Verizon and AT&T: F. Scott Fitzgerald Said it Best

First-quarter financial reporting by AT&T and Verizon Communications now illustrates clearly how diverse telephone industry contestants, and the market, now has become.

Wireless now constitutes 57 percent of Verizon Communications consolidated revenue. Also, 27.9 percent of service revenue comes from data, with 58 percent of data revenue now earned from non-messaging services.

At AT&T, fully 72 percent of revenue now comes from sources other than landline voice.

Compare that with revenue sources at a typical independent, probably rural telephone company. There, revenues are very much tied to voice landlines in service. A typical small telco might earn 45 percent--nearly half--of its money from access revenues (terminating long distance traffic for another carrier), according to Telecom Think Tank.

About 35 percent of total revenue comes from universal service funds. Local service fees paid by end users is about 18 percent of total revenues.

Add it all up and 98 percent of small telco revenue is dependent on active voice lines. So note the clear dichotomy. AT&T and Verizon represent something on the order of 80 percent of all U.S. communications market share. And for these two companies, mobility drives the business, while multi-channel TV is becoming a key contributor, with broadband Internet access, to overall revenues.

Verizon also had 299,000 net adds for its FiOS TV service, which now is at 23 percent penetration of homes that can buy the service, and added 298,000 net FiOS Internet access customers, bringing penetration up to 27 percent.

Most other telcos do not have the option of relying on mobility, television or global enterprise customers to dramatically change their revenue composition. That is the big cleavage in the U.S. telco market.
The rich are different from you and me, " F. Scott Fitzgerald once wrote ("The Rich Boy" in the volume of short stories "All the Sad Young Men."). One might say the same about AT&T and Verizon, compared to virtually every other telecom company in the U.S. market.

For AT&T and Verizon, the transition to new revenue sources--away from wired voice--is largely completed. For many other telco, the future pattern is less clear.

Very-small telcos often also own separate cable TV or local wireless operations. The good news is that the "video" and "mobile" functions possibly already are provided. The less-good news is that small video and small wireless operations do not spin off the same level of gross revenue or margin that the national operators are able to.

So some independent telcos might well be said to have, or will in the future have, the same basic wireless-video-broadband strategy employed by Verizon and AT&T. Many others, though, will not be able to do so, and will have to craft strategies based on a different pattern. The issue now is what those patterns might be.

Opera Mini: More Evidence of Rapid Mobile Web Use

In March 2009, Opera Mini had over 23 million users, a 12.1 percent increase from February 2009 and more than 157 percent compared to March 2008.

Opera Mini users viewed over 8.6 billion pages in March 2009. Since February 2009, page views have gone up 17.4 percent. Since March 2008, page views have increased 255 percent.

In March 2009, Opera Mini users generated more than 148 million MBytes of data worldwide. Since February, the data consumed went up by 19.3 percent.

Data in Opera Mini is compressed up to 90 percent. If this data were uncompressed, Opera Mini users would have viewed up to 1.4 PBytes of data in March. Since March 2008, data traffic is up 319 percent.

http://www.opera.com/media/smw/2009/pdf/smw032009.pdf

Internet has Fragmented: Mobile, Video Will Accelerate Change

Though it is painful for many Internet proponents, the "Internet" now has fragmented. Though in a physical sense there might be said to be "one" Internet, in practice this is no longer the case.

There are lots of private networks, language communities have developed, and national government restrictions on unfettered access to content and use of services. In some sense, it still is true that any end point can reach any other public endpoint.

But we now are witnessing the birth of a mobile-optimized "Internet" as well as a "video-optimized" net, the primary constraint being screen size for the former, bandwidth the issue for the latter.

http://mashable.com/2009/04/27/my-internet-your-internet/

Bandwidth Caps are Just Buckets

Lots of people get upset about bandwidth caps that strike me as extraordinarily generous. Does anybody think the planet or the economy would be better off, companies better able to improve service or people given incentives to "do the right thing" if electricity, gasoline, water, natural gas or heating oil were sold on an "all you can eat" basis.

This is simple economics, folks. Most people can do all they want without ever worrying about bandwidth caps. That's why people like flat rate pricing. And most people don't abuse the reasonable use rules.

But when there is literally no penalty for consuming as much as some people seem to want, you get what economics teaches you will get: over-consumption.

I don't necessarily like my electricity or water rates. But I conserve because there is a penalty for unrestrained use.

Consider the difference between wireless "unlimited" plans and other plans that simply offer more minutes or capacity than you actually use in a month. Is there really any practical difference--for most people--between "truly unlimited" and "more than I can use" plans?

Caps are just buckets. As long as the buckets are capacious enough, the plans clear enough, the usage information available and the prices reasonable, buckets work. Bandwidth caps are just buckets.

http://stopthecap.com/2009/04/23/hissyfitwatch-cutting-off-customers-who-use-too-much-in-austin/

Video, Social Networking Changing the Web

The growing popularity of online social networking and video content is deepening web users’ engagement with the Internet and is causing a dramatic shift in the global online landscape, says the Nielsen Company.

Nielsen’s research shows that since 2003, the interests of the average online user have shifted significantly, evolving from use of “short-tail” portal-oriented browsing sites, such as shopping directories, guides and internet tools, to sites that contain more specialized “long-tail” content geared to specific and interactive user interests.

This change is manifested by the fact that video and social networking sites are the two fastest growing categories in 2009, and will necessitate new ways of thinking about online marketing, Nielsen says.

The number of American users frequenting online video destinations has climbed 339 percent since 2003. The unique audience for online video surpassed that of email in November 2007.

Time spent on video sites has shot up almost 2,000 percent over the same period. In the past year, unique viewers of online video grew 10 percent, the number of streams grew 41 percent, the streams per user grew 27 percent and the total minutes engaged with online video grew 71 percent.

There also are 87 percent more online social media users now than in 2003, with 883 percent more time devoted to those sites, Nielsen says.

http://www.marketingcharts.com/television/socnets-web-video-radically-alter-online-behavior-8838/?utm_campaign=rssfeed&utm_source=mc&utm_medium=textlink

Will Consumers Follow Through on Wireless Plans?

Some quarters are more important than others. The first quarter of 2009, for example, will provide an important test of whether consumers are "putting their money where their mouths are." The reason? Some surveys have consumers telling researchers they will cut back or drop important communication services.

A recent survey by Pew Research Center, for example, has some 20 percent of respondents reporting they’ve gone with a less expensive cell phone plan, or canceled service altogether. About 22 percent adults say they are saving money on their cell phone bills.

Young adults, the group that is the most likely to use mobiles, are the most likely to have taken this step: 30 percent of respondents under the age of 30 and 20 percent of other adults say they have changed cell plans or dropped service because of the recession.

Three-in-ten adults with family incomes below $30,000 say they have changed or cut their mobile service, and 13 percent of those making $100,000 or more say they have done so as well.

If those respondents really are acting as they say they will, we might expect a bit of an explosion as mobile providers report first-quarter results. To be sure, over the last couple of quarters there has been a clear upsurge in use of pre-paid mobile services, generally interpreted as a cost-saving measure.

Still, AT&T, the first mobile provider to report first-quarter results, had a wildly successful first quarter for post-paid plans. There are of course some other logical developments we might be watching for. Among the obvious economy measures are switching from post-paid to pre-paid plans, and that clearly is happening.

On the other hand, we will be watching for any signs of actual, industry-wide shrinkage of wireless accounts. A simple switch to pre-paid generally reduces average revenue per user, while maintaining subscriber numbers. That likely means some shift of market share among wireless providers, even if it does not automatically suggest overall subscriptions will dip.

Based solely on the AT&T results, respondents are not necessarily behaving as they say they will.

http://pewresearch.org/pubs/1199/more-items-seen-as-luxury-not-necessity

New York Times Equity Now Worth Zero?

Quantum changes--such as when a liquid turns to gas or solid--are highly disruptive. That's what we've seen this year as decades of gradually-worsening business models have toppled major U.S. newspapers. Now one financial analyst says debt at the New York Times is so high it essentially values the company's equity at zero.

http://jacksonville.bizjournals.com/jacksonville/stories/2009/04/20/daily36.html?ana=yfcpc