FiOS Does Not Sell Itself

Even FiOS Doesn't Sell Itself

Verizon's third quarter FiOS revenues totaled more than $1.4 billion, up 56 percent year over year. And FiOS average revenue per user also hit more than $137 per month.

Verizon also added about 18 percent more FiOS TV and Internet customers than in the same quarter last year, including 191,000 FiOS TV and 198,000 FiOS Internet customers, increasing Verizon's penetration to 25 percent for TV and 29 percent for Internet.

Still, net adds were less than the record adds of the last two quarters, Verizon says. Gross sales were lower primarily due to a change in promotional activity, the company says.

"As it turns out, we had a couple of promotions that worked, didn't work as well," says Ivan Seidenberg, Verizon CEO. "What happened is we had a couple of better quarters and we toyed with how we could sustain that and found that it was difficult in light of maintaining a fiscal discipline against it."

In other words, Verizon probably did not spend as much as it could have on marketing FiOS services, and the results probably slowed because of that conservatism.

The point, perhaps, is that as powerful a marketing platform as FiOS represents, the value proposition appears to remain less obvious to consumers than we inside the business sometimes think.

Verizon remains committed to adding about one million new FiOS customers every year, on a base of homes passed that stands at about 45 percent of all Verizon residential passings, with video available to about 34 percent of total households passed.

That illustrates part of the problem. Whatever Verizon does, it potentially can sell video services to about a third of all residences, though it can sell FiOS broadband to about 45 percent of homes. It always is tough to market services when a third of homes can buy them, not all.

And as service providers have learned in the past, easing up on promotions, or banking on the wrong promotions, can have significant effect on results. Not even fiber-to-the-home service, in and of itself, seems to "sell itself" to most customers, as powerful as those sorts of connections always have seemed to people in the business.

Twitter Stats Still a Puzzle

Twitter continues to be a bit of a puzzle, for reasons beyond its search for a viable business model. It has enthusiastic users, but also high apparent levels of abandonment. And some studies might lead to the conclusion that Twitter growth is slowing sharply, while other social sites such as Facebook might be accelerating.

Data from hitwise, for examples, shows a peak in Twitter in July 2009, with declines since then. The caveat is that many Twitter users appear to use third party sites to access the service, so the actual Twitter.com visits do not fully capture actual Twitter use.

The hitwise data also might suggest that user engagement with Facebook, a larger and more-established social networking site, is growing much faster than Twitter seems to be growing.

One fact seems clear enough, though, and that is the increased amount of mobile use of the social tool. Although 60 percent of Twitter users say they only use their computers to access the service, about 40 percent say they do so using their mobiles, according to a study of Twitter use during August 2009, Crowd Science.

Crowd Science reports that in August 2009, although only 27 percent of Twitter users posted daily, 46 percent checked for updates every day.

Is Mobile Handset Market Heating Up?

Handset shipments suffered another annual decline in the third quarter but are forecast to rebound in the key final quarter of the year, according to Strategy Analytics and IDC. Virtually all observers attribute the slowdown to slower handset replacement caused by consumer caution in the face of the recession.

Strategy Analytics estimates that global handset shipments reached 291 million units in the third quarter, down four percent from 304 million units year over year.

IDC estimates third quarter 2009 shipments totalled 287.1 million units worldwide, down six percent from a year earlier, but up 5.6 percent from the second quarter.

"The mobile phone market is showing the first signs of improvement since the onset of the economic crisis," says Ramon Llamas, senior research analyst at IDC. "During the third quarter, we saw a number of channels promoting older devices at significantly lower prices. For many, this was enough to spur demand and push volumes higher."

Strategy Analytics forecasts that 300 million handsets will be shipped in the key fourth quarter, an increase of three percent increase on the 294 million units shipped in the last quarter of 2008.

"We believe this will be the first time the industry has returned to positive growth since the third quarter of 2008, signalling an end to the handset recession after four quarters of decline," Strategy Analytics says.

Of course, industry-wide averages sometimes obscure market share changes. Nokia sales dipped eight percent, year over year, while Samsung grew 16 percent. LG grew 37 percent. Both Sony Ericsson and Motorola reported declines.

Pandemic Would Impair Residential Broadband, GAO Says

In a serious pandemic, residential Internet access demand is likely to exceed the capacity of Internet providers’ network infrastructure, says the Government Accountability Office. That means enterprise and government disaster recovery efforts that depend on residential broadband connections may not work as planned, GAO warns.

In a serious pandemic, U.S. businesses, government agencies and schools could experience absenteeism (or forced dispersal of workers as precautionary measure) that could reach 50 percent or higher ranges, thereby displacing Internet access demand from normal daytime sites to homes, says the Government Accountability Office.

But residential broadband networks are not designed to handle this unexpected load, and could interfere with teleworkers in the securities market and other sectors, according to the Department of Homeland Security.

Oddly enough, robust network neutrality measures, such as forbidding any prioritization of bits, could render impotent one obvious way of handling the sudden explosion of traffic.

"Private Internet providers have limited ability to prioritize traffic or take other actions that could assist critical teleworkers," GAO says. "Some actions, such as reducing customers’ transmission speeds or blocking popular Web sites, could negatively impact e-commerce and require government authorization."

In other words, laws and rules that forbid "packet discrimination" would impair ability to prioritize more-important work-related uses of the residential Internet.

"Increased use of the Internet by students, teleworkers, and others during a severe pandemic is expected to create congestion in Internet access networks that serve metropolitan and other residential neighborhoods," GAO warns.

"Localities may choose to close schools and these students, confined at home, will likely look to the Internet for entertainment, including downloading or 'streaming' videos, playing online games, and engaging in potential activities that may consume large amounts of network capacity," GAO says.

"Additionally, people who are ill or are caring for sick family members will be at home and could add to Internet traffic by accessing online sites for health, news, and other information," GAO adds. "This increased and sustained recreational or other use by the general public during a pandemic outbreak will likely lead to a significant increase in traffic on residential networks."

"If theaters, sporting events, or other public gatherings are curtailed, use of the Internet for entertainment and information is likely to increase even more," GAO says. At-home workers will only compound the problem.

Oddly enough, the mechanisms ISPs could use to prioritize bandwidth so that a suddenly-scarce resource can be managed are precisely the tools strong "network neutrality" forbids.

"A provider could attempt to reduce congestion by reducing the amount of traffic that each user could send to and receive from his or her network," says GAO. "Such a reduction would require adjusting the configuration file within each customer’s modem to temporarily reduce the maximum transmission speed that that modem was capable of performing—for example, by reducing its incoming capability from 7 Mbps to 1 Mbps."

"However, according to providers we spoke with, such reductions could violate the agreed-upon levels of services for which customers have paid," GAO points out.

And that is even before any new regulations that specifically would outlaw packet shaping that could, for example, limit video streaming, gaming, and peer-to-peer and other bandwidth-intensive applications during daytime work hours, when teleworkers will have an arguably greater need to maintain functioning connections for voice and data operations essential to their work.

Overly-casual positioning of the need for "packet equality" rules can be dangerous, as the GAO points out.

Google Blocks Calls to About 100 High-Cost Telephone Numbers

Google says that although it still blocks use of Google Voice to terminate calls to fewer than 100 U.S. telephone numbers with unusually high termination cost, it still does so. Earlier, Google Voice had been blocking calls to thousands of numbers in some exchanges.

In a letter to the Federal Communications Commission, Google says a June 2009 study it conducted found that the top 10 U.S. telephone prefixes Google Voice was terminating accounted for 1.1 percent of its monthly call volume, about 161 times the expected volume for a "typical" prefix. That 1.1 percent of calls also accounted for 26.2 percent of its monthly termination costs.

Google says terminating those calls costs as much as 39 cents a minute. Google therefore blocked Google Voice calls to less than 100 U.S. telephone numbers, based on that study.

The difference is that where Google had before only been able to block calls to prefixes, it now can block specific telephone numbers with highly asymmetric traffic typical of free conference call services, for example, which never place outbound calls, but simply receive them.

Will Telecom Markets Grow in 2010?

Worldwide telecom spending will decline four percent in 2009 with revenue of nearly $1.9 trillion. In 2010, telecom spending is forecast to grow 3.2 percent, say researchers at Gartner. The question lots of people logically will have is what pattern growth in U.S. enterprise and smaller business markets will take.

Qwest provided some anecdotal evidence during its third quarter earnings report. "As far as the activity in BMG and wholesale, I would say, yes. we are seeing some quicker decision making," says Teresa Taylor, Qwest COO. "Quicker decision making" is a sign of more buying intent and activity, as longer decision cycles represent less intent and activity.

Qwest's business markets group sells to enterprises, so the anecdote suggests enterprise demand, at least for Qwest, is growing. Business markets segment income of $409 million was flat, compared to the second quarter, but increased 11 percent year over year.

The caveat here is that Qwest believes it has been doing better than AT&T and Verizon over the last couple of quarters. All Taylor will say that trends are "positive."

Verizon to Debut Motorola Droid Nov. 6, 2009

Verizon Wireless will take the wraps off its new "Droid" device, built by Motorola, on Nov. 6, 2009. The new device will feature a 3.7-inch high-resolution screen featuring more than 400,000 pixels total, more than twice that of the "leading competitor," Verizon says.

The Android operating system supports running of multiple applications at once, and allows toggling between as many as six simultaneous applications. Google searches can be conducted using voice input and results are location dependent. Content on the phone, such as apps and contacts plus the Web can be searched using the search box.

"Push" Gmail is supported, as is "push" Microsoft Exchange email. "Google Maps Navigation" provides turn-by-turn voice guidance as a free feature of Google Maps.

Droid will be available in the United States exclusively at Verizon Wireless Communications Stores and online for $199.99 with a new two-year customer agreement after a $100 mail-in rebate.

Customers will receive the rebate in the form of a debit card; upon receipt, customers may use the card as cash anywhere debit cards are accepted.

Customers will need to subscribe to a nationwide voice plan and an email and Web for plan. Nationwide voice plans begin at $39.99 for monthly access for 450 minutes and an "Email and Web for Smartphone" plan costs $29.99 for monthly access.