Qwest Upgrades to 100 Gbps, But Worries About Future Price Impact

Qwest Communications is enhancing its nationwide network to deliver speeds of up to 100 Gigabits per second to its customer edge sites. This build-out has begun on Qwest’s network and is planned through 2010, though no further details are publicly available at the moment. But potential customers can expect that 100 Gbps local access to the backbone will be available in markets where Qwest already offers Ethernet-based "iQ Networking" and "QWave" data networking services.

But Pieter Poll, Qwest CTO, says he is concerned that, after a few years, optical component limitations could impair its ability to keep its cost per bit in line with customer expectations. The basic issue is that customers consume 40 percent more bandwidth every year and expect prices to remain flat.

That means Qwest has to continue reducing its cost per bit by more than 40 percent every year to keep up, Poll told Telephony Online. And Poll worries that Moore's Law, which generally governs development in the electrical domain, will not be possible in the optical domain.

“In the optical environment, you have basic physics issues in how you can integrate to bring costs down," he says. "There is no Moore’s Law in the optical world."

If that observation proves correct, Qwest wil have to look for cost reductions elsewhere. Operations, marketing, overhead, sales and other costs might have to be cut if the gains cannot be made in linear fashion on the optical network element front.

One suspects optical suppliers will do better than Poll now forecasts, but the challenge appears to be real.

1.3 Exabytes of Mobile Video Consumed in 2017

Portable laptop and netbook users will consume 1.3 exabytes of video content per month by 2017, a sixty-fold increase over 2009, says Coda Research Consultancy. If that forecast proves correct, mobile video will account for nearly 75 percent of all mobile traffic.

The top region for video consumption will be Asia Pacific, which will account for just over half (53 percent) of all video traffic globally. In contrast, Europe will account for 26 percent of all global video traffic, and North America 14 percent.

The Asia Pacific region will be so prominent because mobile broadband will be for many the primary or exclusive way of getting access to the Internet, the company says.

The report shows that two thirds of global traffic using by portables will be on Long Term Evolution (LTE) networks by 2017.

Nokia Ditches Barcelona

Nokia apparently will not be exhibiting at Mobile World Congress in Barcelona in February 2010. MWC is generally considered the paramount global mobility event, so the move probably is one more indicator of potential change of marketing emphasis by equipment and software providers.

It is no surprise that nearly all communications trade shows and conferences have been under pressure for a couple of years as the recession has forced travel cutbacks, as tier one carriers and enterprises have clamped on severe travel restrictions and some enterprises actually seem to be looking to "prove" that videoconferencing actually saves money by reducing travel expenses.

One way to demonstrate such a business case is to force employees to use videoconferencing and other conferencing tools while restricting travel.

Such changes have been occurring rather broadly on the wired network side of the business for a decade or more. In part, global consolidation means suppliers have fewer customers to sell to. Using direct sales channels typically makes more sense in concentrated markets, compared to fragmented markets.

But other changes have occurred as well. Quite aside from those changes, online communication channels obviously have reduced the need for indirect marketing venues, and have allowed for more use of direct channels. Many firms are shifting spending from legacy channels to their own Web channels, for example.

The deep global recession has had an effect as well, but that is a temporary trend. What remains to be seen is the longer term change of marketing techniques and approaches based on use of Web and IP technologies. Among the bigger changes are a shift from "push" to "pull" marketing, for example.

Mobile Video the Next Big Thing?

Mobile video is considered by many to be among the next big things in mobility use and service provider revenue.

It likely also will be a big driver of consumption calculators, bigger data plans and at-home or Wi-Fi connections.

The reason is physics. Video requires two orders of magnitude worth of bandwidth compared to most other applications. That's a 100 times greater load placed on a network and a user's bandwidth cap.

Some people think Wi-Fi is a transitional access technology, to be replaced by mobile broadband connections. That's not likely. In the business world, Wi-Fi is replacing Ethernet wired networks on a permanent basis.

In the consumer space, Wi-Fi is replacing wired connections as well. And in the public space, Wi-Fi is getting much more use by mobile handsets, where the original connected device was a PC. As video consumption grows, users quickly are going to figure out they can reduce pressure on their bandwidth caps by using Wi-Fi as often as possible, and especially for video streaming or downloads.

Mobile video might be the next big thing in any number of ways.

Online and Mobile Video Still Incremental to TV

It still appears that online and mobile video consumption is incremental to regular TV viewing, The Nielsen Company says.

“Although we have seen the computer and mobile phone screens taking on a significant role, their emergence has not been at the cost of TV viewership,” says Jim O’Hara, The Nielsen Co. president. The reason is that consumers simply are increasing the total amount of video they consume.

“The entire media universe is expanding so consumers are choosing to add elements to their media experience, rather than to replace them,” O'Hara says.

Nielsen data also shows Americans are using DVRs more than ever, watching one hour more of timeshifted TV each month than a year ago. Currently, 30 percent of homes in the U.S. have DVR devices.

During the second quarter of 2009, the number of people watching mobile video increased 70 percent from last year and people who watch video online increased their viewing by 46 percent compared to a year ago. In addition, the average American TV consumption remains at an all-time high (141 hours per month) compared to the same time frame last year.

Online usage is relatively flat since last year, though more people are viewing video online than ever before. But adults 18 to 24 watch more than five hours each month.

Short form video (such as YouTube clips) still makes up 83 percent of online video viewing, while name-brand TV network content comprises the majority of mobile video viewing.

Mobile video viewing continues its upward trend, with over 15 million Americans reporting watching mobile video in the second quarter of 2009, an increase of 70 percent versus last year and the largest annual growth yet seen, Nielsen says.

Service Provider Finds Online Portal Really Works

Telecom service providers need to be more active about using Web channels to build awareness of, and purchases of, new services, says Michael Philpott, Ovum practice leader, says.

As matters now stand, most service providers have few on-going consumer touch points, except for the monthly bill, and one might question whether that is the right time to engage a customer's attention in a positive way.

“Often the main points of customer contact for the broadband service provider is when the customer first signs up from the broadband service, and when something goes wrong, with only the odd e-mail flyer in-between,” says Philpott.

"Those few service providers that still have a successful Internet portal are starting to innovate around that as a way of entertaining, helping, communication with and up-selling services to existing clients," he says.

One pilot by a tier-one player in the U.S. market found that such a strategy increased its marketing success rate over traditional methods by 200 percent.

That service provider also found a 615 percent increase in Web traffic fror a music service, as well as a 55 percent increase in new security subscriptions, plus a 20 percent in security service churn.

Impressive numbers, indeed.

Youth Mobile Market Saturated?

In developed markets, mobile ownership has surpassed saturation, says Graham Brown, Mobile Youth analyst. High levels of prepaid ownership combined with multiple handsets and SIMs means that in some markets, such as the Middle East, it’s not unusual to see penetration rates of 300 percent in specific age groups such as students and young adults.

In most developed markets, youth spend 10 percent to15 percent of their disposable income on mobile phone services. Some 15 years ago, the figure was zero. Brown says That means they’ve forfeited spending on other goods and services.

In particular, you can track the decline of cigarettes, chocolates and CD spending against the rise of mobile spending and suggest that those areas have suffered as consumers shifted spending towards mobility.

Global recorded music sales peaked in 1999 at $40 billion. Cigarette use by teens in the United States peaked in 1998. Those might be direct consequences of greater mobility spending. The flipside of this is that to grow, mobile needs to displace spending on other products.

A direct consequence, Brown argues, is that further growth in youth segment telecoms must face a natural spending ceiling. For the most part, that means an emphasis on churn control. And on that score, most younger subscribers are much more tolerant than one might suppose.

"They want a service that is inconspicuous enough to work consistently in the background without their attention," says Brown. While a small percentage, less than five percent, are motivated by the latest offers and handsets, the majority of youth switch only when the network hits the “annoy” button.