Avaya Buys Nortel Enterprise Solutions

Avaya is acquiring Nortel Enterprise Solutions for $900 million in proceeds to Nortel and an additional pool of $15 million reserved for an employee retention program.

The deal vaults Avaya clearly into the number one position in the enterprise telephony market, with a combined market share of 25 percent. Cisco, after battling Avaya for years for enterprise telephony leadership, now finds itself number two with 16 percent in market share, and facing a significantly more challenging competitor with the combined Avaya-Nortel, says the Yankee Group.

To the extent that the "unified communications" market overlaps directly with the "business phone system" market, the deal also affects market shares for unified communications solutions as well.

Global Bandwidth Demand Grows 79% in 2009

Few things in life are as dependable as annual increases in Internet traffic globally.

2009 has been no exception, in that regard. So far this year, global bandwidth consumption is up 79 percent, higher than the annual increases of about 60 percent in most prior recent years, according to TeleGeography.

News Business Hit by More than Internet Disruption

Most observers would agree that the Internet is changing the news business much as television news and then cable news changed it in past years. "Audiences now consume news in new ways," says the 2009 "State of the News Media" report by the Pew Project for Excellence in Journalism.

That isn't unusual. Many other businesses, including retailing, communications, music, video, marketing, advertising and ultimately even education face fundamental revenue challenges from the Internet and IP services.

The point is that the Internet and IP create new functional substitutes for older ways of doing things. "They hunt and gather what they want when they want it, use search to comb among destinations and share what they find through a growing network of social media." the study says. And though revenue decline is most measurable evidence of decline, it might not be the only indicator of note.

The public’s assessment of the accuracy of news stories is now at its lowest level in more than two decades of Pew Research surveys, and Americans’ views of media bias and independence now match previous lows, says the Pew Research Center for the People & the Press

Just 29 percent of Americans say that news organizations generally get the facts straight, while 63 percent say that news stories are often inaccurate. In the initial survey in this series about the news media’s performance in 1985, 55 percent said news stories were accurate while 34 percent said they were inaccurate. That percentage had fallen sharply by the late 1990s and has remained low over the last decade.

Similarly, only about a quarter (26 percent) now say that news organizations are careful that their reporting is not politically biased, compared with 60 percent who say news organizations are politically biased. And the percentages saying that news organizations are independent of powerful people and organizations (20 percent) or are willing to admit their mistakes (21 percent) now also match all-time lows.

"Much of the growth in negative attitudes toward the news media over the last two years is driven by increasingly unfavorable evaluations by Democrats," the poll suggests. On several measures, Democratic criticism of the news media has grown by double-digits since 2007. Today, most Democrats (59 percent) say that the reports of news organizations are often inaccurate; just 43 percent said this two years ago.

Democrats are also now more likely than they were in 2007 to identify favoritism in the media: Two-thirds (67 percent) say the press tends to favor one side rather than to treat all sides fairly, up from 54 percent. And while just a third of Democrats (33 percent) say news organizations are “too critical of America,” that reflects a 10-point increase since 2007.

Readership, and hence revenue are dropping for obvious reasons: people get their news other ways. But perhaps newspaper readership also is down for less tangible reasons.

Potential Impact of "Wireless Only" Packaging

It's too early to say whether Sprint Nextel's new "Any Mobile, Anytime" program will revolutionize mobile market packaging and pricing the way AT&T's "Digital One Rate" did in abolishing the distinction between local and long distance calling in the broader mobile business.

It's too early to say whether a rumored or possible merger between T-Mobile USA and Sprint Nextel will occur, creating a strong third carrier to challenge AT&T and Verizon Wireless.

Likewise, it is too early to know whether a strong "wireless-only" carrier can compete effectively against integrated carriers with wireline and wireless assets.

But there are glimmers. Sprint Nextel's new "call any U.S. mobile, in the United States, for one flat fee essentially merchandises voice services to secure new data plan revenues. The new plan attempts to capitalize on the growing population of mobile numbers, the growing number of users who only use mobiles and who also value Web services and mobile access to those services.

The new plan also provides a direct incentive for mobile users to call other mobile numbers as opposed to landline numbers that might reach the same called party.

For some segment of the buying public, the new plan might also nudge some customers away from prepaid wireless, especially those who like the idea of a fixed monthly payment and also want access to many of the latest handsets, something prepaid plans do not offer.

Under the new plan, the potential incremental cost of a Sprint Nextel postpaid calling plan and an unlimited prepaid plan is about $20 a month.

The problem for most potential buyers is that most users probably do not have a good understanding of what percentage, and what number, of monthly calls actually terminate on wireless numbers. That understanding is helpful as the $70 data plan Sprint Nextel offers comes with 450 landline minutes. If half of any given user's calls are terminated on mobiles, that is equivalent to a standard calling bucket of about 900 minutes.

Taken as a whole, Sprint Nextel's marketing initiatives will tend to push consumers in the "wireless only" direction. A potential merger with T-Mobile would create a huge new company with a vested interest in pushing such initiatives even further.

Will T-Mobile and Sprint Nextel Disrupt U.S. Mobile Market?

It long has been clear that both T-Mobile USA and Sprint Nextel would have to do something substantial to dramatically change their lagging market share in the U.S. mobility market.

Verizon Wireless is the current leader with about 32 percent market share, while AT&T has about 29 percent, according to wireless analyst Chetan Sharma. Sprint Nextel has about 18 percent share, down from about 25 percent a couple of years ago, while T-Mobile USA has about 12 percent share.

A T-Mobile USA merger with Sprint Nextel would create a single company with perhaps 30 percent share, creating a wireless market with three "evenly-matched" contestants. The big difference is that AT&T and Verizon would continue to operate wireline assets, while a new company would operate as a wireless pure play.

So now there are reports that Deutsche Telekom, T-Mobile USA's parent, will launch some sort of effort to merge with Sprint Nextel or otherwise structurally change its market position.

Mobile Users Less Likely to Click on Ads?

Mobile users are approximately half as likely to click on an advertisement as non-mobile users, a new study by Chitika, a Massachusetts-based online advertising network, suggests. The contrarian findings are based on a sample of 92 million impressions.

The Chitika study shows that 1.3 million impressions(1.5 percent) came from mobile browsing.

Non-mobile clickthrough rates held steady at 0.83 percent, while mobile clickthroughs averaged 0.48 percent.

While the recent growth in smart phones has sparked greater interest in mobile advertising, it appears given the numbers that mobile users are not receptive to advertising, a phenomenon that Chitika says is not surprising, given the mobile users’ propensity to be searching for quick answers or directions.

Of the five major smartphone operating systems--Google’s Android, Apple’s iPhone, Microsoft’s Windows CE, Palm OS, and Research In Motion’s BlackBerry--iPhone ranked the worst for clickthrough rate at a 0.30 percent.

But the iPhone also accounted for the bulk of mobile hits, at 66 percent. The highest clickthrough rates were observed for phones using "other" operating systems, including group BlackBerry users and a small handful of other phone operating systems including Symbian, Nokia, and HTC.

The clickthrough rates are certainly lower than expected, given the industry’s general consensus that mobile users are more likely to click ads, Chitika says.

So how does one account for the findings, which are contrary to what most would expect? Perhaps rendering is the issue. Chitika notes that the study compares the same ads delivered both to PCs and mobiles.

That likely means inability to render PC-formatted ads on smaller mobile screens reduces clicks, as the ads are unreadable, unviewable or unwieldy.

Still, Chitika suggests that mobile Internet users are disinterested in advertising, and iPhone users are the least interested.

So far, there have been few other studies on mobile clickthrough rates, compared to PC user rates. Given the obvious importance mobile advertising and marketing holds for funding new applications, the matter needs further study.

The study does confirm a couple of observations, however. Many studies have shown that iPhone user behavior is noticeably, sometimes even dramatically different from that of users of other smart phones. The Chitika study confirms that difference in behavior.

MetroPCS, Leap Wireless in Play?

The on-again, off-again potential merger between MetroPCS Communications and Leap Wireless might be on again, Reuters suggests. But both companies might be in play, with rumored buyers including the likes of America Movil , Deutsche Telekom (owner of T-Mobile USA or AT&T.

As often is the case, intense competitive conditions that are good for consumers are not so good for providers. A brutal and ongoing price war in the prepaid wireless business is depressing profit margins at MetroPCS and Leap Wireless, many note.

And while prepaid specialists long have toiled in the shadow of the larger post-paid market segment, growth now is higher in prepaid, which is attracting new interest. Sprint Nextel already has acquired Virgin Mobile, and most market watchers have expected more consolidation for some time.

For America Movil, which operates theTracfone prepaid business, the advantage of acquiring a facilities-based competitor would allow Tracfone to boost its profit margins, as at least some of its traffic could be carried and terminated on owned facilities.

Such a merger also would provide heft in a market where scale economies are important, and allow America Movil to expand in the postpaid market as well as the broadband access market.

MetroPCS might be interesting for T-Mobile USA, which would acquire a facilities-based prepaid brand, a move that would allow T-Mobile to expand in the prepaid market while protecting post-paid profit margins and retail pricing.

Others say it could make sense for AT&T, again as a way to expand in the prepaid segment with a distinctly different brand.