Tesco Abandons VoIP Market

U.K. retailer Tesco, which began selling consumer VoIP service in 2006, now is pulling the plug, though it will continue to sell mobile service. Without reading more into the news than is warranted, the move is illustrative of the fact that consumer VoIP might be less an innovation than some had hoped for, and certaintly is a less-robust business than anticipated, especially compared to mobile service, at least for the moment.

That is not to say other competitors, with different assets, can fare better. But the April 27, 2010 shutoff at least suggests that the "VoIP" market has not proven to be the lucrative business Tesco once believed it was, given its ability to support and market the business, as well as the evolution of end user demand, which arguably has tipped in the direction of mobility.

Earlier in the last decade, there was much more apparent optimism that fixed-line VoIP would "change telephony forever," creating significant new opportunities for non-traditional providers.

One might argue that VoIP's primary impact has been to accelerate voice price erosion, without creating a significant new market, though it has been the way cable operators have taken market share from telcos.

Tesco says "trends in technology have moved forward since we launched Internet phone so that this is no longer a sustainable service". One might infer that means mobility now is the "hot" service.

"Tesco Internet Phone" was basically a Skype-style PC offering, though the supermarket did offer a Vonage-style terminal adapter version as well.

That is not to say further innovation in voice services is impossible, or in fact unlikely. There will be advances. The issue is whether the scale, impact and economic importance of such voice innovations is going to approach the advances being made in mobility, broadband, Internet and Web services.

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TV Advertising the Google Way

Google is making it easier for online advertisers to get TV-style ads, with obvious implications for both PC-based an mobile-based screens.

CBS Gets Ready for iPad

If a video content provider reauthors its content to run using HTML5 instead of Flash, what does that mean? That the content is intended to run on Apple's iPad. And that is what CBS.com appears to be doing.

None of this means the multi-channel video entertainment business is in trouble, by any means. But it is likely to be a step towards a future where that is a serious question.

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Smartphones a Majority of all U.S. Devices in 2011

By 2011, there will be more smartphones in use in the U.S. market than feature phones, Nielsen now projects.

The share of smartphones as a proportion of overall device sales has increased to 29 percent for phone purchasers in the last six months and 45 percent of respondents to a Nielsen survey indicated that their next device will be a smartphone.

Given normal handset replacement cycles, it is possible to project that the installed base of devices will shift dramatically over the next two years. For those of you who wonder about such things, that would likely make the United States one of the world leaders in smartphone usage.

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Verizon Slows FiOS Build: Implications for National Broadband Plan?

Many things have changed since Verizon Communications first began its FiOS construction program in 2004, and in the years leading up to that decision, when hot debates were held about the wisdom of fiber-to-neighborhood versus fiber-to-home networks.

Mobile broadband, especially the faster 3G and new 4G networks, now will begin to offer a serious alternative for a signficant number of end users.  Consumer resistance to paying higher prices for higher-speed fixed broadband (50 Mbps and above) has not lessened.

Cable companies have solidified their position as specialists in the consumer services segment, with the exception of wireless. Given cable's position in consumer video and voice, financial returns from fiber-to-home deployments, in the mass market, are getting harder to justify, not easier.

In many ways, leading U.S. telcos have found that their strengths in wireless and enterprise services are matched by relative cable strength in the mass market video and voice product segments.

Also, opportunity costs arguably have risen over the last 10 years, opportunity cost representing the potential gains a company might have made if capital had been deployed elsewhere,, such as wireless or software, instead of high-capacity fiber access.

In the background are concerns about the long-term relative value of multi-channel entertainment and voice revenues as well, which dampen financial returns from those two core services.

Take all of that into account and the apparent lessening desire on Verizon's part to continue investing in fiber to the home is logical, perhaps even prudent.

Given capital scarcity, burgeoning wireless and mobile broadband opportunities, as well as the slower growth for legacy services such as entertainment video, fixed access and voice, it would be hard to argue with an argument that effort is better placed squarely in the wireless arena, rather than fixed line services.

For that reason, it is not a complete surprise that Verizon seems to be slowing its FiOS program, which had been nearing the end of the major construction phase, in any case. The company says it no longer will seek to build FiOS in communities where it has not already gotten video franchises issued.

That means Verizon apparently will not undertake FiOS builds in Baltimore and downtown Boston, for example, a scenario many of us would not have predicted.

Verizon is still negotiating for franchises in some smaller communities, mainly in New York, Massachusetts and Pennsylvania, but it is not working on securing franchises for any major urban areas.

Verizon never committed to bringing FiOS to its entire local-phone service area, originally planning to make service available to about 18 milliion households by the end of 2010, a goal it will reach. Since the program began, however, Verizon also has been selling assets in less-populated areas in the Midwest and West Coast.

The recruitment of new FiOS TV subscribers slowed last year. In the fourth quarter, it added 153,000 subscribers, little more than half of the number it added in the same period the year before.

At the end of last year, Verizon had 2.86 million FiOS TV subscribers and 3.43 million FiOS Internet subscribers (most households take both).

Investors never have liked the FiOS program, which will wind up costing an estimated $23 billion. FiOS likely has been a key reason Verizon has been able to compete with cable companies.

Verizon is the only major U.S. phone company to draw fiber all the way to homes and the only one to offer broadband speeds approaching those available in Japan and South Korea. But the financial returns have not been so overwhelming that the decision to expand the program is completely clear.

Verizon's experience might be an implicit warning to policymakers that although the goal of 100 Mbps service, provided to 100 million U.S. homes, by 2020 is a fine stretch goal, but might face trouble if it means consumers have to pay significantly more for such service. Consumers might prefer 20 Mbps to 30 Mbps for $50 to $60 a month, rather than 50 Mbps for $100 a month, and certainly more than 100 Mbps for $150 to $200 a month.

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Healthcare Plan to Cost AT&T $1 Billion

AT&T says it is taking a $1 billion charge for the first quarter of 2010 to account for increases in its costs because of the new health care plan. It isn't clear what the on-going hit to earnings might be.


AT&T says it also will also evaluate changes to its health care benefits for employees and retirees, to avoid paying such charges in the future, of course. 

Nexus One Outsells iPhone in February...Sort of

Sales of the Google Nexus One are now on the rise and beat the iPhone by 16 percent in February 2010, says RCS Limited, which expects the trend to continue. That data, based on U.K. results, contrasts with sales in the United States, where initial sales have been modest.

It isn't clear that the statistic means a whole heck of a lot, though. Sales practices are quite different in the U.S. market, compared to others where devices often are bought "unlocked" and at full retail prices. Since most U.S. iPhones are bought at subsidized prices, while many to most Nexus One devices are bought at full retail price, the sales comparisons are difficult. Any expensive device sold primarily "unlocked and at full retail" is going to have low sales volume in the U.S. mobile market.

Also, the Nexus One has been viewed by many as a "demonstration" project whose real objective is to show what can be done when Android open-source software and hardware are tightly integrated.

According to a report by Flurry, Google sold roughly 135,000 of its new Nexus One phones in its first 74 days on the market. By contrast, Apple sold 1 million of the original iPhones in the first 74 days, while Motorola sold 1.05 million Droid phones -- which are based on Google's Android software -- during the same timeframe.

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