Fiber Glut Redux?

You can draw your own conclusions about whether a higher tempo of optical capacity investments is a "bubble" or simply a prudent response to fast-growing demand, or something more nuanced. Once again, it is likely a bit of both will happen.

Excess capacity will be installed on routes that won't prove to "need" the capacity, while some of the capacity will be built at locations where it really does represent a good business case. But, as always happens, there will be over-investment on some routes.

The Wall Street Journal discussion settles none of the questions, but raises the "right" issues about substantial new demand, the importance of "location" and the "competition" from improved laser technology that could jeopardize the new cables and fibers.

How a Business Loses 90% of its Value in 5 Years: Could it Happen to Telcos or Cable?

"Avoid zero" is a paramount bit of advice I recall hearing often at a streaming media start-up. That can be difficult.

After changing hands three times in six troubled years, the Philadelphia Inquirer was was sold for a tenth of the half-billion dollar price they fetched as recently as 2006, according to consultant Allen Mutter.

A decade or so ago, the Inky and the Philadelphia Daily News would have been worth the batter part of a billion dollars. The assets have sold for $55 million.

The broader implications, for any business facing disintermediation from Internet and Web alternatives, would seem to be clear enough. If a business, or an industry, faces sure decline of its primary revenue source, that business or industry has to find a replacement.

You might argue the telecom industry is in that situation. The difference is that the telecom industry already, at least once, has shown an ability to replace a key source of revenue and profits.

Globally, earnings growth at the largest public telecom companies over the last three years trailed revenue growth by an average of 50 percent over the last year, according to AlixPartners. This is especially the case in North America, where earnings before interest, taxes, depreciation and amortization trails revenue growth by a factor of ten, AlixPartners argues.

Overhead costs (sales, general and administrative) also are outstripping both earnings and revenue increases. And though carriers have pared capital investment where they can, postpoining projects that will need to be undertaken at some point, such restraint never can last indefinitely. The common pattern is three lean years followed by three to four where spending ramps up again, one might note.

Those findings are consistent with virtually all other studies of global telecom provider financial performance, and simply point out the structural changes occurring in the telecom business. Basically, older legacy products that underpin the bulk of total revenue are in a declining phase.

Until quite recently, robust growth of mobile services has compensated for the weaker fixed-line performance. But the wireless revenue growth engine now is peaking as well, at least in developed markets.

That means the largest global operators are entering a period of heightened danger and opportunity. The way some of us might describe the challenge is that carriers essentially must replace "half of all existing revenue within about 10 years."

And there are good reasons for making those sorts of predictions: it has happened at least twice in the past couple of decades. Most cannot now remember a time when "long distance" represented nearly half of all revenue for a large U.S. telco. But that once was the case.

And where local telcos once had nearly 100 percent of the market for fixed line voice, the only question now is whether the large providers will stabilize somewhere around 50 percent of the total market, or drop lower.

To be sure, mobile service revenue has been the run-away killer revenue source for most tier-one providers.

Broadband has helped a lot, and video helps a little. But mobile and broadband are mature, and video, though it will help, is a relatively lower-penetration, lower-margin service for most telcos.


Though it is likely mobile broadband will help preserve roughly the existing revenue contribution from mobile services, it is starting to appear as though even mobile broadband will fall short of fully replacing declining mobile voice revenues. So far, there is no clear industry consensus on what the new revenue "killer app" might be.

That suggests a period of continued experimentation with multiple new potential revenue sources, until something clearly emerges.

Of course, carriers can work at cutting  operating costs. But it is the "revenue enhancement" part of the strategy that is the toughest, as carriers have been cutting costs for nearly a decade already. 


And part of the problem is that it takes a fairly good-sized new revenue stream to make a difference for a tier-one telco or cable company. It isn't an easy thing to identify any new market, and execute well enough, to capture $1 billion in new revenue over a five-year period, for example.

Android, iPhone Wi-Fi Patterns are Different: Issue is "Why?"

A comScore analysis of U.S. Wi-Fi and mobile Internet usage across unique smart phones on the iOS and Android platforms reveals that 71 percent of all unique iPhones used both mobile and Wi-Fi networks to connect to the Internet, while only 32 percent of unique Android mobile phones used both types of connections.

If one assumes users are rational, how does one explain the difference in behavior? Also, the pattern of behavior in the United Kingdom is consistent with the U.S. results, as 87 percent of unique iPhones used both mobile and Wi-Fi networks for web access compared to a lower 57 percent of Android phones.

U.S. smart phones on the AT&T network were more likely to use Wi-Fi than those on other major operator networks, likely due to AT&T having both a greater iPhone market share and the largest Wi-Fi hotspot network in America.

Some might argue the problem is just that Android users can't figure out how to use Wi-Fi on their devices.

In the U.K., smartphones on the Vodafone, Telefonica and Orange networks were more likely to use Wi-Fi than were others on other U.K. operators.

In the U.K., the scarcity of unlimited data plans and higher incidence of smart phone prepaid contracts likely contributes to the use of Wi-Fi.

In addition, the current lack of high-speed data networks in the U.K. might also lead users to seek out higher bandwidth capacity on Wi-Fi networks, comScore speculates.

In the U.S., the increased availability of LTE, 4G and other high-speed data networks doesn't explain the pattern of heavier iPhone usage of Wi-Fi as well as the preponderance of devices on the Wi-Fi-extensive AT&T network.


 

Apple Earns 80% of Mobile Handset Profits in 4th Quarter 2011

Apple and Samsung accounted for a stunning 95 percent of the handset industry's profits during the fourth quarter, according to a study Canaccord Genuity Canaccord Genuity.

By itself, Apple accounted for 80 percent of the profits in the period.  That isn't the first report showing similar results, only the latest.

Social Networking Displacing "Knowledge Management?"

Sometimes it isn't easy to understand how dramatically-new technology can be applied in a business setting. Consider "social" software and networking.

As it turns out, enabling workers to set up profiles, form groups and "follow" each other's status updates can provide direct business value. It isn't just the social connections. The new software increases productivity by making it easier for employees to identify who does what within an organization and to share their knowledge.

Some of you might instinctively recognize that these are the sorts of problems "knowledge management" was supposed to address, a couple of decades ago. 

Social networking might be providing some of that value in a new way.

That doesn't necessarily or primarily mean using Facebook, though. Tibco Software launched a service called tibbr that not only enables users to follow what colleagues are doing, it also allows them to follow data, such as the status of an order or invoice.

The 25 Brands Small Businesses Respect Most

A list of the 25 brands small business executives respect the most has Apple at the top, followed immediately by Google. The l;ist was developed as a part of surveys sponsored by the Business Journals.

The study was based on interviews with more than 2,000 small and medium business owners, CEOs and presidents. This year, 291 brands were included in the proprietary study conducted annually by the Business Journals.


The study shows increased business usage of mobility products such as tablets, smart phones and cloud computing. But no communications company appears in the top 25, though. 

Retina Display Appears to Drive New iPad Sales

If Changewave survey respondents are indicative of broader buyers, the new "Retina" display on the latest Apple iPad accounts for the buyer interest. The high-definition display far outweighs other attributes consumers indicated were their favorite attributes about the latest iPad.

The High-Resolution "Retina" display was cited by 75 percent of buyers as the attribute they liked best about the device. Battery life, processor speed or faster mobile broadband ranked much lower.