Titanic Battle Shaping Up over Broadband

As busy as people are trying to prepare for the imminent opening of the first of three proposal submission windows for funds authorized by the American Reinvestment and Recovery Act ("broadband stimulus"), a bigger food fight will begin to break out next year as the Federal Communications Commission opens a new rule-making on a national broadband strategy. As much attention as the broadband stimulus program is getting, it is going to be dwarfed by any new framework that emerges from the FCC effort.

The stimulus money is a temporary "shot in the arm." In fact, some question whether there will be much of any long-term impact from the majority of the money that ultimately is allocated, in jobs, an identifiable uptick in broadband use or economic growth.

Any new national broadband policy will reshape the broadband marketplace, creating new winners and losers on the supplier and reshaping the financial terrain for existing and would-be contestants, in ways that contribute "in a material way," to use the financial term, to the health of virtually all service providers, software and hardware suppliers.

Specifically, the FCC now is charged, by statute, to determine how tax dollars will be spent on deploying and upgrading Internet access across the United States. Telcos large and small--and their suppliers--have huge stakes in how those rules are recast. And make no mistake: current business models, revenue streams and company valuations are at stake.

The FCC's responsibility is also to update policies and regulations that have conspicuously failed to keep pace with changes in communications technologies and the different ways in which the US public actually get their phone, cable TV and Internet services.

It would not be overstating the case to say we will witness the biggest single change to U.S. communications regulation since either the 1934 Communications Act, or the Telecom Act of 1996, each of which has been foundational for shaping the U.S. communications environment.

As some of us have been arguing for a half decade or more, it is likely that regulators will be looking at greater structural change involving a form of structural or functional separation, developments which already have occurred in Europe and now are happening in Southeast Asia, and which has happened on a small scale in the United States as well, principally in Rochester, N.Y., where Rochester Telephone agreed to form a new wholesale access company providing local loop services to all licensed providers.

That move will be fiercely resisted by most telcos, you can be sure, as it formally breaks up the vertically-integrated model historically the mainstay in the U.S. market. Cable operators have to worry that they will, for the first time, also be forced to provide widespread wholesale access to competitors as well, something the cable industry always has opposed but which will be hard to avoid if other key providers are required to do so.

Small telcos face equally-large challenges, as a shift to broadband concerns might necessarily reshape rural investment rules in ways that directly harm the existing voice revenue support many hundreds of companies now rely on to support their firms. For hundreds of independent and rural companies, that government support is the single largest income category, vastly outstripping actual direct end user revenues.

The other potential changes are new requirements for minimum bandwidth, control of network management practices and a wide variety of business-model-shaping changes.

If you have any familiarity with the on-going disputes about universal service funds, or the intense pressure created by the debates leading up to the Telecom Act, you have some idea of what is about to happen.

Oddly enough, you will find widespread sentiment that the Telecom Act failed. But you will not find many human beings that believe their own choices, value or communications richness now are worse than they were before the Act was passed. What is clear is the foundational impact any rules changes will have on competitor fortunes. Still, an early prediction: no matter what ultimately happens, no matter which sectors claim they have "won or lost," end users will have richer options than before, with or without rules changes. But rules changes are inevitable.

Comcast to Use Smarter Phones to Enhance Wired Experience

Devices increasingly are key as service providers seek to add value to their wired and wireless experiences. "Compelling end user devices are definitely part of the story," says Chris Mairs, MetaSwitch CTO.

So it comes as no surprise that Comcast plans to roll out new cordless phones that add email and other Internet features, as Verizon is doing as well.

http://www.lightreading.com/document.asp?doc_id=174853&site=cdn

Conference Calls Really Do Need Live Blogging

Seth is right: conference sessions are more valuable--or can be, when a large call is in process--when there is a live blogging or chat function.

http://sethgodin.typepad.com/seths_blog/2009/04/reinventing-the-conference-call.html

More Signs of Prepaid Wireless Surge

MetroPCS added more than 1.5 milion gross customers in the first quarter of 2009, up 59 percent over the same point a year ago, and 684,000 customers after accounting for quarterly churn of five percent.

The growth suggests one thing: more wireless users are keeping their mobile service, but downgrading to prepaid plans. We can make a couple of observations: despite fears, wireless is now so embedded in user lives that it cannot be dispensed with.

On the other hand, there are ways to satisfy that need at lower cost, and consumers are taking that option.

Australia to build $31 Billion Fiber to Home Network

The Australian government is moving ahead with a $31 billion national broadband network that will operate on a structurally separated, wholesale-only basis, with all licensed retail providers able to buy and use the network. The network aims to connect 90 percent of Australian homes with service at speeds up to 100 Mbps. 

Every private company bid submitted in any earlier tender process earlier had been rejected by the Australian government as inadequate.

Instead, a public-private partnership will be commissioned to construct the network, with provatization planned for five years after network operations begin. But construction might take seven to eight years, so it will be some time before an privatization event occurs. 

The network would operate on a wholesale-only, open access basis, separating retail operations and allowing Optus, Telstra and other companies to build services into the system.

Telstra, though, will not be barred from applying to manage the wholesale network, once built. In some ways, the scrapping of the original plan might be positive for Telstra, which now will face for the first time a high-speed optical fiber network that virtually any other retail competitor can use. 

The upside is that although Telstra might not savor the new and more-competitive marketplace, it might be able to salvage a role as the wholesale operator, even as it has to compete as a retail provider buying access from the wholesale entity. 

There are other, shorter-term sub-plots as well. One is the mix of motives, from economic stimulation and job creation, that are blending with the concrete goal of creating a broadband platform; as well as the issue of how well the plan will work out in terms of end user pricing, which affects the ability to raise investment capital to build the network in the first place.

Still, the move potentially ends the stalemate that has prevented Australia from moving ahead on badly-needed broadband upgrades that have been stalled by inability of regulators and policymakers to come up with a solution acceptable to Telstra, the national incumbent. 

http://www.bloomberg.com/apps/news?pid=20601081&sid=aBA74wtO9nDc&refer=australia

IM Most Popular French Online Activity

French Internet users in February 2009 spent more time uisng instant messaging than any other application, including email. Instant messaging claimed the highest share of total time spent at 14.3 percent, followed by social networking at 5.7 percent, say comScofre.  In combination, the two categories accounted for one out of every five minutes spent online during the month. 

Online entertainment accounted for 8.6 percent of time spent and online gaming 2.9 percent share of total time spent online. 

http://www.comscore.com/press/release.asp?press=2763

Wireless "Net Neutrality" Will Lead to Higher Prices

There's a sort of inescapable logic to what wireless network access providers will do if or when mobile VoIP applications are freely enabled, as some policy proponents advocate. Since the entire business model rests on voice revenues, the loss of those revenues will be compensated for in the form of higher mobile broadband access prices.

Existing best-effort plans might be the baseline. But new plans optimized for voice, or conferencing, or other applications, might well emerge. Of course, optimizing might violate some notions of "net neutrality," unless optimizing is available to any provider of voice over a mobile IP network, in which case it might not be a neutrality violation.

But those optimizing services will be an add-on.

You might argue providers can create replacement revenues some other way: selling content or advertising, for example. But the numbers don't work. Build your own spreadsheet and you'll figure that out. There is no conceivable new revenue stream that replaces voice revenues "one for one."

After some years of watching what happens in a robust, mandatory wholesale environment, even European regulators are starting to see what happens. Service providers start spending their money outside the home market, where financial returns are higher.

Investors aren't dumb. Businesses with low growth and margin prospects get less investment than competing alternatives promising a higher return. The current capital stringency is bad enough. Wait until you see a capital strike.

http://www.eweek.com/c/a/Mobile-and-Wireless/Skypes-iPhone-App-May-Force-FCC-Hand-on-Wireless-Net-Neutrality-527564/?kc=rss