Regulatory Pendulum Swings: But Which Way?

In the telecommunications business, the regulatory pendulum swings all the time, though slowly. So periods of relatively less-active regulation are followed by periods of relatively more active rule-making, then again followed by periods of deregulation.

It has been apparent for a couple of years that the regulatory pendulum in the the U.S. telecom arena was swinging towards more regulation.

What now is unclear, though, is whether such new rules will largely revolve around consumer protection and copyright or might extend further into fundamental business practices.

Current Federal Communications Commission inquiries into wireless handset subsidies and contract bundling, application of wireline Internet policies to service wireless providers, as well as the creation of new "network neutrality" rules are examples.

But so will the settting of a national broadband policy likely result in more regulation. And there are some voices calling for regulating broadband access, which always has been viewed as a non-regulated data service, as a common carrier service.

One example is a recent speech given by Lawrence Strickling, National Telecommunications and Information Administration assistant secretary, to the Media Institute.

He said the United States faces "an increasingly urgent set of questions regarding the roles of the commercial sector, civil society, governments, and multi-stakeholder institutions in the very dynamic evolution of the Internet."

Strickling notes that “leaving the Internet alone” has been the nation’s Internet policy since the Internet was first commercialized in the mid-1990s. The primary government imperative then was just to get out of the way to encourage its growth.

"This was the right policy for the United States in the early stages of the Internet," Strickling said. "But that was then and this is now."

Policy isues have ben growing since 2001, he argued, namely privacy, security and copyright infringement. For that reason, "I don’t think any of you in this room really believe that we should leave the Internet alone," he said.

In a clear shift away from market-based operation, Strickling said the Internet has "no natural laws to guide it."

And Strickling pointed to security, copyright, peering and packet discrimination. So government has to get involved, he said, for NTIA particilarly on issues relating to "trust" for users on the Internet.

Those issues represent relatively minor new regulatory moves. But they are illustrative of the wider shift of government thinking. Of course, the question must be asked: how stable is the climate?
Generally speaking, changes of political party at the presidential level have directly affected the climate for telecom policy frameworks. And while a year ago it might have seemed likely that telecom policy was clearly headed for a much more intrusive policy regime, all that now is unclear.

A reasonable and informed person might have argued in November 2008 that "more regulation" was going to be a trend lasting a period of at least eight years, and probably longer, possibly decades.

None of that is certain any longer. All of which means the trend towards more regulation, though on the current agenda, is itself an unstable development. One might wonder whether it is going to last much longer.

That is not to say some issues, such as copyright protection or consumer protection from identity theft. for example, might not continue to get attention in any case. But the re-regulatory drift on much-larger questions, such as whether broadband is a data or common carrier service, or whether wireless and cable operators should be common carriers, might not continue along the same path.

You can make your own decision about whether those are good or bad things. The point is that presidential elections matter, and the outcome of the 2012 election no longer is certain.

Nexus One for Verizon

The Google-specified Nexus One, released on T-Mobile USA's network in January, will launch on March 23, 2010 on Verizon Wireless, a source says.

Verizon will introduce the Nexus One on the day the International CTIA wireless show begins, Neowin reports.

Pricing and terms of use are not known but likely will be "competitive" with T-Mobile's positioning.

The Nexus One is available for T-Mobile on an unlocked basis for a price of $529. Consumers can also order the phone through T-Mobile for $179 with a two-year contract.

Palm in "Death Spiral"?

"Death spiral" is not a word any company executive ever hopes to see or hear in the same sentence as the firm name. But that's what Barron writer Eric Savitz now does. "I fear Palm has begun sliding into a death spiral," he says. "Palm is simply too small, too poor and too weak to compete in a market where some of the world's most powerful companies are vying for supremacy."

Though its competitors will not lament the potential loss of one contestant in the market, the webOS software Palm developed also is described by Savitz as "brilliant." Walt Mossberg at The Wall Street Journal in a review last summer called the Pre "potentially the strongest rival to the iPhone to date."

"There's just one problem: No one is buying the phones," he says. Palm now says revenue for its fiscal year, ending in May, will be well below its previous forecast of $1.6 billion to $1.8 billion. The problem, Palm said, is "slower than expected consumer adoption of the company's products." In other words, the Pixi and the Pre aren't selling.

Whether Palm somehow can pull off a turn-around is not clear, nor is it clear whether the company will wind up being sold to another firm. But webOS is yet another illustration of the fact that in the technology business, the "best" product does not always win.

Is UC Still Relevant and Growing?

IP-based communications often has not developed as its supporters have forecast. Suppliers thought it was an "enterprise" product, but VoIP erupted in the consumer space. That actually has been the rule, of late, not the exception.

Email, the Internet, instant messaging, text messaging, search, social networking, broadband and mobility all gained traction in the consumer space and then were forced upon enterprises.

Has unified communications now been superseded by social media and mobile devices? For many enterprise executives, that is a rhetorical question, though it might not be so rhetorical for smaller organizations or individuals.

Contact centers remain the province of enterprise-class unified communications solutions and nearly all office environments, as well as for traveling workers who need access to home office communications features.

Global businesses likewise benefit from enterprise-grade unified communications more than small, local businesses and organizations.

Since supplier organizations tend to mirror the organizations they sell to, that means many large suppliers of unified communications believe in its value because they themselves are large, far-flung organizations in best position to leverage UC and other collaboration tools.

What is not so self evidently clear is that the same level of benefit is obtained by smaller, more localized user organizations and firms.

"These customers aren’t worried about presence and a unified portal," says David Burnand, a former Siemens enterprise communications executive. In fact, "many of them run their business using mobile handsets, simple PBXs, social media, Skype and Google Voice."

Many use elements of unified communications, including single number services, video-calling and instant messaging. They just don’t call it unified communications, or use those tools because they are "unified." They use point solutions because they solve real problems.

The point, says Burnand, is that "old school" definitions of unified communications do not hold.

UC is no longer about managing a desk phone, mobile, Windows PC and many other devices. The smart phone has made that view redundant for all except the power users, he argues.

Instead, it is evolving into skinny applications for low-end users and specialist applications for power users, mixed with a dose of social media, a splash of video and a few Web-based collaboration tools.

That will be an unsettling view for many unified communications or collaboration suppliers, as it suggests the "UC market" is far smaller than many would have predicted for hoped for.

Global Voice Penetration Really is a Miracle

By the end of 2009, there were an estimated 4.6 billion mobile cellular subscriptions, corresponding to 67 per 100 inhabitants globally, says a new report from the International Telecommunications Union.

Last year, mobile cellular penetration in developing countries passed the 50 per cent mark reaching an estimated 57 per 100 inhabitants at the end of 2009. Even though this remains well below the average in developed countries, where penetration exceeds 100 per cent, the rate of progress remains remarkable.

Indeed, mobile cellular penetration in developing countries has more than doubled since 2005, when it stood at only 23 per cent.

Not many will recognize this success for the great achievement it really is. Policymakers of the 1960s, 1970s and 1980s would be, and probably are, shocked at what has happened. In days past, the thinking was that getting phone service to people who had never made a phone call would be stubbornly difficult. I do not recall anybody suggesting mobile technology would do the trick.

The broadband gap, though significant, also is showing dramatic progress, and again because of mobile networks.

There is a "problem" people and organizations who "solve problems" often have: they cannot recognize victory. Many difficult problems actually get fixed. When they do get fixed, rejoice and move on.

Getting voice services and now broadband broadly adopted throughout the world is a huge, miraculous success.

Enterprise Workers Ready to Ditch Their PCs for Smartphones?

Something rather unusual seems to be happening in the enterprise mobility space. According to a recent survey taken by iPass, 63 percent of mobile employees prefer to use a smartphone, not a laptop, as their primary mobile device, for trips of any length.

For trips of up to five days, 59 percent of respondents prefer to carry a smartphone, while 41 percent prefer a laptop. For trips lasting longer than 30 days, 64 percent prefer a smartphone to a laptop.

That likely is testament to the high value traveling workers place on voice and text communications, as well as the increased capabilities smartphones now offer, including email and Web access.

But the findings also suggest that some enterprises are over-investing in laptops and software and might need to look at scenarios where mobile or traveling workers can get along just fine with smartphones.

There is another and possibly darker view here as well. Industry suppliers have been touting mobility investments as a driver of productivity. As it now appears, enterprise workers do not even want to carry laptops with them when traveling. So what is the value of all those investments in remote access?

Granted, most enterprises likely are trying to get a better handle on mobile phone expenses, so indiscriminate replacment might not be wise. But the survey also suggests the near-universal embrace of the BlackBerry has "soft" support from users.

According to the iPass survey, while 32 percent of mobile employees ranked the BlackBerry smartphone as their mobile device of choice, 54 percent of BlackBerry smartphone users would switch to an Apple iPhone if it was supported by their enterprise.

"Mobility" also once was an issue of supporting traveling workers. Today every employee
is a potential mobile employee, iPass says. While many mobile employees have some business travel, many more are logging in from home.

About 68 percent of iPass survey respondents did not travel during the last quarter of 2009, but  45.8 percent of mobile employees logged in from home at least twice a month, and 16.8 percent logged in more than ten times a month.

Excluding home and the office, mobile employees most often log in from hotels (42.6 percent), airports (27.2 percent), retail outlets and restaurants (27 percent).

According to the iPass survey, while 32 percent of mobile employees ranked the BlackBerry smartphone as their mobile device of choice, 54 percent of BlackBerry smartphone users would switch to an Apple iPhone if it was supported by their enterprise.

Telco Choice is Not "Dumb Pipe" or "Service Enabler" or "Service Provider"

There's no question that the fundamental business underpinning of the entire global telecommunications business is undergoing a fundamental change from "voice driven" to "broadband driven," and, to a certain extent, from "services" to "access."

That leads to a fear that the future is one of "dumb pipe" access services providing modest revenue and slimmer profit margins than any existing provider can tolerate, without significant downsizing of operational cost.

Many observers suggest service providers will gradually take on more "application enabler" roles, supporting third-party business partners.

At the same time, there is debate about the degree to which any existing video or voice service provider will be able to continue doing so in the future.

But those three choices are not mutually exclusive. For better or worse, "dumb pipe" access is a permanent foundation for every telco, mobile, cable, satellite or fixed wireless provider. That is precisely what "broadband access" is; a simple "access" service.

That does not mean "only" access will be provided. There likely will be some permanent role for managed video, voice, storage, backup and other services. At some combination of value and price, users simply will prefer to buy such "services" rather than use comparable applications.

At the same time, it is likely service providers will find ways to grow the percentage of their revenue earned by supplying services to business partners. That might include billing services, location and device information, hosted processing or storage services.

"Dumb pipe" access is not the only business of the future, but it is foundational, and permanent. In addition to that, though, today's service providers necessarily will have to grow the proportion of revenue they make from "enabling" services, as they manage a likely decline of "services" such as basic voice communications or multi-channel video.

And it is not necessarily that those services decline because of a shift in user demand. The simple existence of capable competitors means market shifts will occur, irrespective of any conceivable shifts of demand. In other words, one does not have to make a definitive bet on "over the top" voice or video to plan on lower revenue from existing voice or video sources. One simply must assume that capable competitors will take some amount of market share.

In other words, at the level of discrete enterprises, cable executives have to anticipate declining video customer base and revenue contribution, while telcos have to assume declining gross voice revenue. No shift of demand to online video or VoIP need be assumed.

To be sure, those forces likely will be factors. But it is not the case that a stark choice must be made between the "dumb pipe" access provider and the "service enablement" or "service provider" roles. All three will remain parts of the overall revenue stream.