Verizon Exec Says "We Don't Want to Upgrade" Charges are "Absurd"

Some policy advocates are taking shots at Verizon Communications for taking the position that a workable minimum definition of "broadband," for purposes of setting national broadband policy, is 768 kbps downstream and 200 kbps upstream.

"There seems to be some confusion around Verizon’s filing suggesting that the FCC keep a baseline definition for broadband as

768 kbps down and 200 kbps up," says David Young, Verizon VP. "The implication here is that we want to keep the speed set low so we won’t have to upgrade our networks."

"This is clearly absurd," he says. Indeed, in its filing Verizon itself suggests a goal of 50 Mbps for fixed broadband and 5 Mbps for mobile broadband.

But Verizon suggests that for reporting, tracking and measurement purposes, the FCC should maintain the current definition used in

the FCC broadband data reporting program (Form 477) for a basline, while continuing to track multiple higher “speed tiers” to get

a full view of what’s happening in the broadband marketplace.

This threshold definition also has the benefit of being the same one used by NTIA and RUS for the broadband stimulus program, Young argues.

There are lots of good reasons for being consistent about national data collection, the most obivious being that it is impossible to track progress over time if we keep changing the definitions. Many important changes that happen in national communications take 10 years or more, and it can make a huge difference if, along the way, the definitions of what we are tracking have changed frequently.

The other reason is that the definitions will cover networks of very type physical properties. Satellite, fixed wireless wireless, mobile and fixed networks all have different cost and capability profiles.

Beyond that, if what we are after is the fastest possible broadband availability, from the widest array of suppliers, with the most-robust growth in speeds and quality of service, at the lowest cost to consumers, the different speeds and investment profiles have to be harmonized.

Every communications engineer realizes there is a trade-off between capability and cost whenever a network is designed. Every engineer knows a network can be optimized--both in terms of performance and deployment cost--if a single application is supported. But multi-purpose networks inherently are tougher to design because there are more trade-offs.

Broadband networks generally are more expensive than narrowband networks, and networks featuring higher bandwidth generally cost more than networks of lower bandwidth.

If definitions are too stringent in the near term, it is possible some potential users, especially users in thinly-settled areas, will find that few, if any, providers can provide them service at any price those consumers would be willing to pay.

Finally, it would strike many as odd to accuse Verizon, which has been the most-aggressive tier one U.S. provider, of not being willing to invest heavily in broadband. Its FiOS fiber-to-home network is the most aggressive program in North America, and Verizon already is ready to start building a 4G wireless network even as it upgrades its 3G wireless network.

Floors are different from ceilings, and floors for some networks are ceilings for others. Customers, for example, cannot buy satellite broadband operating at more than 5 Mbps downstream, for any amount of money. And satellite is, by anybody's estimation, the absolute most affordable way to provide broadband to isolated locations. Fixed and mobile broadband are somewhat more expensive, but can support higher bandwidth.

In an isolated area, optical fiber or even digital subscriber line or cable modem service offers the most bandwidth, but at the highest cost. Cost and bandwidth, in other words, represent a standard engineering trade-off. The highest bandwidth also comes at the highest cost.

To the extent that retail prices are to be kept relatively low, the network investment must be matched to the anticipated revenue. It might, in some cases, be necessary to trade off some capability to keep costs low.

It would be a mistake to confuse that problem, and the other need to maintain comparable statistics to measure progress, with provider unwillingness to keep pace with growing market demands for broadband speed.

Providers that fail to keep pace will lose customer share. They know that. But unreasonable near-term definitions will not help potential customers get service, or even help existing customers get faster speeds, more quickly.

http://policyblog.verizon.com/BlogPost/661/title.aspx

European Mobile Broadband Penetration to Double by 2014

European mobile broadband penetration will double from 17 percent in 2009 to 39 percent in 2014, Forrester Research now projects.

Click on image for larger view.

This forecast of course looks quite linear, but that's a hazard of the forecasting business. It isn't possible to model unexpected effects.

Penny Wise, Pound Foolish Complaining About Communications?

Lots of people enjoy complaining about how bad their mobile service is, how expensive and slow their broadband is or how useless their landline voice service is. It isn't that the complaints have no foundation.

And even if unfounded, consumers are under no obligation to be "happy" about products they believe do not offer proper value-price-quality relationships.

Oddly enough, people are less happy when change is occurring. Students of revolution often have made that observation: that unhappiness is highest when there is hope for change, compared to situations where there is no hope of change.

The simple way of maintaining perspective is to ask oneself how much one was paying for such services--compared to the value one was getting--for any services as they existed in 1980s or in 1995. Then evaluate what one now gets, compared to the price, compared to when one first began using any new service (mobility or broadband or the Web).

The less conducted exercise is to compare how much complaining gets directed at all communication services as a whole, compared to what one spends for fuel on one's automobile. As it turns out, U.S. consumers spend 2.2 percent to 2.5 percent of disposable income on all communication services they use and buy.

Of late, they have been spending 2.5 percent to four percent of disposable income on fuel for autos and about 11 percent on transporation overall.

Of course, most people likely feel there is only so much they can do about spending on fuel or transportation, but considering that people spend more on fuel than all of their communications, and perhaps four to five times more on transportation, one wonders if people are not being "penny wise, pound foolish."

In other words, people seem to worry lots about a smaller amount of spending, but seemingly worry less about larger amounts of spending.

Small Business Optimism Plunges in July: Government is the Reason

Small businesses create 80 percent of new jobs, virtually all observers agree. So what's happening with small business hiring? The good news: year-to-date small business hiring, as measured by changes in the average size of a U.S. small business, is up 1.7 percent in 2009. The bad news: Salaries, on the other hand, have consistently been trending in the opposite direction. Year to date, the average small business salary has dropped 5.1 percent, says SurePayroll, which handles payroll functions for U.S. small businesses.

Year to date, salaries have dropped 5.1 percent. The average small business annual paycheck in the United States now is $29,995. One year ago, in July 2008, it was $32,290. The last time the average small business paycheck dipped under $30,000 was March 2006. Since we began the Small Business Scorecard in January 2004, the lowest average small business paycheck was $28,589 in August 2005.

The other potential worrisome finding is that, although optimism is growing on the job front, small business owner optimism has plummeted lately. To the extent that optimism is an underpinning for more hiring, that is troubling.

"For July 2009, we saw a substantial decrease in business owner optimism levels," SurePayroll says.

"In response to a survey we conducted at the end of July, only 56 percent of responding small business owners indicated that they were optimistic about the small business economy," SurePayroll says.

"That represents a big drop in optimism from June 2009 when 79 percent of respondents indicated they were optimistic about the small business economy. In May 2009, 73 percent of respondents were optimistic," the firm says.

It may seem odd that optimism is dropping at the same time that there are many reports about how the economy appears to have turned the corner toward recovery.

But many respondents indicated that their pessimism is powered primarily by increased government spending and concerns about the costs of health care reform. That should be a big warning signal for government policymakers who claim to want a fast return to higher employment.

Shocking Change in Video Behavior?

Is linear video about to take an unprecedented hit? A stunning new poll suggests it is possible, even if the results are shockingly different from any others taken so far.

Nobody ever seems surprised by surveys or polls suggesting younger users consume media differently than older users.

A new survey of 1,660 ChangeWave members suggests the changes in media consumption--though not a substitution of online video for linear video--are spreading to users between the ages of 45 and 63 as well.

The Baby Boomers surveyed now spend more free time online han they do watching traditional TV. Where they use the Internet 12.9 hours a week, they use TV 11.8 hours a week.

So what about substitution of online video for linear video? The results do not suggest users are switching video viewing to online mechanisms: they simply are watching less TV.

By a five-to-one margin, respondents say they are watching less traditional television than they did a year ago.

Among this group, 62 percent say it’s because they’re not as interested in what's on TV these days, and another 26 percent say they’re spending more time surfing the Web.

The big question is whether the linear video business model will face pressure as a result, not because users are watching online, but because TV itself is not as interesting. That might be the case.

Among traditional TV viewers, 20 percent say they’re likely to downgrade or cancel their current TV service package in the next six months. That is a bombshell. No other survey I am aware of has suggested anything like this level of dissatisfaction with linear video subscriptions.

The likelihood of canceling is highest among cable and satellite subscribers, 22 percent of whom say they are likely to do so, while just seven percent of fiber-optic TV subscribers say they are likely to do so.

Respondents delivered bombshell results on another question as well. When asked which one paid subscription they’d be most willing to give up, 44 percent said their video subscriptions. In virtually all other surveys I am aware of, TV has been least likely to be dropped.

So radically do these findings differ that one suspects there is sampling bias. But if there is something changing out there among the "Boomer" demographic, we ought to know soon enough. Though I cannot imagine shifts of this magnitude, we ought to see softening of cable and satellite video subscriptions within a year or so.

This bears watching. Because the results are so divergent from all others, there is risk of sampling error: the self-selected respondents might not be typical of the wider population. But it also is possible the survey is detecting a radical shift of sentiment that has not occurred before.

The results are unprecedented, and shocking.

Small, Mid-Sized Businesses Have Embraced Online Advertising

Small and medium-sized businesses in the United States are more likely to advertise online than through traditional media, but spend less on online than traditional media.

In August 2009, 77 percent of U.S. SMBs used online for advertising, compared to 69 percent that used traditional media, according to The Kelsey Group and ConStat.

The groups say the August figures represent the first time penetration of online advertising surpassed traditional.

“We have been tracking the trend of digital/online media replacing traditional media over four waves of the Local Commerce Monitor study,” said Steve Marshall, director of research at The Kelsey Group. “The milestone of digital/online surpassing traditional media among SMBs is an indicator of the broad shift to online platforms.”

Note, however, that spending does not necessarily track penetration. Though more SMBs used digital advertising, the majority of their budgets still went to traditional channels. In August 2009, The Kelsey Group found 36.8% of SMBs’ advertising budgets went toward online. That was up more than 14 percentage points over the prior year.

Total annual ad spending among SMBs was down, from an average of $2,734 in August 2008 to $2,092 in August 2009. Spending on Websites and online profile pages, however, was up more than 26% to $769.

New Cables Mean 72% Drop in Long Haul Bandwidth to Africa

What will 12 new undersea cables to Africa mean? Broadband prices on the long-haul networks will drop as much as 72 percent over the next three years, says Pyramid Research. But demand for capacity will grow at 28 percent through 2013 as well.

Click on the image to enlarge it.

The cables will increase Africa’s total international bandwidth from about 6 Tbps to as much as 34 Tbps and will reduce the number of coastal countries without any cable access from 19 to one.