Leap Wireless Applies for Stimulus Funds

Though major telcos and cable companies, as well as many independent rural telcos seem to be passing on applying for broadband stimulus funds, it appears wireless firms are active.

Leap Wireless says it has applied for a grant to supply 23,000 low-income families in Baltimore, Houston, Memphis, San Diego and Washington, D.C. broadband access and digital literacy training.

Yonder Media, a Reno-based wireless broadband provider to rural communities, also has applied for funds to deploy 150 3G rural wireless broadband networks, serving 400 communities.

Qwest, Comcast, AT&T and Verizon did not apply, and that was not unexpected. The Rural Utilities Service rules generally bar firms such as Qwest from applying for support for their rural operations if they also serve at least one metro market in a state. And none of the major providers were too happy about strings attached to the receipt of funds, which affect the business models and practices the companies can use.

Level 3 Communications likely will apply for funds to support middle-mile facilities that can be used by local access providers.

Sprint Launches 4G in Las Vegas, Atlanta and Portland, Ore.

Sprint Nextel has launch its 4G mobile broadband service in Las Vegas, Atlanta and Portland metro areas. The service offers peak downlink speeds of more than 10 Mbps and average downlink speeds of 3 Mbps to 6 Mbps, three to five times faster than the 3G service offered by any carrier today, based on average download speeds, and without bandwidth caps, for $70 a month.

If you are a typical 3G user the unlimited service won't mean that much. Few 3G users use anywhere near the 5 Gbyte monthly cap, costing $60 a month.

Heavy video users might want to consider it, though. The additonal bandwidth is more than adequate for quality video viewing, and the lack of a cap means you won't have to worry about blasting through your cap.

Of course, the decision also depends on where you live, and where you use mobile broadband. If you are a road warrior, the coverage simply isn't wide enough to be of exceptional use, though the modem also will allow you to use the Sprint 3G network anyplace there is 3G service.

For users who normally use 3G, Sprint Nextel offers a $10 a day pass that allows 4G access when a user is in an activated market.

DirecTV Launches Broadband-Only Sunday Ticket

Broadband access providers rightly are concerned that their big broadband pipes over time will allow users to bypass service provider voice and video services, and DirecTV just fired a limited shot in that direction.

Though direct competition from Hulu and other sites is a bit muted since those services typically make sure online content is not made available at the same time the same content is showing on the linear networks, the new Sunday Ticket package will do precisely that.

Though I frankly don't know how DirecTV is going to ascertain which consumers, in which locations, actually cannot get a DirecTV signal, users who are in that predicament will be able to buy the National Football League "Sunday Ticket" package as a stand-alone, without paying for a subscription to DirecTV's other linear video offerings, and have that programming delivered over their broadband Internet access connections.

There will be some locations where landlords or property associations may not allow satellite dishes, which might be easier to ascertain. But it will be harder to determine, without a site visit, where direct line of sight is not available.

The new offering is an "over the top" service that does not require DirecTV to pay a cent to the broadband access providers whose access services are used to support it.

The package will sell for $349, $100 more than most DirecTV subscribers pay.

O2 Germany Now Fully Supports Mobile VoIP

Generally speaking, potentially-disruptive innovation in the mobile business happens when a smaller provider launches new assaults. That appears to be the case in the German mobile market, as Telefónica's O2 Germany business launches mobile Internet packages that allow users total access to VoIP services at no extra charge.

The operator is pushing two data plans in particluar: Internet-Pack-M and Internet-Pack-L. Pack M gives the subscriber a data limit of 200 MB per month for 10 euros. The larger plan, Internet Pack L, increases this limit to 5 GBytes for 25 euros a month. Neither of the plans actually cuts users off when they hit those limits, but connection speeds are reduced.

“We operate one of the most modern and most rapid mobile data networks in Europe and our customers are to experience it without limitations, no matter whether they surf, email, use instant messaging or make phone calls”, says Lutz Schüler, Managing Director Marketing & Sales, Telefónica O2 Germany. “By opening our mobile high-speed network for VoIP services, we set new standards in the area of the mobile internet.”

The issue in the U.S. market is probably when, not "if" some provider ultimately will decide to take that gamble as well. And it might not even be an upstart provider, though that likely makes the most sense. At some point, leading providers with their own termination facilities and backbone networks might well conclude that it makes sense to do so.

When AT&T launched its "Digital One Rate" plan, which eliminated the distinction between local and long distance calls, it revolutionized pricing industry wide.

Sprint Nextel and Clearwire would seem perennial candidates to launch a disruptive attack, in part because they have no landline voice revenues to cannibalize.

That was one reason AT&T thought Digital One Rate would work (before its acquisition by or merger with SBC Communications, AT&T had no significant local access customers, and none supported over owned facilities).

Right now the leading providers probably are right in concluding they are better off avoiding such disruption. Voice revenues still are too important to risk. But that will change with time. And then an O2-style move will make more sense.

Is Qwest VOD Coming?

Qwest Communications is a laboratory of sorts for incumbent telcos that do not have the resources and customer heft to justify launching IPTV services. Many small, rural telcos with small subscriber bases find that most customers already subscribe either to a satellite TV service or a competing cable TV service, for example.

Qwest has decided to rely on partner DirecTV for its multi-channel video offering, but has been interested for years in ways to use its broadband access plant to supplement linear TV with true video-on-demand services. Now that Qwest has upgraded many of its metro networks to operate at 40 Mbps in the downstream, with plans to serve 23 metro markets with services that fast, we might finally see some movement in that direction.

That would have important ramifications for many smaller and independent firms as well. If it works, if revenue for a true VOD service, built in conjunctionw with DirecTV does prove financially interesting, the same approach can be taken by many smaller operators as well.

That is not to say IPTV cannot work. AT&T and Verizon are prime examples of firms with enough customer base and resources to do so. And many indpendent telcos have concluded that IPTV still makes sense. But IPTV remains a tough proposition for many smaller providers. On-demand video might offer a solution. But Qwest likely will be the key test of that theory.

Qwest's approach also might prove helpful if cannibalization of linear multi-channel video actually does start to happen on a significant level. In that case, Qwest will have preserved scarce capital for robust access bandwidth upgrades, and then will be in positiont to push ahead aggressively with a VOD plan without risk of cannibalizing its linear video base.

That would challenge the conventional wisdom, which is that a stand-alone VOD effort will fail without the ability to offer linear TV as well. Of course, Qwest already has that covered, with its DirecTV partnership.

BT Rolls Out 20 Mbps, FTTH Danger Remains

BT is rolling out 20-Mbps broadband access services to about 40 percent of its network terminations, up from 8 Mbps possible before BT upgraded many of its Digital Subscriber Line Access Multiplexers to the ADSL2+ standard.

Actual connection speeds people will see will vary based largely on the amount of metallic cable between their home and the telephone exchange, as always is the case for DSL. Speed increases will be most noticeble in the upstream direction.

Most BT retail customers connect at up to 448 kbps on the upstream when using ADSL, but this will double to up to 1 Mbps using ADSL2+. The new upgrades will be provided at no charge.

Faster speeds are possible if a further upgrade to VDSL is made, but that also would entail deploying much more fiber in the network.

And while BT faces criticism for not deploying fiber to the home, Fitch Ratings investment analysts say FTTH deployments are highly risky for European service providers facing cable operators. Fitch analysts estimate a telco FTTH upgrade in the U.K. market might cost BT about six times more money per connected home than it will cost cable operators to upgrade using DOCSIS 3.0.

The obvious risk there is financial return. In a competitive sales environment, BT likely could not charge six times more for its offering than a cable operator would. For that reason, Fitch analysts say fiber "to the curb," which costsly significantly less, will be the preferred upgrade strategy.

"FTTH is not commercially viable for much of the incumbents’ networks," though some greenfield builds will be feasible, Fitch Ratings argues.

The point is that Fitch believes wide FTTH deployments are highly risky for European telcos facing serious cable competition.

The broader point is that though fiber to the home likely is the "best" access technology in terms of bandwidth, it is highly financially risky, because the incremental revenue might not cover the incremental cost of the new facilities. It is one thing to mandate national broadband policies. It is quite another thing to require service providers to make investments that are demonstrably highly risky.

That said, there are financial risks either way. Underinvest and telcos are vulnerable to cable operators taking dangerous amounts of market share. Overinvest and a return is not assured.

All that said, actual facts on the ground are decisive. FTTH is more feasible where densities are high and where there is lots of aerial plant, compared to underground. The reason is that it is cheaper to rebuild aerial plant than underground plant. High density helps because loops are shorter and more shared infrastructure can be used. Shared infrastructure always is cheaper than dedicated infrastructure.

But cable operators face the same general financial problem. As fiber is pulled closer to end user locations, the cost rises dramatically. At some point, after DOCSIS 3.0 is deployed and bandwidth is reclaimed by moving to digital video, raw bandwidth might still have to be increased. And that is going to take significant capital investment.

For the most part, then, copper drops of one sort or another are likely to be with us for quite some time.

National Broadband Plans Not That Effective?

As the Federal Communications Commission starts work on creation of a "national broadband plan," it is worth keeping in mind the relatively slight impact such policies have.

In fact, 91 percent of the differences in fixed broadband adoption rates in the 30 Organization for Economic Cooperation and Development member countries can be explained by reference solely to differences in income, education, population age, and other demographic factors that bear little relationship to broadband or telecommunications policy," the Phoenix Center for Advanced Legal & Economic Public Policy Studies. says in a new study.

In fact, perhaps 87 percent of the variation in broadband subscription rates across the OECD can be explained by a few inputs.

On average, a $10,000 increase in gross domestic product per capita increases the connection rate per capita by 1.97 percentage points. A 10 percentage point rise in the percentage of a population living in an urban area, or a 10 percentage point decline in the share of persons over 65 years of age, both increase the subscription rate by about 3.0 percentage points, on average.

Beyond, one of the deficiencies of the OECD study is that it does not include other popular methods used by people for Internet access, such as at libraries and public Internet connection centers, for example. Nor do OECD studies include mobile Internet access, a more-serious problem as mobile connections grow.

Fully 56 percent of Americans saying that have "at some point used wireless means for online access," according to researchers at the Pew Center Internet & American Life Project say. Notebook PCs are the main way most Americans get online wirelessly, with 39 percent saying it is their "most prevalent means of wireless access," and 32 percent saying they have used a cell phone "or other hand-held device to check e-mail, access the Internet for information, or send instant messages."

More important, 69 percent of Americans also are also starting to use their cell phones for texting, e-mailing, getting directions, snapping and sending photos, Pew says.

Ignoring mobile broadband access under such conditions is a major flaw.

"Mobile broadband is likely to be very important for users who do not own or know how to use a computer, since Internet access is also possible through smart mobile phones and other small, portable devices such as Netbooks," the Phoenix Center says. "Indeed, broadband provided over mobile networks may replace fixed connectivity for many users."

In Portugal, for example, more than half of all broadband connections use mobile technologies, and 10 percent of broadband connected persons in the country use only a mobile access method.