What Paid Online Newspaper Access Might Mean for Telcos

Sometimes one can gain useful insight into the business impact IP services pose for one industry, such as communications, by looking at other industries that also are in the throes of a transition to IP-based services that challenge legacy approaches.

One example is the way newspapers are attempting to create new "for free" versions of their products online, as physical distribution remains under great pressure. While some point to the Wall Street Journal as the preeminent example of an online product that has been successful, most newspapers do not have the scale or unique readership to copy that model in a straightforward way.

That is similar to the difference between firms such as AT&T and Verizon Communications, compared to most other providers in the communications market. Strategic options are hugely different for those two firms and the hundreds to thousands of smaller firms without the assets those two firms possess.

So what about newspapers in smaller, often rural markets? Some point out that the online editions tend to cost about 75 percent of the print product prices, and tend to have smallish readership levels (perhaps five percent or less of the print base).

TheDaily Gazette in Schenectady, New York has a paid print circulation of about 44,000, and offers online-only subscriptions for $2.95 a week; while print subscribers pay $3.00 a week for home delivery, can get unlimited online access for just an additional cent a week. Some limited features remain free to view.

After a conversion to paid online viewing, Web site traffic has plummeted by 40 percent in the three weeks since the Gazette started charging for most of its online content.

The Newport Daily News in Newport, R.I. has a paid print circulation of about 12,000.Online-only subscriptions cost $5 a day, $10 a week, $35 a month, or $345 a year. Print and online combo subscriptions cost $11 a month or $100 a year.

Since converting to paid online access, Web site traffic is down by about 30 percent. But the Daily News says the goal is not to generate online revenue but rather drive readers back to print. That might be working, as single-copy paper sales are up about eight percent. In fact, the online product costs more than the print product.

The Arkansas Democrat-Gazette in Little Rock, Ark. has a paid print circulation of about 183,000 readers. Online-only subscriptions, which include access to an electronic edition, are available for $5.95 a month or $59 a year. Print subscribers get online access for free. Apparently print circulation is down about one percent since the paid online program was started.

Revenue from online subscription sales amounts to only about $200,000 a year, modest compared to print revenues.

The Albuquerque Journal in Albuquerque, New Mexico has about 102,000 paid print readers. The Journal charges $110 a year (or $38.25 for three months) for full access to the paper’s website, along with an electronic edition of the paper.

Readers can also pay $185 a year for a subscription to the print edition, the electronic edition and online access. Alternatively, they can pay $153 a year for home delivery and online access.

Between 1,500 and 2,000 people pay extra each month for some sort of additional online access, a number that has “remained fairly consistent” over the past eight years. Paid daily circulation is down about six percent since the newspaper instituted the paid online plans.

The Bend Bulletin in Bend, Oregon has paid circulation of 32,682. Online-only subscriptions are available for $8 a month or $96 a year. Print subscribers pay $11 a month or $132 a year for home delivery, in addition to online access.

There are 1,200 online-only subscribers, or about 3.6 percent of the print base.

Based on those examples, one might conclude that paid alternatives to print circulation have had modest success, and that is partly or primarily intentional. The newspapers want online access to remain expensive enough that it simply makes more sense to pay for the paper version.

Communication servicer providers likely do not have even that option. Unlike newspapers, telcos and cable companies cannot "wall off" customers who have broadband connections from using "over the top" voice or applications. Charging higher prices for VoIP than for legacy voice, for example, therefore is not an option. Unlike newspapers, third party VoIP providers also can supply a fully-functional substitute to legacy voice. That is not the case for local newspapers, for which there is no convenient content.substitute.

But there is one similarity. Daily newspapers, like landline voice, seem to be products for which there is declining demand. Newspaper readership has been declining for more than a decade or two. Landline voice subscriptions have been declining since 2000.

Current newspaper policies about charging for online access might only delay further decline. Likewise, charging higher prices for VoIP service compared to legacy voice likewise seems unfruitful, as users have other functional substitutes. What remains unclear is the long-term consequences of charging identical prices either for VoIP or legacy voice service. Up to this point, dominant service providers have tended to price both products in similar ways.

Unlike newspapers, telcos already have other replacement products to sell, namely wireless voice, wireless data and broadband. So a rational strategy might be to harvest much of the legacy voice business as long as possible, then shifting to a lower-priced VoIP service at some point, when a lower-priced VoIP product can compete well with third party alternatives and the providers actually make less money by sticking with legacy pricing.

Right now, a telco executive would rationally conclude that firms make more money by sticking to higher prices for legacy voice and losing market share to lower-price VoIP services, especially when many see landline voice as a product in the declining years of its life cycle.

That doesn't mean major changes couldn't happen. Nobody yet knows whether service providers can shift to a new features-driven model where the basic access costs little, but powerful new features are what people pay for.

Consider what is happening in the mobile business. In many cases, mobile users pay more for data access, features and service than they do for voice usage, for example.

Still, telcos are better placed than newspapers. Newspapers are in the ad-supported content business. Newspaper execs seem to be using paid online to prop up the legacy business.

Telcos already are multi-product businesses. They are growing new businesses to replace their older business, and only need to harvest their original business, while experimenting with applications that are replacements for that older business.

Unified communications could be the revenue driver, not the minutes of use, in other words.

That's a better place to be.

Apple Approves Vonage for iPhone

Apple has approved an official Vonage VoIP application to give iPhone users the ability to make voice calls over WiFi, as does the Skype app for iPhone.

The restriciton to "WiFi only" is part of an agreement with AT&T to not allow customers to use their network to initiate VoIP sessions using the AT&T 3G network.

The decision does not go as far as many would like, but as far as the current agreement with AT&T will allow. But change will come, though not fast enough to suit some. Over a 10-year period between 1997 and 2007, for example, U.S. communication service providers replaced the nearly 50 percent of revenue derived from long distance charges with an equivalent amount of wireless revenue.

It would be reasonable to suggest that IP services and mobile broadband likewise will, over a possibly similar amount of time, also transition from reliance on voice revenues to a reliance on mobile broadband and data services. In fact, such a transition is virtually required, as 3G and 4G networks do not support the existing voice format for technical reasons.

That said, it is no so clear that all voice will be consumed using any particular VoIP business model. Some portion will be provided by third parties, while some will be provided by the carrier themselves. Over time, though, there is little debate about the relative importance of the voice revenue stream declining while the relative importance of the data streams increases.

Given the already-reasonable retail cost of domestic U.S. calling, VoIP might have the most obvious impact in the global calling market, where per-minute prices are much higher.

That said, a mobile voice capability actually is a bundle of several values. The simple ability to make and take local or domestic calls is analogous to the function of a voice fixed line. Most mobile plans, and most VoIP plans, alrready eliminate the distinction between local and domestic long distance calling. The difference between "unlimited" plans, and "buckets of minutes" also already is being narrowed, at least for domestic U.S. calling.

The ability to place international calls has many product substitututes, including VoIP, but also including calling cards, for example. Email, instant messaging and text messaging are functional, if not complete substitutes as well.

It might take a while, but relatively standard use of mobile VoIP is coming, as it likewise ultimately will come in the landline business as well. But complete change will take quite some time.

AT&T, Sprint Nextel, Verizon Among Top-10 Social Networking Advertisers

AT&T was the leading display advertiser on social networking sites in June 2009, Sprint Nextel was the fourth-biggest and Verizon Communications was the 10th largest advertiser on social networks that same month. About 80 percent of all social networking display ads were placed with just two sites: MySpace and Facebook.

Though most of us probably have not been paying attention, social networking sites quietly have grown to represent more than 20 percent of All U.S. online display impressions, according to comScore Ad Metrix.

MySpace and Facebook each represent nearly 10 percent of total U.S. online display ads, and then there is a classic long tail of advertisers each representing a fraction of percentage point of the overall online display advertising market.

The reason spending is shifting to social networking sites, and to online venues overall, is that advertising ultimately follows people. And leading U.S. communication companies have moved aggressively to follow their potential customers to social networking.

“Over the past few years, social networking has become one of the most popular online activities, accounting for a significant portion of the time Internet users spend online and the pages they consume,” says Jeff Hackett, comScore senior vice president.

“Social networking sites now account for one out of every five ads people view online. Because the top social media sites can deliver high reach and frequency against target segments at a low cost, it appears that some advertisers are eager to use social networking sites as a new advertising delivery vehicle.”

In the month of June 2009, AT&T got two billion impressions (the number of times an advertising item is seen, heard or watched), representing about 30 percent of AT&T's total advertising impressions for the month, across all media. AT&T's social networking ads were seen by more than 87 million unique people during the month.

Sprint Nextel served up 790 million impressions, representing more than 26 percent of its total ad impressions during June 2009, and was seen by 68.6 million unique visitors.

Verizon Communications represented 435 million impressions, representing 10.5 percent of its June 2009 ad impressions, and reaching 54 million unique visitors.

All of those are bigger numbers than I would have guessed.

Clearwire Activates 10 More Markets

As Clearwire activates 10 additional markets, it also is elaborating on service plans that offer casual use in addition to the more-standard monthly subscriptions.

The new markets include Boise, Idaho; Bellingham, Wash.; and eight Texas markets, including Abilene, Amarillo,Corpus Christi, Killeen/Temple, Lubbock, Midland/Odessa, Waco andWichita Falls.

Clearwire mobile and residential plans can be purchased by the day or by the month. Home Internet service plans start at $25 per month; while mobile Internet plans start at $35 per month, or customers can purchase a convenient mobile day pass for $10.

For a limited time, customers can also choose the "Pick 1 Unlimited" plan; offering an unlimited home or mobile Internet for $22.50 for the first three months and $45 per month thereafter.

Equipment options include USB modems for PCs, including WiMAX-only or dual-mode modems that allow roaming on Sprint’s nationwide 3G network service whenever the Clear 4G service is not available.

Pricing for modems start at $49.99, after instant rebate, or may be leased for prices as low as $4.99 monthly.

For residential service, modems can be purchased for $69.99 or leased for just $4.99 monthly. Residential customers can also add in-home voice service with purchase of the "Clear Voice Adapter" for $15, and receive unlimited local and long distance service for just $25 per month.

With the "Clear Spot," any existing, off-the-shelf Wi-Fi device (802.11b/g) can connect to Clearwire’s 4G WiMAX network. The Clear Spot creates a personal Wi-Fi hotspot that travels with consumers anywhere they happen to be within CLEAR’s mobile WiMAX service area.

This $139.99 device is a portable, battery-powered router that seamlessly connects up to eight standard Wi-Fi-enabled devices (computers, mobile phones, portable gaming, consoles, cameras). The Clear Spot is compatible with both the Clear 4G and Clear 4G+ mobile USB dual-mode service options.

Clearwire also sells Intel Embedded WiMAX laptops, including the Dell Studio 17, Studio XPS 16, Latitude E4300, Latitude E6400, Latitude E6400 ATG, Latitude E6500, Precision M2400, Precision M4400 and Vostro 1220.

The company also offers the Fujitsu LifeBook P8020. WiMAX-ready laptops from Lenovo include the ThinkPad line: SL400, SL500, X200, X200s, X200 Tablet, X301, T400, T500, W500 and W700.

Samsung offers the X460 notebook as well as the NC10. The Samsung Mondi is a mobile WiMAX-enabled handheld device.

Leap Wireless Seeks $8.6 Million in Broadband Stimulus Funds

Cricket Communications, which owns Leap Wireless, has applied for a $8.6 million broadband stimulus grant in partnership with One Economy Corporation, to provide 23,000 low-income families primarily in Baltimore, Houston, Memphis, San Diego and Washington, D.C. with sustainable, innovative broadband access and digital literacy training.

Project Change Access would furnish subsidized, low-cost wireless broadband using Cricket’s 3G wireless network.

One Economy would provide targeted and localized content for education, employment, and health care through its multiple online portals, in addition to training.

Clearwire Seeks "Modest" Broadband Stimulus Funding for 2 Markets

Clearwire says it has applied for a "modest" amount of broadband stimulus funds to bring new service to underserved areas within Detroit and Puerto Rico, two areas that were not otherwise part of Clearwire’s current business plan.

Clearwire also announced its plans to affiliate with a limited number of other grants submitted, as a spectrum and technology partner, covering additional territories in five states.

These stimulus-related projects would have no significant impact on Clearwire’s funding or build-out plans, the company says.

As it appears fewer telcos applied for funds than might otherwise have been expected, it is possible that fixed wireless providers will have a relatively high profile amongst service provider applicants in rural areas.

8x8 Adds Web Conferencing

8x8, has introduced new Web-based conferencing service to its existing portfolio of business communication offerings for small to medium sized businesses.

The first in a series of new unified communications services to be introduced over the coming months, the "8x8 Virtual Meeting" Web conferencing service is an online collaboration tool accessible instantly (no software download required) from any web browser and any computing platform.

Available as an add-on service for existing 8x8 customers or as a stand-alone offering for new subscribers, 8x8 Virtual Meeting lets users conduct centralized online meetings, complete with integrated voice conferencing (to and from any telephone or web browser platform), presentation slide sharing, desktop and application sharing, instant messaging, chair control, conference control and call recording, with up to 50 participants per conference.