AT&T Seen Keeping iPhone Exclusivity Until 2012

AT&T will likely keep its exclusive hold on the iPhone for the next 12-18 months, rather than ending its exclusivity in mid-2010, says Jonathan Chaplin of Credit Suisse.""

"We believe there is a 75 percent probability that AT&T keeps exclusivity in 2010," says Chaplin.
"We conclude that there is only a 50 percent probability" that AT&T loses its exclusivity agreement at the end of 2010.

Chaplin also believes AT&T can afford to compensate Apple at a rate high enough that Apple could reasonably conclude it has essentially nothing to gain by allowing Verizon or other carriers to sell the iPhone.

http://gigaom.com/2010/02/04/att-seen-keeping-the-iphone-through-2011-analyst/

Giving Up on Hulu, Going Back to Cable

It's just one subscriber's view, but Dan Frommer of Silicon Alley says his experiment with getting all his entertainment video from Hulu and other sources has failed.

Two years ago, he thought he could do it.

Now, he says, "I really like having it." High-definition programming is part of the reason. But the main reason is that "there's still way too much good stuff that's not online."

"Anything that relies on a live, nationwide cable audience, like most live sports, or the Oscars, or "MythBusters," isn't going to be available for free online for a long time," he says.

"So while the "Hulu household" experiment was fine, I'm actually pretty glad it's over," he says.

"I agree with Henry Blodget that the TV industry is eventually going to be severely disrupted by the Internet, and eventually, I hope that I'll be able to get everything I want to watch online," he still maintains.

But it's going to take longer than it should, because TV companies are still fairly insulated -- especially as Comcast buys NBC -- and can protect their legacy business models for a while longer.

Bad and Worse News on Job Front

Unemployment rose in most cities and counties in December, signaling that companies remain reluctant to hire even as the economy recovers, according to a new report from the U.S. Labor Department.

The unemployment rate rose in 306 of 372 metro areas, the Labor Department says. As bad as that is, matters may be worse.

Job losses during the recession may have been underestimated by close to a million jobs. The prevailing figure is that the recent recession cost more than seven million jobs. It appears the Labor Department might have to revise those numbers, making the actual total eight million.

The shockingly bad news is that over the last 10 years, according to ADP data, the United States actually has added no net new jobs.

In December 2000 there were 111.65 million U.S. employees working. In January 2010 there were 108.14 million Americans working.

In May 2008 there were 115.2 million U.S. workers. That means the country must add back 7.1 million jobs--or more likely 8.1 million--to get back to where it was before the recent recession began.

That raises a question many of us have not been asking. Up to this point, the issue has been "when will the recession end?" with the implicit assumption that a relatively normal job recovery pattern would follow.

The recovery appears to have started, though we will have to wait for some time to date the actual turning. point.

The new question is what happens to growth rates and job recovery as the recovery continues.

Some have argued that consumer behavior has permanently altered because of the severity of the recession, which would imply a slower rate of growth, even if other negatives were not in place.

But there is no way to test the thesis of new consumer behavior patterns in the near term, because it will take years before consumers really are free to choose new patterns of behavior. There is a difference between "permanent" changes in behavior and "temporary" changes. We seem at the moment stuck in a "temporary" mode: people simply are not free to change their behavior at the moment. So long-term conclusions cannot be drawn.

That has obvious implications for the marketing of most consumer products and services. The recession is over, but recessionary buying habits will persist for some time. We cannot know whether these changes are permanent or cyclical.

Will Facebook Become a News Portal?

Is Facebook encouraging direct distribution of news content? Yes. Will it become an important "news portal"? That's hard to say, yet. But there is no question more news is appearing on Facebook, and that Facebook is encouraging that trend.

"Your friends on Facebook help you cut through the clutter so you can read what's most relevant to you, discover new items and carry on thoughtful discussions," says the Facebook blog.

"Just as your friends can post news throughout the day, so do many news outlets," Facebook says. By connecting with friends' Facebook Pages, users can stay updated and interact with outlets such as The New York Times, The Guardian and CNN, CBS Evening News and CNBC, Facebook suggests.

"At any given time, the news on your home page can consist of celebrity gossip posted by your sister, sports scores from the ESPN Page, and a political debate among your friends as they cite their favorite blogs," Facebook notes. "With so much information at your fingertips on one site, Facebook can serve as your personalized news channel.

By way of comparison, Google Reader recently accounted for .01 percent of upstream visits to news and media websites Google News accounted for 1.39 percent of visits and Facebook 3.52 percent.

In fact, Facebook recently was the fourth-largest source of visits to news sites, after Google, Yahoo! and msn.

"The Perils of Prosperity: The Story Behind the Economic Crisis"

This essay is by noted U.S. economist Robert Samuelson. Those of you who studied economics in college read his books. It's a great piece. Having lived through bubbles, this is starting to make much more sense to me. Perhaps it will make sense to you, as well.

WASHINGTON -- We need to get the story straight. Already, a crude consensus has formed over what caused the financial crisis. We were victimized by dishonest mortgage brokers, greedy bankers and inept regulators. Easy credit from the Federal Reserve probably made matters worse. True, debate continues over details. Fed Chairman Ben Bernanke recently gave a speech denying that it had loosened credit too much, though he admitted to lax bank regulation. A congressionally created commission opened hearings on the causes of the crisis. Still, the basic consensus seems well-established and highly reassuring. It suggests that if we toughen regulation, suppress outrageous avarice and improve the Fed's policies, we can prevent anything like this from ever occurring again.

There's only one problem: The consensus is wrong -- or at least vastly simplified.

Viewed historically, what we experienced was a classic boom and bust. Prolonged prosperity dulled people's sense of risk. With hindsight, we know that investors, mortgage brokers and bankers engaged in reckless behavior that created economic havoc. We know that regulators turned a blind eye to practices that, in retrospect, were ruinous, unethical and sometimes criminal. We know that the Fed kept interest rates low for a long period (the overnight Fed funds rate fell to 1 percent in June 2003). But the crucial question is: Why? Greed and shortsightedness didn't suddenly burst forth seven or eight years ago; they are constants of human nature.

One answer is this: Speculation and complacency flourished, because the prevailing view was that the economy and financial system had become safer. For a quarter-century, from 1983 to 2007, the United States enjoyed what was arguably the greatest prosperity in its history. The boom was triggered by the conquest of high inflation, which had destabilized the economy since the late 1960s. From 1970 to 1984, inflation dropped from almost 13 percent to 4 percent. By 2001, it was 1.6 percent. As inflation fell, interest rates followed -- though the relationship was loose -- and as interest rates fell, the stock market and housing prices soared. From 1980 to 2000, the value of household stocks and mutual funds increased from about $1 trillion to nearly $11 trillion. The median price for existing homes rose from $62,200 in 1980 to $143,600 in 2000; by 2006, it was $221,900.

Feeling enriched by higher home values and stock portfolios, many Americans skimped on savings or borrowed more. The personal saving rate dropped from 10 percent of disposable income in 1980 to about 2 percent 20 years later. The parallel surge in consumer spending, housing construction and renovation propelled the economy and created jobs, 36 million of them from 1983 to 2001. There were only two recessions in these years, both historically mild: those of 1990-91 and 2001. Monthly unemployment peaked at 7.8 percent in mid-1992.

The hard-won triumph over double-digit inflation in the early 1980s, engineered by then-Fed Chairman Paul Volcker and backed by newly elected President Ronald Reagan, qualifies as one of the great achievements of economic policy since World War II. The temptation is to portray it as a pleasing morality tale. The economic theories that led to higher inflation were bad; the theories that subdued higher inflation were good. Superior ideas displaced inferior ones, and the reward was the increased prosperity and economic stability of the 1980s and later. But that, unfortunately, is only half the story.

Success also planted the seeds of disaster by creating self-defeating expectations and behaviors. The huge profits made in these decades by both professional and amateur investors conditioned many to believe in the underlying benevolence of financial markets. Although they might periodically go to excess, they would ultimately self-correct without too much collateral damage. The greater stability of the real economy -- by contrast, there had been four recessions of growing severity from the late 1960s to the early 1980s -- provided an anchor. The Fed was also a backstop: Under Alan Greenspan, it was lionized for averting deep downturns after the stock market crash of 1987 and the burst "tech bubble" in 2000. Money managers, regulators, economists and the general public all succumbed to these seductive beliefs.

The explosion of the subprime-mortgage market early in the new century may now appear insane, but it had a logic. Housing prices would continue rising, because they had consistently risen for two decades. Consumers could borrow and spend more because their wealth was constantly expanding and they were less threatened by recession. That justified relaxed lending standards. Similarly, investment banks could take on more "leverage." Homeowners with weak credit histories could refinance loans on more favorable terms in two or three years, because the value of their houses would have risen. If borrowers defaulted, lenders could recover their money because the underlying homes would be worth more.

The paradox is that, thinking the world less risky, people took actions that made it more risky. The pleasures of prosperity backfired. They bred carelessness and complacency. If regulation was lax, the main reason was that regulators -- like the lenders, investors and borrowers they regulated -- shared the conventional wisdom. Markets seemed to be working. Why interfere? That was the lesson of experience, not an abstract devotion to the theory of "efficient markets," as is now increasingly argued. Euphoria, or something close to it, was considered realism.

Unless we get the story of the crisis right, we may be disappointed by the sequel. The boom-bust explanation does not exonerate greed, shortsightedness or misguided government policies. But it does help explain them. It doesn't mean that we can't -- or shouldn't -- take steps to curb dangerous risk-taking. Some of the Obama administration's proposals for "financial reform" make sense. Greater capital requirements would protect banks from losses; the ability to control the shutdown of large, failing financial institutions might avoid the chaos of the Lehman Brothers collapse; moving the trading of many "derivatives" (such as "credit-default swaps") to exchanges would create more transparency in financial markets. Because the government ultimately stands behind financial markets, regulation is justified to limit taxpayer expense and to prevent catastrophic economic instability.

But it's neither possible -- nor desirable -- to regulate away all risk. Every "bubble" is not a potential Depression. Popped bubbles and losses must occur to deter speculation and compel investors and borrowers to evaluate risk. The overregulation of finance may discourage useful innovation and clog the channels for capital on which an expanding economy depends. Finally, a single-minded focus on the blunders of Wall Street may also distract us from other possible sources of future crises, including excessive government debt and borrowing.

The larger lesson of the recent crisis is sobering. Modern, advanced democracies strive to deliver as much prosperity as possible to as many people as possible for as long as possible. They are in the business of creating perpetual booms. The cruel contradiction is that this promise itself may become a source of instability, because the more it is attained, the more people begin acting in ways that ultimately invite its destruction. Booms often have unintended and nasty side effects. Even anticipated side effects that are ultimately unsustainable -- stock market "bubbles," excessively tight labor markets -- can be hard to police, because they're initially popular and pleasurable.

The quest for ever-more and ever-better prosperity subverts itself. It might be better to tolerate more frequent, milder recessions and financial setbacks than to strive for a sustained prosperity that, though superficially more appealing, is unattainable and ends in a devastating bust. That's a central implication of the crisis, but it poses hard political and economic questions that haven't yet been asked, let alone answered.

This essay is adapted from the paperback edition of "The Great Inflation and Its Aftermath: the Past and Future of American Affluence" by Robert J. Samuelson, published by Random House at the end of January.

ADP Reveals Shocking Decade-Long Employment Data

Medium-sized businesses are back in hiring mode, according to ADP. That's the good news, since medium-sized businesses employ more Americans than big corporations and almost as many as small businesses. Nationally, these firms employ more than 42 million Americans, far more than large companies (17.8 million) and nearly as many as small businesses (48 million).

The bad news is that small businesses shed another 12,000 jobs and large businesses shed 19,000 in January 2010.

The really bad news is that over the last 10 years, according to ADP data, the United States actually has added no net new jobs.

In December 2000 there were 111.65 million U.S. employees working.

In January 2010 there were  108.14 million Americans working. From March 2007 to May 2008 U.S. employment was above the 115 million mark.

Overall, the economy still lost 22,000 jobs between December and January, according to the ADP report.

In May 2008 there were 115.2 million U.S. workers. That means the country must add back 7.1 million jobs to get back to where it was before the recent recession began.

One might argue that means 7.1 million U.S. families that are spending far less than they used to, on communications and all sorts of other things. But that completely understates the matter. Several hundred other million consumers have ratcheted their spending down as well.

All of that likely means several more years of slow economic growth, as consumers restructure their finances, government at all levels finds it simply cannot spend so much because the tax revenue isn't there, and the other long-term impact of unusual and unprecedented government indebtedness starts to be felt.

Some have argued that consumer behavior has permanently altered. One doesn't even have to go that far to predict a long, sluggish climb back up. Behavior now is constrained in real ways. It isn't a matter of permanently altered behavior but rather of sheer inability to behave otherwise.

The recovery has begun. The bad news is that it will be hard to see, and that there is no way to test the thesis of new consumer behavior patterns for some years, because it will take years before consumers really are free to choose.

How Many New Broadband Access Lines Will be Added by Broadband Stimulus?

For most applicants, Feb. 16, 2010 to March 15, 2010 is the window for filing "broadband stimulus" requests to the Rural Utilities Service and National Telecommunications & Information Administration programs. 

Satellite providers largely will be waiting for a new "third round" aimed at funding satellite projects, funded by the RUS.  A funding window will open "later" to provide grants for satellite service for premises that remain unserved after all other Recovery Act broadband funding is awarded, NTIA says. 

It isn't clear how much funding that might entail. The RUS will be disbursing about $2.2 billion in this funding round, while the NTIA will be awarding about $2.6 billion, of which approximately $2.35 billion will be made available for infrastructure projects, $150 million for public computer center projects, and $100 million for sustainable adoption projects. 

Most of the NTIA money is expected to support middle-mile projects, rather than access. Perhaps oddly enough, that decision by NTIA means there will not be a significant increase in new broadband access facilities,. since the middle mile projects, by definition, are "backbone" projects deemed necessary to get broadband backhaul facilities into place, not serve end users. 

The RUS, on the other hand, has said its $2.2 billion will be spent directly to expand access facilities. 

Assume each new broadband line costs just $3000, the figure suggested as an average for new rural broadband deployments. If all $2.2 billion is spent on access facilities, an additional 733,333 new broadband access lines would be added to the national total. Since there are additional costs, the total will be less than that. 

As the bulk of the total RUS funding ($2.3 billion out of a total of $2.5 billion) will be awarded in the second round, and using the same $3,000 per line assumption, of the $200 million awarded in the first round, 66,667 new lines could have been added, for a grand total of 800,000 lines. 

That is not to say the additional middle-mile facilities will not be foundational, and will result in potential new lines later. But there is no particular reason to believe an additional $3,000 per new access line will be required, when the time comes to actually install access facilities.

$7.2 billion for 800,000 lines might be an unfair way to characterize the program, as some of the money will be spent for public access facilities and training, and the middle-mile infrastructure is required for eventual deployment of new access facilities. 

But it is not far from the truth to point out this near-term conclusion: the immediate change in new broadband access lines from the whole broadband stimulus program will be on the order of 800,000. There will be some additional growth when wireless broadband networks funded under the program are able to finish deployment of their new networks, of course.

But the calculation of 800,000 new lines does not subject overhead and other administrative costs that will lessen the total number of added lines. In all likelihood, adding all fixed broadband lines will only bring the total back up to the 800,000 range.