Verizon Tries to Block Avaya Purchase of Nortel

Verizon Communications has moved to block a planned $900 million sale of Nortel Network Corp.'s Government Solutions group and DiamondWare Ltd., a Nortel-owned maker of softphones, to Avaya Inc., arguing there will be "serious consequences to safety, welfare and security" because of feared disruption of U.S. government and military communications networks and emergency systems across the United States and Canada.

The dispute--which has a major customer objecting to practices of a major supplier, appears in part to be a contract dispute. Avaya of course says it intends to honor all existing Nortel contracts, but Verizon and Avaya apparently have not been able to agreement in language that suits Verizon.

An outstanding patent infringement lawsuit against Verizon in Texas, slated for trial next year, appears to be an issue. Avaya appears to believe Nortel might face some liability, and doesn't want to take over Nortel's "highly contingent" liability in the patent case.

If Avaya buys Nortel's business and leaves Verizon's contracts behind, Verizon will have only a few months to get a new source of equipment, software, maintenance and support for systems that are at the heart of U.S. emergency response, anti-terrorism and national defense systems, Verizon argues.

MetroPCS to Offer 4G in 2010: Consumers Win

MetroPCS Communications, a leading provider of unlimited prepaid wireless communications service will launch Long Term Evolution 4G mobile broadband services in the second half of 2010. Ericsson will provide infrastructure while Samsung Telecommunications America will provide the company's initial LTE handsets.

The network upgrade likely will have wider implications for consumers using other service providers as well, as MetroPCS likely will offer more affordable mobile broadband prices and packaging than have been available to date, from tier one and other providers.

As MetroPCS has made a market largely on users who are substituting mobile service for landline, one suspects the firm might be tempted to try the same thing for broadband access.

As MetroPCS uses the CDMA air interface for voice and text services, it will introduce dual-mode LTE/CDMA devices as part of the plan.

MetroPCS has been a price leader in the prepaid space, and the new capabilities likely will put pressure on the tier one carriers to lower their mobile broadband tariffs further.

One wonders whether the tier one providers might not also, as part of that shift, create differentiated mobile broadband tiers that are quite a bit more "application specific," or at least tailored in key ways to the usage profiles different users have.

Business users have different requirements in the reliability area than casual consumer users. Heavy users of mobile video will require more bandwidth, but might also be offered heavy-usage plans at a higher price.

The challenge is to balance simplicity with consumption. The problem right now is that few mobile users have any idea how much bandwidth they consume and for which applications. That means consumers will have a hard time figuring out which plans they ought to buy.

Providers, on the other hand, might need to work on their billing and operations processes so they can flexibly track usage, make that information available to end users, and then create differentiated plans tailored to actual end user behavior.

It isn't yet clear what packaging innovations MetroPCS might be willing to introduce. But it has long positioned itself in several clear market segments, including users who can replace wired telephone service with a mobile, especially users with low needs for mobile support outside of the home market.

Its mobile broadband efforts are likely to build on that profile.

Telstra Gets Ultimatum: Divest Voluntarily or Forcibly

Telstra, Australia's incumbent communications service provider, has been given an ultimatum by the Australian government: either cease to be both an owner of and service provider or face forced functional separation.

If it does not act voluntarily to break itself up into two new companies--one providing wholesale access to all retailers while the second firm is limited to retail operations, Telstra will be forced by a proposed law to do so by government edict.

Communication Minister Stephen Conroy has introduced legislation that, if implemented, will separate Telstra's network operations from its retail sales and marketing.

According to the proposed legislation, Telstra will have two choices about the structural separation.

It can create a new company and transfer its fixed-line assets to that company, or it can move its fixed-line traffic to the new national broadband network and scrap its existing access network. Telstra, in other words, would have to strand 100 percent of its access assets.

If Telstra does not agree to voluntary structural separation the bill provides for forced functional separation. Under the forced separation plan, Telstra would be required to conduct its network operations and wholesale functions at arm's length from the rest of the company; provide the same information and access to regulated services on equivalent price and non-price terms to its retail business and to non-Telstra wholesale customers; and put in place and maintain strong internal governance structures that provide transparency for the regulator and access seekers that equivalence arrangements are effective.

Good News, Bad News for Mobile Video

The good news for mobile service providers: according to data from Mediamark Research & Intelligence, more than one-fifth of US mobile phone or PDA users are interested in watching live TV on their mobile device.

The bad news: Only 13.5 percent of all respondents said they would pay a subscription fee for mobile TV, and even among respondents who said mobile was a source of entertainment, the figure was just 34.5 percent.

The best news: people once scoffed at the very notion of consumers paying for TV, but that belief has been proven dramatically wrong. Most U.S. consumers get their TV from a satellite, cable or telco video provider.

The challenge: differentiated programming not available on broadcast networks was what drove the interest. Simply making existing content available on mobile networks might not move the needle much.

The current thinking by distributors is that making mobile video a feature available to fixed line video services is one way to drive business value from mobile video. That is helpful to an extent, but doesn't address the more fundamental problem, which is that video will put an order of magnitude or two greater strain on mobile networks, largely without benefit of revenue lift to compensate for the required network investment.

If a business--any business--faces a magnitude or two of incremental cost, it stands to reason that those costs simply must be covered, one way or the other. If advertising is insufficient--and it clearly will be--then paid viewing or higher direct bandwidth charges are the most-likely revenue generators.

TV Leads Sub Growth in Second Quarter 2009

Broadband Internet access grew the fastest of a range of 10 video, voice and other consumer services in the second quarter of 2009, an analysis by Silicon Alley Insider suggests. About 3.3 million more net new broadband subscribers were added in the second quarter of 2009, compared to the same quarter of 2008.

VoIP subscribers also grew, adding 2.5 million cable subs. Overall, though, video services added twice as many subs as did broadband Internet access or VoIP services, among the 10 services tracked.

Digital cable, telco TV (FiOS from Verizon and U-Verse from AT&T), and satellite combined for 4.8 million net new subscribers in the 12-month period ending this June, more than the number of new broadband Internet subscribers. Meanwhile, Netflix added 2.2 million new subscribers.)

Internet Displaces Newspapers, TV Next?

More people now get their news from the Internet than from newspapers, the Pew Research Center for the People & the Press reports.

The percentage of people who say they get most of their international and national news from TV has been dropping slowly.

But the vast majority of Americans (71 percent) continue to cite television as their source for most national and international news, and there is yet no dramatic shift on the order of what has happened to newspapers.

Not many would bet against that state of affairs continuing forever. The bigger question seems to be over timing: How long will it be before something like the 2005 inflection point for newspapers occurs?

The newspaper experience suggests the change, whenever it happens, will be abrupt. There seems to have been some significant shift of user behavior around 2005 that caused an sudden shift in market share for newspapers.

Since 1999, the percentage of people who report getting their international and national news from television has fallen from about 82 percent to 71 percent.

What the chart does not capture is the shift of TV news from "broadcast" to "cable news," though.

While 42 percent of Americans rely on the internet for national and international news, just 17 percent say the Internet is their main source of local news. Americans are about equally likely to say radio is their main source for national and international news (21 percent) and local news (18 percent).

While 70 percent of those younger than 30 say they get most of their national and international news from television, nearly as many (64 percent) point to the Internet. Among those ages 30 to 49 a similar pattern is evident; 62 percent get most national and international news from television, while 54 percent cite the Internet.

Mobile Handset Features Strongly Affect User Engagement

As you might expect, less-developed handset features make ease of mobile Web navigation a key issue for feature phone owners, while smart phone owners are less concerned. That said, speed of page loading is the top issue for both smart phone and feature phone users.

On the heels of a study that suggests less ad engagement with mobile advertising by smart phone users, another study suggests nearly-identical levels of engagement with Internet activities. The studies do not contradict each other, but merely suggest that high levels of engagement with mobile content do not necessarily lead to high levels of engagement with mobile ads.

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

The new InsightExpress study found that 68 percent of smartphone users reported feeling positively engaged while using the mobile Internet, second only to the 70 percent of users who were positively engaged while on a computer.

Only 47 percent of feature phone users reported positive mobile site engagement, as you might expect, given the more-limited capabilities of feature phones, compared to smart phones.

These results indicate that smartphone users are as engaged with mobile Internet content as those who are browsing the Internet on their computer. The Chitika results suggest that, for any number of reasons, mobile advertising is not yet optimized.

When mobile Internet users were asked to identify the top three elements that most influence their decision to return to a mobile Internet site, they said the top three issues were the speed at which the site loads, the ease of navigation on the site and the quality of the content on the site itself.

Service providers largely control the first variable, site designers and handset manufacturers the second variable and content providers the third.

Among mobile Internet users, several small but telling differences were revealed when comparing smart phone owners to feature phone owners. While both groups prioritized the speed at which a mobile site loads, smart phone users looked next at the quality of the content, ranking ease of navigation as less important.

In contrast, feature phone users found ease of navigation almost as essential as their number one concern, how fast the mobile site loads.

These differences can be explained by the limited navigation capabilities available with feature phones, making simple interfaces an absolute necessity. Smart phones, with their advanced browsers and inputs, allow for more complex page navigation.

Mobile Web site features that had the least impact on a users decision to make a return visit were the absence of advertising, the ability to personalize, and the number of links, videos or images on the site.