular, data revenues could be adversely impacted by a reduction in consumers’ real incomes, ITU says. Also, more consumers are likely to opt for prepaid and flat-rate packages for telecom services to try and control their expenditure.

Unemployment may accelerate fixed-mobile substitution, with consumers preferring to switch
fully to mobile services. Young people may delay decisions to adopt a fixed broadband or voice line in addition to mobile service.

Unemployment will accelerate households’ decisions to give up fixed services, either because they are unaffordable, or because a mobile alternative is cheaper.

"In terms of practical pricing strategy, the economic slowdown will increase pressure on operators to reduce prices," the ITU says. Operators will find it harder to promote value-added services and the adoption of new services such as mobile TV will be affected, ITU believes.

$200 Million More in Videoconferencing Service Revenue This Year?

An Association of Corporate Travel Executives survey shows that 71 percent of its member companies plan to spend less on travel this year than in 2008.

According to the trade group, that’s a huge and unprecedented shift in corporate travel mangers’ plans from just five months ago.

ACTE’s new survey shows most companies are seeking to spend 10 percent to 20 percent less on travel than they reported in September of 2008.

Using the most conservative figures for estimating the dollar impact of such cuts, ACTE suggests that the 176 member companies responding to the survey will spend about $880 million less on travel this year than they had planned. If the same estimate is applied to the ACTE’s full membership of 2,400 companies, the impact would be more than $2 billion.

That should lead to opportunities for Web and other conferencing services and applications to get more traction, undoubtedly including many users and companies that have not historically relied on conferencing services, especially those with a video component.

Assume just 10 percent of the avoided $2 billion is spent on video-enabled conferencing services. That's a gain of $200 million in service provider revenues.

Enterprise IP Telephony Slows, In-Stat Says

The struggling economy will slow the growth of enterprise IP telephony adoption, In-Stat researchers suggest. Some 32 percent of enterprise-size businesses say the economic situation has slowed their VoIP deployment plans.

Broadband IP telephony remains the most common carrier-based business VoIP solution with revenues exceeding $1.1 billion in 2008, compared to $857 million for hosted IP Centrex service within the United States, In-Stat says. 

Adoption varies significantly by size of business, with enterprise-sized businesses preferring a partial deployment, while small office and home office users are more likely to go IP-only.

About 13 percent of U.S. businesses use both carrier-based and premises-based IP solutions. 

Slightly more than one in three US businesses that have deployed VoIP use it exclusively, In-Stat says.  Many more businesses use VoIP as a partial voice solution. U.S. businesses are also beginning to embrace voice-enabled IM capabilities, particularly among younger workers. 

Mobile Backhaul = 30% of Opex

Mobile backhaul now represents more than 30 percent of mobile service provider operating costs, says Juniper Networks. If one looks at opex and adds depreciation, backhaul can represent 70 percent of on-going costs.

Up to this point, most of the mobile backhaul has been provided by T-1 lines or DS-3 connections, in some cases.

But deployment of 2.5G and 3G technology has lead to an increased backhaul requirement, to say nothing of coming 4G requirements. So where base stations that previously required one or two T1/E1’s for backhaul now need four to six T1/E1’s. The result has been a 200 percent to 400 percent increase in required backhaul capacity and its associated increase in operating expense costs.

Mobile Backhaul Services $15 Billion in 2011

Telcordia analysts predict there will be a $15 billion wholesale transport revenue opportunity in the mobile tower backhaul market by 2011, based on new needs to get broadband backhaul to more than 200,000 wireless network cell sites in the United States. 

Satellite Pioneer Andy Werth Dies

Andrew (Andy) Werth, a satellite industry pioneer, died January 28.  He was 74 and lived in Washington, D.C. 

He co-founded a digital satellite communications company that eventually became Hughes Network Systems. Mr. Werth later became president of the company’s international division.

Andy was an avid cyclist, finishing one place short of qualifying for the U.S. cycling team in the 1952 Olympics, though he won numerous other events in his youth, including the New York State Junior Championship and the Tour of Somerville. A victory in a nine-day cycling event in Canada earned him enough prize money to pay for his first semester of college. He resumed cycling later in life, and won the Masters National Track Championship in 2000, 2003 and 2004. Until slowed by illness, he was an active member of DC Velo, a Washington-based cycling club.

Beyond that, what many of us always will remember is his mentoring and teaching, born, no doubt, of his genial and caring nature. Thanks, Andy. 

Mr. Werth was born in Saarbrucken, Germany on March 2, 1934, to a German father and a French mother. His family fled the Nazis, and by the time he was 10 years old, young Andrew had lived in four countries, learning a new language with each move. His fluency in many languages and ease with international clients helped him establish Hughes’ presence in 17 countries and build international sales to $1.4 billion by the time he retired in 2000. 

Mr. Werth, a graduate of Columbia University and an Air Force veteran, began his career at ITT Laboratories in New Jersey. Following the launch of Sputnik, he was assigned to do research in digital satellite communications in the late 1950s.

He left ITT for satellite operator COMSAT Corp. in 1964, and his first job was working on the Early Bird project team with the manufacturer, Hughes Aircraft Company. He soon transferred to COMSAT Laboratories, where he developed a series of high performance satellite modems and was awarded a number of patents in satellite communications applications. His work in the digital satellite communications was cited in 1982 when he was named a Fellow of the Institute of Electrical and Electronics Engineers, the profession’s highest award.

In 1972, Mr. Werth and a group of colleagues left COMSAT to form Digital Communications Corp. (DCC), a company that specialized in building sophisticated digital communications systems utilizing both terrestrial and satellite technology. 

The company prospered and was acquired in 1978 by Microwave Associates and became MA/COM Telecommunications, which was acquired by Hughes Electronics in October 1987, becoming Hughes Network Systems (HNS).

Mr. Werth was initially general manager of the satellite communications division. He later led international marketing and sales for a new satellite technology, very small aperture terminals (VSAT), that eventually became the backbone of the private satellite network industry, connecting millions of retail establishments, hotels, gas stations, and other users. 

Software-Based Telecom (Video in 5 Parts)

Voice has for decades been a "service" sold by the "the line" or as an "application" created by a premises switch. Now voice also is a feature of instant messaging, Web sites, enterprise applications and email. As a result, there now are multiple business models, revenue streams and applications that use the "voice" feature. This panel will examine some of the ways this is happening, and what it means for traditional providers of voice services.

Gary Kim, Editor-in-Chief, IP Business

Rodrigue Ullens, Co-founder & CEO, Voxbone

Trevor Baca, VP, Software Engineering, jaduka

Michael Veys, COO, JAJAH

Eric Reiher, Founder & CTO, Mobivox

Click on "Related Article" at the bottom of this post for the first of five parts. Click "Watch in HD" if you have the bandwidth.