Investment Incentives Key for National Broadband Plan, McDowell Says

As part of the recently passed American Recovery and Reinvestment Act of 2009 ("stimulus package"), the Federal Communications Commission must create a national broadband plan.

Commissioner Robert McDowell says “it is essential that our plan give current and prospective broadband network and service providers the proper incentives to deploy new technologies."

"We must also provide entrepreneurs with the flexibility to make full use of all available spectrum, including the television white spaces, to backhaul broadband traffic," McDowell says. "In order to attract investors to fund the build-out of new networks, we must not engage in rulemakings that produce whimsical regulatory arbitrage."

"Rather, we must allow market players to succeed or fail on their own merits and not due to the government picking winners and losers," McDowell says. "In short, our rules must allow network operators to have a reasonable opportunity to pay back their investors. That’s the only way to improve existing networks and build new ones.”

Broadband is Partly an Availability Problem; Partly a Demand Problem

"Predominantly, even in contexts with reliable supply of broadband, it is consumer demand for broadband that is the tallest barrier to adoption and represents America’s competitive vulnerability," says Connected Nation.

It might be worth keeping that in mind as plans for the broadband stimulus program operated by the National Telecommunications & Administration and Agriculture Department's "broadband stimulus" rules are finalized.

There clearly is a physical access problem in rural areas (at least in terms of wired access: though some locations may not have clear line of sight, multiple providers of satellite access are available, and it is possible to supply speeds up to perhaps 5 Mbps using satellite), but broadband availability is not the same problem as lack of adoption. In fact, people have lots of reasons not to buy services they already have access to.

The largest barrier to broadband adoption is a lack of awareness about broadband’s benefits, Connected Nation says. Nearly one-half (44 percent) of those with no home broadband connection say “I don’t need broadband.”

Likewise, the top barrier to computer ownership is also a perceived lack of need. Nearly two-thirds

(62 percent) of those who do not own a computer say “I don’t need a computer,” Connected Nation says.

In other cases, perceived cost is an issue. Nearly one fourth (24 percent) of those who do not own a computer cite the up-front cost as a barrier. Similarly, nearly one-fourth of those without a home broadband connection say broadband is too expensive.

Four out of ten parents with children who are without a home computer see no need for having a computer in the home. And nearly one-third (30 percent) of parents with children who do not have a home broadband connection see no need for a broadband connection.

More than one half (56 percent) of people with disabilities who do not own a computer see no need for having a computer in the home. Four out of ten people with disabilities who do not have a home broadband connection see no need for a broadband connection, Connected Nation says.

Close to one half (42 percent) of rural residents without a home broadband connection say it is because they do not need broadband. This compares with 19 percent of these rural residents who say they do not subscribe because broadband service is not available in their area.

Additionally, 22 percent of these rural residents say broadband is too expensive.

http://www.nga.org/Files/pdf/0812BROADBANDCHALLENGE.PDF

Internet Video Complementary to Cable, Satellite and Telco Video, Study Indicates

Fears that the recession will encourage more and more people to drop cable or satellite TV service and rely on free online video services appear to be exaggerated, Pike & Fischer researchers say. Some might say grossly exaggerated. In a recent survey, less than half of one percent of respondents indicated they would cancel a multi-channel video subscription.

That said, about 15 percent of respondents said they intend to downgrade to a lower-priced video subscription this year, through such means as giving up premium channels. Both the findings are consistent with consumer behavior in past economic recessions.

Typically, consumers hang on to their subscriptions and do not disconnect. They do however tend to downgrade premium services or postpone upgrades.

About eight percent of respondents said they plan to upgrade their service to receive expanded numbers of channels or advanced services such as high-definition TV.

Although there are no signs yet that the Web is on its way to replacing traditional TV, a substantial number of respondents said they are turning to the Web to watch video, Pike & Fischer says. About 32 percent of respondents to the survey said they regularly watch video from Web sites such as Hulu, YouTube and iTunes.

"The results indicate that consumers appear to be willing to continue paying for cable or satellite TV, despite the fact that they can get a vast amount of shows for free or very low cost on services like Hulu and Veoh," says Scott Sleek, Pike & Fischer director. "But they don't appear to be willing to spend any extra money for premium channels or on-demand movies. And they're increasingly willing to go to the Internet to watch their favorite shows."

Telco of the Future is a Software Company

"The telco of the next five years has to be a software company," says John Lazar, MetaSwitch CEO. That statement is rich with implications for business strategy, organization, investment and priorities, but must at least incorporate the ability to "create and tear down" whole applications, service or features very rapidly, without labor-intensive physical processes. That's why MetaSwitch believes in IP Multimedia Subsystem.

The meaning does not extend as far as the notion that access networks and a range of services related to voice, data and video services will be unnecessary. What Lazar means is that since nobody really can predict what the killer app of the future is, providers simply must have the ability to react quickly when users suggest demand exists for any application that benefits from network access.  

And the access and services platform has to transcend silos. "You have to innovate quickly and build links between things," says Lazar. "Things you don't expect will stick," he notes, reminding people that  "nobody predicted SMS (text messaing) would be the huge success it hsa turned out to be."

But addressing both the current recessionary climate, which has nearly everybody reacting caustiously, Lazar also warned that some "people are not thinking ambitiously enough." There are opportunities to be seized, but action is necessary. And Lazar predicts innovators will do well in this recession.

There are constraints, to be sure. "Damn the dollars, full speed ahead" may not be a strategy many firms can embrace. But keep in mind: when somebody, or a company, says "something can't be done," you have to translate.

What the speaker means is that "I, or my organization, for a host of very-real reasons, cannot do it." That is different than saying something really cannot be done.

Other speakers may well say "something is possible, and can be done," because they do not have barriers of one sort or another that prevent them from doing something others say "cannot be done."

Over the next five years, people will do things that "cannot be done." They will be done for one simple reason. Despite a host of reasons why one contestant says something "cannot be done," others will operate without those constraints.

Mobile Broadband PC Data Card Growth Decelerates

Mobile broadband PC card accounts continued to grow in the fourth quarter of 2008, but at a much-reduced rate compared to the prior six quarters, researchers at comScore say. But it is a product that continues to have an enviable growth pattern.

PC data card adoption grew 163 percent overall in 2008, slightly ahead of the 157 percent growth rate in 2007. However, despite this rapid adoption curve, fourth-quarter growth showed the first signs of decelerating growth. On a quarter over quarter basis, the subscriber growth fell to just five percent, following sequential growth of 22 percent in the third quarter of 2008.

One can speculate about the reasons for the slower growth rate, but one obvious explanation is a deceleration of employment, reducing the number of users whose consumption is subsidized by their employers. Add to the that the slowing economy, and one probably has all the explanation one requires.

Consumer users might also be choosing to access the mobile Web using their smart phones, as a data plan already is required, and the logic of paying for another subscription plan to access the Internet and Web applications probably is unattractive.

PC Data Cards Cannibalize Landline Usage

Researchers at comScore say PC-based mobile broadband usage largely displaces tethered PC Internet usage. That is not to say wireless broadband is displacing fixed broadband, but only to note that most users do not spend more time online overall, when both mobile and fixed modes are available.

Looking at total hours of use in the fourth quarter of 2008, comScore found that the U.S. Internet user spent 90 hours online, or roughly one hour a day. Users who had both fixed and mobile broadband access spent 89 hours online during the quarter, using mobile or fixed access.

Of PC data card users with both a PC data card and a wired connection, 25 percent of their total online time (22 hours) was spent using a PC data card.

The rather clear implication is that PC mobile broadband is a substitute for fixed access, and does not increase the amount of time the typical user spends online.

There are some obvious implications. Over time, the typical user will start to see broadband access as something they have, irrespective of network. They will start to see this as a value that is measured against the cost of satisfying that need.

They probably are going to approach this as "broadband access is worth X dollars to me every month." They are not going to indefinitely pay for multiple accounts, supporting a single device, much less multiple accounts supporting multiple devices, forever.

The logic likely will parallel the way some wireless-only users behave. They simply decide that the ability to talk and text is worth some finite amount of money, and conclude that paying for that capability twice does not make sense. So they drop landline voice service and use some of that money to pay for heavier mobile usage.

Overall spend probably doesn't change much. As with so much else these days, consumers are willing to switch behavior when functionally equivalent products are available, and when use of those products costs no more than what they already spend, or costs less.

http://www.comscore.com/press/release.asp?press=2771

More Qualms About Broadband Stimulus: This Time From Small Rural Telcos

Large U.S. telcos have their doubts about whether it will make any sense at all to apply for any funds under the National Telecommunications & Information Administration's portion of "broadband stimulus" funds, and generally are barred from applying under the Rural Utilities Service rules.

It appears small, independent, rural telcos have similar qualms. Attendees at a MetaSwitch Forum workshop on the broadband stimulus plan were shaking their heads in disbelief about "strings" attached to receipt of funds under the RUS plan, in particular the nebulous language about investments in access that allow multiple providers to compete.

Depending on how the final rules shape up, it is conceivable that most telcos and cable companies will decide not to participate directly.