FCC Votes to Open Title II Reclassification for Broadband Access

The U.S. Federal Communications Commission has taken the first step toward imposing limited regulations on broadband providers by voting Thursday to launch a notice of inquiry exploring the change.

The commission voted three to two to launch the notice of inquiry, which asks for public comment on a proposal by FCC Chairman Julius Genachowski to reclassify broadband as a common-carrier regulated service. It might be an expensive proposition, if the FCC proceeds.

Proposed regulation of high-speed Internet service as a "common carrier" service could cost the U.S. economy at least $62 billion annually over the next five years--a total of $310 billion--and eliminate 502,000 jobs, according to a study released by the Advanced Communications Law & Policy Institute at New York University Law School.

The report estimates that broadband providers and related industries may cut their investments by 10 percent to 30 percent from 2010 to 2015 in response to additional regulation.

At at 30 percent reduction in investment, the economy might sustain an $80 billion hit, according to Charles Davidson, director of the law school's Advanced Communications Law & Policy Institute.

"There will be follow-on effects in the whole ecosystem," said Bret Swanson, president of technology researcher Entropy Economics in Zionsville, Ind., who co-authored the study with Davidson. "A diminution of investment by the big infrastructure companies will reduce network capacity, new services, and investment by all the ecosystem companies."

These investments would spur capital expenditures by others in the ecosystem. A five-percent incremental increase in capital expenditures by the rest of the  ecosystem companies could boost investment by approximately $18 billion per year between 2010 and 2015--about $90 billion over five years--and yield an additional 450,000 jobs created or sustained.

One might ask whether it makes sense to place further burdens on a business whose revenue steadily is declining as a percentage of total end-user communications spending. It wouldn't be the first time the FCC or Congress has moved to essentially disrupt industry structure in hopes of spurring higher consumer welfare.

In the Telecommunications Act of 1996, voice services were liberalized. What nobody apparently anticipated is that wireline voice would suddenly reach its zenith, and begin a long, steady decline. The background assumption was that the business was a "growth" business, rather than a "declining" business. But common sense suggests that different policies are needed when a business is shrinking, than when it is growing, when a business can grow faster because of more competition and when it will simply decline faster because of new constraints. $310 Billion Economic Loss, Over 5 Years if Title II Rules are Imposed

Is Email Going Away?

Lots of people, including Facebook COO Sheryl Sandberg, think email is fading away as a communiation activity. "Only 11 percent of teens email each day," Facebook COO Sheryl Sandberg says. "Email is probably going away."

Part of that behavior pattern can be explained by the fact that teens are not in the work world in the same way as older users are, and email remains highly important in the work world.

This is good news for Facebook and online advertising in general, she argues.
People are more comfortable seeing ads directed at them in their Facebook "News Feed" than they are in their email inboxes, she argues.

While ads in an inbox are called "spam," Facebook users will even sometimes click "Like" on a brand's Facebook page and volunteer to receive messages directly from advertisers.

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Mobile Advertising Growing, But Revenues Still Modest

Mobile advertising will continue to be a modestly-sized segment of the digital media ecosystem as long as different segments of marketers have alternative media vehicles which better meet their business objectives, say researchers at MagnaGlobal. But mobile commerce and mobile marketing are destined to grow.

Global online advertising will rise by 12.4 percent in constant currency terms during 2010, to $61 billion dollars globally. Accounting for actual and expected changes in currencies over the course of 2009 and 2010, online advertising will grow during 2010 by 13 percent in U.S. dollar terms or by 21 percent in Euros.

Paid Search has quickly become the most important component of online advertising, and in 2010 this segment will account for nearly $30 billion, up by 16.5 percent over 2009 totals on a constant currency basis, and about 49 percent of total revenues.

Google is the global leader in paid search, but in the paid search markets of China and Russia, the leading paid search providers are domestic players Baidu and Yandex.

All other online advertising will account for $31 billion, up by 8.7 percent in constant currency terms.

Advertising networks retain their importance to advertisers given their ability to aggregate and monetize vast quantities of inventory in an inexpensive manner. Social networking sites such as Facebook capture a large and growing share of audience time.

These trends should continue over the next five years, and the report expects online advertising to collectively grow by 11.7 percent in 2011 and by an average rate of 11 percent through 2015. At this time the global industry will generate $103 billion dollars in constant dollars.

The ongoing global economic recovery has contributed some modest uplift to the expectations of growth, but secular factors are the primary cause of this rapid and sustained pace of development. Importantly, says the study, industry growth is not directly caused by increasing numbers of consumers online nor by rising levels of time spent online.

Instead, growth is driven by businesses, many of them small, that find online media to be the single most effective platform to accomplish their business goals.

PC Sales Up by 52% Next Five Years, Forrester Says

Apple CEO Steve Jobs has compared the PC to a farm truck, saying that when America was an agrarian economy, “all cars were trucks because that’s what you needed on the farm."

The analogy is that PCs will be displaced by new devices such as the iPad.

Steve Ballmer, Microsoft CEO, obviously does not agree. “I think people are going to be using PCs in greater and greater numbers for years to come," he said. "The PC as we know it will continue to morph form factor."

Semantics aside, there still is a question: is the iPad something new, a new market, or simply a new PC form factor? Steve Jobs may not view the iPad as a PC, but we do, says Sarah Rotman Epps, Forrester Research analyst.

"Our view is that the consumer PC market in the United States is indeed getting bigger," she says. "Over the next five years, PC unit sales across all form factors will increase by 52 percent."

Desktops are the only type of PC whose numbers will be fewer in 2015 than they are today, she argues.

Growth will come from new form factors like tablets, but laptop sales will increase steadily also.

Tablets will, however, cannibalize netbooks, outselling netbooks starting in 2012.

In 2015, 23 percent of all PCs sold to consumers in the US will be tablets.

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A Contrarian View on iPhone?

It takes a brave constitution to suggest iPhone is losing its "cool" factor, especially given iPhone's success in the very-tough Japanese market, where foreign-made devices tend not to succeed.

Enterprises Will Spend $12.5 Billion on Tablets, Other MIDs in 2015.

Tablet devices such as the iPad are getting most traction in the consumer market, but will get traction in business markets as well, according to ABI Research. The firm predicts worldwide ultra-mobile device adoption will average 55 percent per year as businesses find many uses for such devices.

In addition to tablets, the research company also puts other devices in the UMD category, including netbooks, smartbooks and mobile Internet devices.

“Businesses will be attracted to these devices for the same reasons as consumers – their larger screens, LAN and WWAN connectivity, and most importantly, low cost," says Dan Shey, enterprise practice director. The firm predicts businesses will buy $12.5 billion worth of tablets and other MIDs in 2015.

ABI Research: Enterprise adoption of ultra-mobile devices to hit $12.5 billion by 2015

Why Some AT&T Customers Might Want to Stay Away from "MicroCell"

It appears there are at least two distinct customer segments where it comes to use of AT&T's new femtocell offering.

Users who really cannot get decent macrocell coverage in their homes or offices probably will welcome the "MicroCell."

But users who do not have that problem, and want to offload their data traffic to the in-home network, will be better off avoiding the Microcell.

The reason is that data consumed on its MicroCell femtocell will be included in subscribers' newly capped monthly data allowance.

Any 3G data traffic running over the AT&T MicroCell will count towards a user's monthly data limits, just as making voice calls over the Microcell counts towards a user's monthly bucket of minutes.

It is possible to get unlimited calling on the Microcell for $19.99 per month, but this is only for voice calls, not data.

In contrast, Wi-Fi usage does not count towards a subscriber's monthly data limit, even though both access methods use the customer's own fixed broadband connection. Of course, AT&T has to invest capital to acquire, deploy and support the femtocells, so relying on the customer's own equipment makes sense, where possible.

The 3G MicroCell complements Wi-Fi by providing enhanced in-home voice coverage and reliable data when Wi-Fi may not be available -- but it is primarily intended for voice calls.

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