Test of Tiered Pricing for Broadband Access

Time Warner Cable is testing usage-based broadband access pricing, according to Broadbandreports.com. The move is hardly surprising. Most Internet service providers report that a fraction of all users, about five percent or so, use over half of all access bandwidth.

The Time Warner test presumably aims to discover how such usage can be monitored by end users themselves, how scalable the process might be, and possibly whether such heavy users will upgrade to higher-usage plans or flee to another provider.

Over time, it seems inevitable that heavier users will find themselves facing universal caps on their usage and the ability to buy plans that support their higher usage levels.

Broadandreports.com says the test will involve new customers in the Beaumont market, not existing customers. Those users will be placed on metered billing plans where overage charges will apply, and provided a web site where they can track their usage and upgrade, if required.

In principle, the approach is akin to how mobile pricing plans now are structured, where users can choose higher usage or lower usage plans for voice and text usage.

One way or the other, as video becomes a bigger part of overall broadband usage, it is inevitable that usage-based plans supplant current "all you can eat" plans. Video is the reason.

Video consumes vastly more bandwidth than Web surfing, email or voice, requiring across the board capacity increases in the network backbone and access networks. That obviously costs money, and those costs will have to be recovered.

Usage-based pricing is coming because it has to.

Lots of SMEs Now Buy Video

Entertainment video of the sort delivered by cable, satellite or telephone companies often is thought of as a consumer application. But there's new evidence that lots of small and mid-sized businesses and organizations buy video services. To be sure, bars have long been a key business customer for video services.

What is striking is the degree to which lots of businesses now want to have video services available at the workplace. Whether for employee benefit or keeping up with the news (branch offices of financial services firms, for example), SMEs now appear to be far more willing than formerly to buy entertainment video services.

SME Hosted PBX: Smaller is Better

The smaller the business, the more likely it is to prefer a hosted IP PBX solution over a premises-based solution, says Yankee Group VP Steve Hilton. The pay-as-you-go
approach coupled with minimal on-site IT support makes hosted solutions desirable for
small businesses.

Based on Yankee Group survey data, businesses with fewer than 20 employees are three times more likely to want hosted IP solutions, compared to organizations with 99 employees.

Buying preferences are about evenly split in the 20-to-99 employee range.

Demand for hosted solutions also seems to be quite a bit higher in the retail segment, as you might expect, as these are deployment situations where most people will not need voice or text communications most of the time.

Small businesses in retail segments (a segment with more branch or franchise locations per firm) are almost three times more likely to want hosted IP solutions, whereas firms in professional services and manufacturing sectors are more evenly split between hosted and premises-based IP solutions, says Hilton.

There are some obvious conclusions. Service providers able to deliver hosted voice soltuions over a wide geographic area are positioned to sell hosted PBX services to retail enterprises with lots of franchises to support.

Service providers without wide geographic reach will largely have to content themselves with a focus on professional and manufacturing prospects that more often operate out of one or just a few sites.

The paradox is that there is no simple answer to the question of whether hosted PBX service makes more sense for small or enterprise-sized organizations. Large retail entities often operate thousands of essentially small sites, even though a sale will be made at an enterprise level. Geographic scale then matters, even when the actual use case is a gas station, convenience store or fast food outlet.

XO Launches IP Flex

XO Communications has launched XO IP Flex, a new converged IP services bundle that upgrades and replaces XOptions Flex, XO’s VoIP services bundle. The new service positions XO as a better provider of voice and data for larger businesses, and also packages voice services as a broadband access feature.

There are a couple noteworthy elements here. The offering is Ethernet-based, and so moves beyond the bandwidth formats dictated by the T1 and SONET frameworks. An organization can buy bandwidth between 1.5 and 45 Mbps, eliminating the abrupt cost and bandwidth jump between a couple of T1s and a DS-3.

Also, the offering positions the new product as "Ethernet access" and voice as an included application. Some will argue this is merely a marketing position, but it is an important shift in positions.

XO IP Flex extends XO’s VoIP services to larger business customers by offering new higher-speed bandwidth options including 4.5 Mbps and 10 Mbps. XO IP Flex works with existing phone systems.

The service eliminates pricing based on the number of voice lines. Unlike other approaches to IP pricing that still are based on traditional TDM services pricing models, XO’s bandwidth-based pricing acknowledges that voice is simply another application on the IP port and offers rates based on the size of the port, not on the number of voice lines.

Standard IP Flex features include:

* Voicemail, caller ID, call waiting, call forward, three-way calling, and one toll free number
* Dedicated Internet Access with Dynamic Bandwidth Allocation
* Unlimited local calling
* Unlimited site-to-site calling for multi-location customers with IP Flex, IP Flex with VPN and XO SIP locations
* Long distance calling with choice of calling plans
* Online Feature Management through the XO Business Center
* Optional features, including Auto Attendant, Call Center, Account Codes and Voice Virtual Private Network.

The company also has launched XO SIP, which delivers converged voice and data services to businesses with IP-PBX systems over a single, high-speed IP connection. XO SIP is a fully integrated solution designed to support the needs of businesses with the most demanding voice and data applications at single locations or multiple locations nationwide.

Session Initiation Protocol uses a native IP-based facility to manage all traffic between a customer’s IP-PBX system, the XO IP network, and the Public Switched Telephone Network. The service provides greater efficiencies by eliminating the need for businesses to maintain multiple access facilities for voice and data services and eliminates the need for bandwidth-consuming protocol conversions, thereby, simplifying the overall deployment and management of customers’ enterprise IP telephony services.

XO SIP includes a broad range of bandwidth options to maintain optimal network performance. XO SIP features include:

* Dedicated Internet Access with Dynamic Bandwidth Allocation
* Unlimited local calling
* Unlimited site-to-site calling for multi-location customers with IP Flex, IP Flex with VPN and XO SIP locations
* Long distance calling with choice of calling plans
* Optional Voice Compression
* Online Feature Management through the XO Business Center

XO SIP is currently interoperable with Avaya IP Office, Cisco Call Manager, Cisco Call Manager Express and Digium Asterisk Appliance. XO SIP also utilizes the BroadSoft BroadWorks VoIP platform to provide customers additional advanced IP-PBX features, including auto attendant, call center and voice VPN.

Customers simply select an IP port speed from 1.5 to 45 Mbps, a calling plan and any additional features. Because voice is just another application on the IP port, customers pay nothing for incremental lines or voice channels provisioned within the port speed they have with their service. The bandwidth-based pricing is now being offered with XO IP Flex, XO IP Flex with VPN and XO SIP plans.

Voice Peering: New Directions?

We might disagree about why the change is occurring, but it does seem that discussions of "voice peering" are moving in a different direction. Early on, there might have been more emphasis on how electronic numbering or native IP interconnection could save providers money, disintermediate legacy carriers or disrupt the voice business. If recent discussions are any indicator, there now is much more emphasis on solving basic interconnection tasks in a world of IP traffic, as well as creating a platform for introducing new services.

That isn't to say all peering supporters dismiss advantages of the disintermediating sort. There is no question but that cable companies as an industry segment are anxious to avoid interconnection payments to telephone companies whenever possible, as GSM-based mobile carriers likewise are interested in avoiding transit costs where possible.

The point is that there is a new practicality about the issues. Arbinet CTO Steve Heap, for example, points out that "peering is interconnection between two or more service providers to preserve quality, lower costs and create new services." In fact, Heap points to new problems created by number porting as a mundane but important problem peering can address. "In the Belgian market, for example, 18 percent of mobile numbers are ported," Heap notes.

And since every operator has different termination rates, peering can help service providers determine what the settlement rate ought to be when a mobile call is terminated, where to send a call and make those sorts of decisions in real time. Peering can also help with the time-consuming but relatively mundane issues of negotiating termination agreements with hundreds of discrete carriers. "Not every carrier has a relationship with every mobile operator, so maybe you want to route to provider who does have a relationship," says Heap.

One measure of how the discussion is changed is that a major service provider such as Tata views peering as a simple matter of ensuring call quality under conditions of increased routing complexity. "It isn't just about free calling," says Christian Michaud, Tata SVP.

In fact, routing complexity now appears to be a problem in its own right. "There are more choices of endpoints in the IP world," says Georges Smine, Nomin um senior director. There also are codec transcoding issues that will grow as more voice traffic shifts to IP origination.

In a business increasingly using IP transmission, "what we actually deliver changes as well," says Sarina Tu, Telcordia senior director. "These days, you really don't know where to send a call, what the class and quality of service are supposed to be or what the business relationship is between the originating and terminating networks."

Then there is a growing class of "presence" information that has to be exchanged, not simply the bearer traffic and signaling.

Then there's the matter of supporting all sorts of new services and applications over discrete physical networks, says Shrihari Pandit, Stealth Communications CEO. In many cases there will be advantages to terminating traffic without touching the public switched telephone network, especially when some features simply cannot be passed between networks based on PSTN switches.

The general notion of application-aware networks also applies to voice communications. "Types of calls are more diverse" and peering fabrics can provide the intelligence to support that diversity, Smine argues.

"Who can access and control your information and preferences," Tu asks, especially when that information might be scattered among any number of discrete databases?

"Who would be the central repository for the various databases?" asks Heap. "What do you do about conflicting returns if multiple databases provide different results when a query is made?"

"Service providers want all routing information processed internally, not by a third party," says Heap. "The issue is how all that information gets there."

Nor "do we want to create a new monopoly," Michaud adds.

Technological Determinism, VoIP and Video

Time Warner Cable once pondered offering a network-based digital video recorder service called "Mystro." Time Warner decided against introducing the service after legal threats from the broadcast industry. Cablevision Systems Corp. also tried to introduce a similar service before running into a content industry buzz saw.

Comcast now is testing a less-ambitious service like the "Start Over" service Time Warner now offers, allowing users to start a program at the beginning in case they missed the start.

At a recent industry meeting, a question arose: Where is the logical place to put such technology? Should it be in a consumer, edge of the network device or "in the cloud"? From a pure technology perspective, one might reasonably argue such functionality should be "in the network."

Of course, that is a technology answer. The problem is that rights holders fear such a move would damage their control over content and ad revenue attached to that content. In principle, one could strip out the original advertising inserted into a "live" stream and replace it with other advertising sold by the network distributor, not the program originator.

In similar fashion, another question arose at a separate "voice peering" panel about why proponents were spending so much time focusing on voice peering rather than other sorts of application peering or bandwidth.

Legitimate questions both. There is a place where advanced technology intersects with copyright law, national or local taxation regimes, rights of way issues, consumer protection laws and conflicting bodies of law governing voice communications, radio, TV, newspapers and data communications.

Technology enables us to cross many of those old boundaries. What technology does not allow us to do is transcend the legal, regulatory and tax laws that come attached to services, applications and activities. And that is the rub.

There are many things we can do. There are many things we want to do. The problem is that some of these things can only be done in certain ways without running afoul of laws, regulations or business models built on the existence of those rules.

It gets us only so far to say the rules increasingly are illogical in a genuine sense. Some of the rules might change over time. Others might simply have to be endured. The point is that simple logic and technological capability sometimes do not trump legacy ways of doing things.

China, India Drive Mobile Growth

Merrill Lynch forecasts handset volume growth at a 21 percent cumulative average growth rate CAGR from now to 2010. They expect combined India and China will account for 26 percent of the overall handset market in 2007 and 28 percent in 2010, up from 16 percent in 2005, implying nearly 332 million handset units in 2010.

Mobile penetration in India is set to ramp and will reach 35 percent by 2010, up from just seven percent in 2005. This implies Indian mobile subscribers will reach 411 million by 2010, up from just 76 million as of 2005, a CAGR of 40 percent.

China's penetration rate should reach just over 50 percent in 2010, ors 682 million Chinese mobile subscribers in 2010.

China Mobile Says "No" to iPhone

China Mobile has decided it doesn't want to carry the iPhone, and has stopped negotiations with Apple, opening the door to talks with the second-largest mobile provider in China, China Unicom.

It is sais that China Mobile and Apple could not agree on revenue-sharing terms. An unnamed China Mobile source was said by Dow Jones Newswire to be unwilling to pay between 20 and 30 percent of future user fees from the iPhone to Apple for the right to carry the device.

Music Industry "Goes Open" to Make More Money

One of the odd justapositions out there right now is the recent move by music companies to drop encryption measures (digital rights management) online music sales through Amazon.com as a way of increasing sales. Given the general vested interest in protecting content from copying, this is a bit strange.

Why would music labels voluntarily drop DRM measures that make it harder for users to port their music around? In this case, a move that essentially is more open is a competitive measure. Apple, which uses a DRM format to restrict downloaded music to playback on its own devices, essentially has gotten too much market power in the music business, the studios think.

And in this case, one way to wrest back more control is to stimulate sales of unprotected music through rival retailers such as Amazon.com.

Amazon MP3, the DRM-free music store of Amazon.com, now sells DRM-free MP3s from the four major music labels - EMI, Universal, Warner Music, and Sony BMG - and 33,000 independent labels.

Apple iTunes has more than two-thirds market share of paid online music donwloads.

The top 100 songs at Amazon MP3 come at a price of $0.89 each and most other tracks are offered at a range of $0.89-$0.99, underpricing iTunes titles which are sold for 99 cents a song.

It's a bit unusual to find any industry's leaders pushing a trend towards openness, rather than upstarts. But that's what happens when an upstart becomes too successful in a new line of business. If "open" sells better than "closed," they'll try it, despite an obvious interest in copyright protection that might be furthered by DRM measures.

Of course, the problem with DRM is that it angers legitimate customers as much as it deters piracy. It is a blunt instrument.

MPLS over DSL from New Edge Networks

New Edge Networks will offer its managed network customers in April the ability to tag and prioritize data applications traffic over low-cost, high-speed digital subscriber lines commonly used for wide area networks. The move is a challenge to T1 services that sometimes are alternatives to business-class DSL services, and which can offer tagging and prioritization.

New Edge says it also will support tagging and traffic priorities end-to-end through private networks

Businesses in various industry segments can use up to five classes of service to tag and prioritize their applications so that critical services such as VoIP telephone calls or inventory and price lookups move across DSL-based networks ahead of email or other less important business functions.

Currently, traffic tagging and prioritization with class of service are available only on more costly high-capacity T1 lines with MPLS technology, short for Multi-Protocol Label Switching.

New Edge will honor DSL class-of-service tags end to end throughout its customers’ private wide area networks.

The move means enterprise branch offices and remote locations or smaller businesses that cannot justify a T1 line will be able to buy class of service features at a business DSL price.

A typical DSL connection used as part of a managed, private network costs about $150. Monthly costs for T1 lines range from about $500, depending on distance and geographic area.

Mobile Web: The Browser Matters

On Christmas, traffic to Google from iPhones surged, surpassing incoming traffic from any other type of mobile device, according to internal Google data made available to The New York Times, says staff writer Miguel Helfta. So apparently the design of a mobile phone brower really does stimulate high levels of usage.

The data shows that although iPhone's used to access Google fell back into a more normal range after that, levels of access still were higher than from Symbian mobiles. Keep in mind that Symbian has something like 63 percent of the installed base while iPhone has perhaps two percent.

Yahoo also saysiPhones accounted for a disproportionate amount of its mobile traffic, Helfta notes.

There might more upside for Web application developers. If they can develop for mobile-optimized browsers, rather than for the details of individual devices or operating systems, there arguably is an easier path to ubiquity.

Telcommuting Downside

Telecommuting may boost morale for telecommuters, but it can have the opposite effect on those left behind in the office, according to Professor Timothy Golden, a management professor at Rensselaer Polytechnic Institute.

"Those who do not telecommute are more likely to be dissatisfied with their job and leave the company, says Golden. Golden's research suggests that their co-workers tend to find the workplace less enjoyable, have fewer emotional ties to co-workers and generally feel less obligated to the organization.

About 37 percent of U.S.-based and international companies now offer flexible work arrangements, with the number of those programs growing at a rate of 11 percent per year, according to the Society of Human Resource Management.

With a greater prevalence of telecommuters in a work unit, he said, non-telecommuters find it less personally fulfilling to do their work.

Greater face-to-face contact between co-workers when all employees are in the office and granting greater job autonomy can help, Golden argues.

He studied a sample of 240 professional employees from a medium-sized company.

Consumer Electronics Trumps Other Retail Sales

It doesn't appear to have been a good Christmas selling season, as this graphic by the Wall Street Journal illustrates.

But Best Buy says its December sales were up 1.5 percent over last year, compared to an increase of about seven percent in the 2006 over 2005 comparison. The company says the slower growth rate is due where the post-Thanksgiving week data was recorded. This year, that key week fell into the November numbers, instead of in the December reporting period.

Best Buy affirmed its 2008 guidance, suggested the company really did have stronger sales than it might appear. The contrast in sales might point to the increasing importance of consumer electronics as a component of discretionary spending.

That would accord with increasing broadband and mobile penetration, plus continuing interest in high-definition and flat screen TV displays, gaming, digital audio and even personal computers.

Over the past decade, for example, the percentage of disposable income now going to communications and electronic entertainment goods has been rising in virtually all North American, Far Eastern and European regions.

iGoogle for Mobiles Now Live

If you are the sort of user who uses iGoogle, and you put Real Simple Syndication feeds on the iGoogle page, this is helpful. Also, Google has authored a number of its other applications, including Docs and Spreadsheets, the RSS reader, Picassa, Gmail, Google News and even the basic search function in ways that are compatible with a mobile screen. Very nice.

Business Phone Systems: Still Lots of TDM

After dipping one percent in the previous quarter, enterprise telephony equipment manufacturers saw an 11 percent jump in worldwide sales in the third quarter of 2007 to reach $2.6 billion, according to Infonetics Research. But IP-based phone systems did not get all the growth. In fact, Infonetics researchers say the rate of growth in the legacy time division multiplex segment actually outpaced that of the IP PBX segment.


In fact, hybrid PBX systems account for 64 percent of all PBX and key system line shipments worldwide. Pure IP lines account for 18 percent of shipments while TDM lines represent 17 percent of total.

It looks like lots of buyers still are hedging their bets or have reasons to support TDM systems even as they migrate to IP.

Mobile VoIP Proliferates

One wonders how long mobile carriers will wait before launching their own lower-cost global calling plans. At some point they will. The only issue is how much market share they are willing to tolerate losing to VoIP providers before they counterattack. Raketu is the latest contestant in the business calling space, by virtue of its compatibility with RIM BlackBerry devices.

What is emerging now is the IP equivalent of "over the top long distance" calling plans that used to be prevalent in the U.S. market. Under such plans, created in large part for reasons of regulatory compliance, users selected one provider for local calling and then another provider for long distance. At one point, one could not select one's local voice carrier for that purpose.

So you see the business effect: a regulatory framework creates an entire "long distance calling" business. It lasts for a while, as competition knocks prices way down. Then, at some point, regulators decide markets are competitive enough to allow the local phone companies back into long distance.

And then the independent long distance industry collapses.

VoIP over mobile, indeed VoIP itself, is headed for such a day of reckoning, at least for that portion of its use as a substitute for landline or wireless calling. Nobody knows when the day will come. It might come carrier by carrier. But at some point, mobile and wired service providers are going to reach a point where it makes sense to offer much-lower global calling from their existing services and devices.

That isn't to say independents will not gain share and build businesses in the short term. Nor is it to say VoIP features embedded into other experiences are likewise susceptible to telco repositioning and pricing. It is to say that past telco responses to regulatory and technologiccal change offer some obvious clues about what they will do in the future.

As scale players, they tend to ignore new threats and markets until some critical mass or clear strategic interest emerges. Then they move, and fairly quickly. They'll do so again.

Raketu Launches VoIP over BlackBerry

Raketu has launched a new peer-to-peer VoIP application designed to run on Research in Motion Blackberries. The app furthermore is intended to be used by enterprise, small and mid-sized business users.

Raketu does not require a client download and is accessed from the BlackBerry's Web browser at www.BlackBerry.raketu.com.

The application obviously will make most sense for business users who need to send and receive text messages from international locations, as well as users who need voice communications in a global context.

FiOS Best, Says Consumer Reports

The February issue of Consumer Reports features a survey of broadband access providers, and names the Verizon FiOS service, best for reliability and performance for its Internet, television, and telephone services.

Better cable companies include Cox, Bright House and Wow, the survey indicates.

For Internet service offered through a cable company, Wow, Cincinnati Bell and Bright House also did well in the survey. Verizon's DSL Internet service was rated "average" for value, reliability and support, but scores for performance were lagging, according to Consumer Reports.

Slowing Economy or Just Slowing Growth?

That's the question as at&t Chief Executive Officer Randall Stephenson claims slowing economic growth has led to "softness" in the home-phone and Internet businesses while Verizon COO Dennis Strigl says that's not the case.

“We have seen virtually no economic impact,” Strigl says. "Any challenges facing the company have more to do with competition," said Strigl, than the economy.

It is possible Verizon's customer base simply isn't feeling the economic pinch or hasn't felt it yet. It is possible Verizon simply is faring better in the competitive battle with cable and other contenders. Maybe there is some other explanation.

Could it be FiOS? Also, Stephenson pointed to wireline voice and broadband growth. In some ways, that is no surprise. Landline share continue to shrink, in large part because of wireless substitution and cable market share gains.

Broadband adds have been slowing for a couple of quarters, at least, in part because most people who rely on the Internet already have broadband, and suppliers now are facing customers who don't own PCs, so have no need for broadband; customers who think dial-up still is adequate; and customers who have PCs but don't use the Internet. It is no surprise that broadband additions are slowing.

Telcos More Open to 3rd Party Partners

One difference between 2006 and 2007 was that global telco executives began to shift attitudes about the importance of working with third party application and service providers. Where they might arguably have been more focused in 2006 on cost cutting and other internal measures, 2007 found executives more focused on how to position themselves for new services.

Though there arguably is more recognition that advertising operations will demand partners, there also seems to be more recognition that core communications capabilities can be leveraged as a revenue stream if those features are made available to other application and service providers.

This is a very big and quite important shift in thinking.

Why VoIP Won't Escape Voice Regulation

Telephone subscribers in Oklahoma City and 223 other communities throughout the state will be required to pay a two percent "line inspection fee” on the basic residential rate beginning in February. The fee has been assessed by cities for decades, but up to this point at&t has simply "eaten the cost." It now will pass the fee through to users.

Apparently at&t pays a fee to maintain the rights of way for its telephone lines in 224 of about 490 communities it serves in Oklahoma.

And that's one of the reasons VoIP-as-a-replacement-for-wired-voice will not forever escape regulation of the sort legacy voice services are subject to. There are many vested interests at the local and state level, as well as at the national level, that generate revenue from voice services. As IP-based communications begin to displace huge chunks of the services base, those interests inevitably will move to protect the revenue by pulling VoIP into the older framework.

Now, the way this gets done might change. Where a "subscriber line charge" now is assessed for each "voice line," it might someday be assessed on a "broadband access connection." The revenue won't be allowed to evaporate.

Startling BT FTTH Trial

BT is installing what amounts to a test fiber-to-the-home network at Ebbsfleet, Kent, U.K. What's interesting about the 10,000-home network is the early announcement of prices.

Because U.K. broadband access operates under the wholesale Openreach model, the first thing BT is doing is announcing wholesale prices to be charged to competing service providers and BT itself to use each of the lines. Retail pricing will be set by each of the wholesale partners.

Rates range form £100 a year ($195) for a basic line to £530 ($1,038) a year for the fastest connection, at 100 Mbps.

BT still is wranging with U.K. regulators about the ultimate shape of regulations surrounding widespread fiber-to-customer networks. BT wants more freedom to use its own assets, of course, including freedom from mandatory wholesale regimes of the current sort, in the best case scenario.

From a U.S. perspective, it is striking that the first pricing information is about wholesale rates rather than retail pricing, a measure of how different the regulatory frameworks now are.

What's Good for Suppliers Also Good for You?

If you casually stroll past displays of PCs on the shelves of any electronics retailer, you'll see at least a few notebooks preconfigured for one brand of wireless data card access. Now, in one sense this is the same strategy used when software comes preloaded on your brand-new machine. Dial-up Internet access services, anti-virus, firewall and security, media players, browsers, games and so forth provide examples.

In the same vein, there has been an argument that the notebook screen represents real estate that a provider's icon must occupy to get more usage or attention. Up to a point there's a clear logic to such thinking.

But there's some point at which the strategy breaks down. Lots of machines sport RJ-11 connections for dial-up Internet access. I don't know how many of you think that's a "feature" instead of a "bug" anymore, but it's clearly not an important feature for many.

The point is that USB and Ethernet ports, like RJ-11 ports, are general purpose computing capabilities. They don't lock anybody into a continuing commercial relationship with any single provider. The user has choice.

Providing that a new notebook has sufficient hard disk capacity, most users probably just ignore all that preloaded software and most of the offers. Norton might disagree, of course, and that might be one of the salient exceptions. Others of us have to spend some time removing all the unwanted software from the machine or at least disabling their ability to start up automatically.

Suppliers might think otherwise, but the incremental cost of preconfiguring a PC for one flavor of 3G data card access probably outweighs everything but the revenue the manufacturer gets from the service provider for preloading the software.

Most people don't seem to have any problem buying a card when they want to use wireless broadband services. To be sure, there might be some instances where a particular buyer of a particular model actually wants to buy wireless broadband from the precise supplier whose access software is preloaded on that machine. But not very often.

Perhaps an argument can be made that the revenue gotten by the PC manufacturer from such deals helps in some small way to control the overall cost of the device. In that sense, there is a consumer benefit. So maybe this is the PC equivalent of advertising. Users might not "like" it, or "want it," but it might help lower the cost of acquiring and using something else (their PC).

Still, it's hard to imagine that preloading broadband wireless for a single provider can be done on a wide-enough scale to produce incrementally-significant customer additions.

The way this could work, though, is to do the reverse: sell a cheap device that actually is configured to use one broadband access provider. Consumers can do the math. If the value of getting a general-purpose computing device is low enough, and the price is lock in to one broadband access supplier, some buyers will do so.

YouTube, Video Site Visits Double

It isn't your imagination: more people are going to YouTube and other video sites than did a year ago. So say researchers at the Pew Internet and American Life Project.

Nearly half of online adults now say they have visited such sites. On a typical day at the end of 2007, the share of Internet users going to video sites was nearly twice as large as it had been at the end of 2006.

About 48 percent of surveyed Internet users say they have visited a video-sharing site such as YouTube. A year ago, in December 2006, 33 percent of internet users said they had ever visited such sites. So year-over-year growth was 45 percent.

About 15 percent of respondents said they had used a video-sharing site “yesterday". A year ago, just eight percent said they had visited such a site “yesterday.” So, on an average day, the number of users of video sites nearly doubled from the end of 2006 to the end of 2007.

Almost Safe for Consumers to Buy HD DVDs

Some suppliers might like format wars, at least to the extent it allows them to gain some business advantage in licensing streams. Consumers generally lose when they buy devices and software built around the losing standard.

Just days ago Warner Bros. threw its weight behind the Blu-ray standard. Now Daily Variety says Universal's commitment to backing HD DVD exclusively also has ended.

Paramount, one of the few remaining majors to release content in the rival HD DVD format, apparently has an escape clause in its HD DVD contract allowing it to release content on Blu-ray now that Warner Bros. has decided to back that format exclusively.

Retailers such as Best Buy and Blockbuster Video now will contribute to the Blu-ray trend. If retailers think Blu-ray is the future, they aren't likely to devote much shelf space to HD DVD players or content.

Even Apple will be shipping Macs with Blu-ray drives. So the good news for buyers of DVD players is that it is just about drop-dead safe to go buy a high-definition player.

You can do your own survey. Visit a Blockbuster and compare the space devoted to content in Blu-ray rather than HD DVD.

A Tip on WiMAX Direction

If analysts at In-Stat are right, and the WiMAX chipset market is driven primarily by embedded Mobile WiMAX chips in mobile PCs through 2012, we might conclude that some suppliers are betting WiMAX will be about mobile and tethered PCs, much more than dual-mode cellular/WiMAX handsets, at least for the foreseeable future.

In that view, WiMAX is, at least initially, a replacement service for cable modems, DSL and 3G data cards, rather than a platform for newer services. There's nothing wrong with approaching a possibly-new market by snagging revenues for legacy applications. What will be interesting is to see whether WiMAX can develop into something more than a 3G network with more bandwidth.

To be sure, there are several potential "disruptions" here. There is the "open networks" challenge, the possibility of disruptively-lower prices, opening up Web connections for whole new classes of devices as well as the potential creation of a mobile-Web-optmized network for the first time.

“The total WiMAX user terminal chipset market will reach almost $500 million in 2012, growing from $27 million in 2007,” says Gemma Tedesco, In-Stat analyst. “Furthermore, WiMAX base station semiconductor revenues are expected to be approximately $1.4 billion in 2012, compared to $130 million in 2007.”

Verizon Launches 7 Mbps Service

Verizon has launched a new 7 Mbps broadband access service availabe in about 400 Verizon-served communities. Prices begin at $39.99 for contract plans. Verizon will expand the program into more communities throughout the year.

Verizon Shifts to GPON

Verizon has begun installing Gigabit Passive Optical Network (GPON) optoelectronics as part of its FiOS deployments in California, Maryland, Massachusetts, New Jersey, New York, Rhode Island, Pennsylvania, Virginia and Texas. GPON will replace the former broadband passive optical network (BPON) technology Verizon has been using up to this point. Users won't notice anything different, at least at first.

In years to come, they well might. BPON delivers 622 Mbps to 32 potential users in the downstream, with a shared 155 Mbps in the upstream.
GPON supports 2.4Gbps downstream and 1.2Gbps upstream that can be shared among 32 to 64 users. Basically, that means a downstream bandwidth increase of four times and an upstream improvement of eight times.

At some level, GPON is a logical and improved enhancement to BPON technology, and its price now is closer to BPON than was the case some years ago. At another level, the move is protection against the cable industry's upcoming upgrade to Data Over Cable Service Interface Specification 3.0, which will support channel bonding and shared downstream bandwidth as high as 160 Mbps.

Depending on customer take rates, the FiOS GPON network can support much more bandwidth that DOCSIS 3.0, absent some sort of major network upgrade by a cable operator.

So long as on-demand techniques are used to deliver video, most of the additional bandwidth can be allocated for other data-focused uses. As this chart from the IEEE shows, after video, it is data demand which grows most.

Xohm: Where's the Beef?

Sprint Nextel says it will launch it Xohm WiMAX service at the end of April. Associated Press also reports that Xohm will not use subsidized handsets, will offer daily, weekly, monthly and longer-term contracts. In an attempt to differentiate itself from simple "access" services, Xohm will feature location-based services tied to advertising and search and portal services created by Google.

But Xohm will have to do more than that. As the first widespread network created expressly for broadband-based services, Xohm will be an early test of the economics of networks anchored on broadband access revenues rather than voice. And that is going to be a challenge in the early going. By definition, Xohm is soft launching service in three markets with established cable modem and Digital Subscriber Line service.

Chicago, Washington D.C and Baltimore, to be specific. Other markets are supposed to be added in April. The point is, if the offering is positioned as a terrestrial broadband substitute, how big is the opportunity? Conversely, if Xohm is positioned as a mobile broadband alternative to existing third generation services, are location services enough of a differentiating factor?

It is conceivable that customers will defect to Xohm for prosaic reasons: no-contract service or lower prices, for example.While helpful, that is hardly an objective requiring construction of an entirely-new network. Many years ago, when new blocks of spectrum were auctioned off for what was then called "personal communication services," the thinking was that the spectrum would be used to create new services, used in new ways. A prime example was a sort of quasi-cordless, quasi-cellular service that offered call handoff when the user moved at pedestrian speeds, but wouldn't be usable at freeway-driving speeds.

What happened is that all that spectrum wound up being used as the basis for CDMA and GSM-based 3G mobile networks instead. New services were created, of course, but not the ones everybody expected. People thought the access mode would be the difference. Instead, it was text messaging and mobile email that wound up driving new service revenues.

It is conceivable that some new use mode will develop for WiMAX networks, based on game platforms or media devices rather than phones, for example. The issue then will be about whether the cost of building and operating the network, and securing the spectrum, can support the revenue generated by the new use cases. It's not going to be easy.
.

FCC to Look at Traffic Shaping

The Associated Press says the Federal Communications Commission will investigate complaints that Comcast Corp. actively interferes with Internet traffic as its subscribers try to share files online.

This should be very interesting. One one hand, there's an issue about packet blocking. On the other hand there is an issue of exposure to copyright law, since much peer-to-peer traffic that Comcast and others appear to be blocking infringes copyright laws.

A coalition of consumer groups and legal scholars asked the agency in November to stop Comcast from discriminating against certain types of data. Two groups also asked the FCC to fine Comcast at a rate of $195,000 for every affected subscriber.

It is possible there are two intertwined issues here: packet blocking and copyright violations. The former might be technologically necessary to prevent the latter.

Satellite Broadband Gets Eutelsat, ViaSat Boost

French satellite operators Eutelsat SA and U.S.-based ViaSat want to leapfrog current and emerging generations of satellite-based broadband, and are putting money behind the effort, according to the Wall Street Journal.

To put the effort into perspective, the ViaSat satellite will have bandwidth exceeding the combined signal capacity of nearly all the two-way commercial communications satellites serving North America, ViaSat calculates. Basically, the two new satellites will offer price-per-bit performance an order of magnitude better than the advanced satellites in orbit today.

For its part, Eutelsat's one new advanced satellite will have a capacity equal to Eutelsat's entire 24-satellite existing fleet.

Each company has committed to separately build and launch a satellite with 10 to 15 times greater capacity than the most-advanced birds already in orbit. The companies say they plan to share some marketing and capital expenditures in securing wholesale customers.

Eutelsat hopes to launch its satellite in 2010, with ViaSat scheduled about a year later. In the U.S., the Internet connections are expected to cost between $49 and $79 a month.

Business Fiber: Better, Not Good

By some measures, business customers have better fiber access than they used to. By other measures, most businesses still do not. One has to be in a building with enough private line potential to support something on the order of four T1 circuits, says McLeodUSA CEO Royce Holland. And as recent data from service providers such as XO Communications shows, most business customers are not in those buildings.

In fact, despite strenuous efforts by all sorts of companies that make a living providing fiber-based services to business customers, lower T1 prices over the last decade arguably have made the "fiber to building" business case tougher. Lower T1 prices obviously reduce the amount of recurring revenue any provider can hope to make from a single site.

The countervailing trend is higher demand for optical services such as Ethernet. Though the cost of hardware has declined over the last 10 years, the cost of installation and construction has not, and that's most of the cost.

Skype Hits 11 Million Concurrent Users

Whatever concerns eBay might have about Skype's ability to attract new users, Skype recently hit the 11 million concurrent users level, after passing the he 10 million user milestone was passed 83 days ago on October 17, 2007. Since 2006, there has been concern about some slackening of the pace of new user additions and at least momentary dips in Skype usage. Concurrent usage arguably is a better metric than client downloads, and that growth rate seems consistent.

Robust Enterprise Social Networking

If ChangeWave Research is correct, wikis, blogs and social networking are being adopted by corporations at an explosive rate.

ChangeWave Research recently surveyed 2,081 companies and found 24 percent already using social software, while eight percent say they will start using it within a year. Wikis apparently are used by 20 percent of respondents, blogs by 18 percent, social networking by 15 percent, says Joshua Levine, ChangeWave researcher.

While current users find wikis to be most useful, future adopters think blogs (26 percent) and social networks (21 percent) will be most beneficial.

About 39 percent report their company is very or somewhat willing to use Web 2.0 social software for business purposes.

Current users say they use social networking to improve internal employee collaboration as well as to increase internal efficiency and productivity.

Users who say their firms will be adopting social networking also agree about the merits of internal communications, but also are more focused on using the tools to
improve external customer service and support, increase brand awareness and loyalty
and drive sales of products and services.

at&t, Telefonica Eyeing Targets?

Apparently, at&t wants to buy a stake in the mobile arm of state-controlled phone firm Telekom Malaysia , a Malaysian newspaper has reported.

Telekom Malaysia is spinning off its mobile business into a separately listed firm, TM International, which will include its domestic Celcom unit and operations in nine other countries, including India, Indonesia, Bangladesh and Sri Lanka.

Separately, there is talk of Vodafone or Best Buy buying Carphone Warehouse. There also are rumors that KPN is being eyed by Telefonica (KPN denies talks are underway).

Given the success Western European mobile providers are having in Eastern Europe and elsewhere, we might make one observation: though wireless has underpinned carrier revenue growth over the past several years, internal growth now is slowing sharply, meaning growth will have to be sought "out of territory."

Typically, when that sort of situation develops, it is a clear sign that internal growth prospects are limited.

Less Focus on Landlines?

Once upon a time, telecom analysts tracked the volume of a carrier's access lines in service, applied a revenue per line metric, and got pretty close to that carrier's annual revenue. No longer.

Given the mutltiple lines of business and products, if anything gets tracked as a more accurate predicator of how a carrier is doing, it is revenue-generating units.

Keep in mind that most tier one "telco" service providers get something on the order of 20 percent of revenue from consumer landlines these days. To be be sure, lines still are important cash flow generators, but no longer are driving growth.

That honor is reserved for mobile and broadband products. Businesses are a different matter, but for consumers, most of whom are equipped with wireless phones in any case, there just are more questions every day about why to keep a wireline circuit.

Some analysts predict that, by 2010 (two more years) wireless-only households should rise to 27 percent, from at least 13 percent in 2007, according to the Pew Internet & American Life Project. Other analysts think the figures already are higher, in the 17 percent range.

Packet 8 Mobile VoIP Trial Program Launched

8x8, provider of Packet8 voice and video services, has launched a no-obligation, no-fee trial program that lets customers of any U.S. based wireless carrier experience the dialing simplicity and call quality of the Packet8 MobileTalk mobile VoIP international calling service at no charge.

Wireless customers can download the MobileTalk application onto their mobile device and use the service at no charge until a total of $2.00 in per minute fees is reached. Packet8 MobileTalk service offers rates of $.02 to $.05 per minute for most locations in Europe and Asia.

Users can dial calls directly and natively from their mobile handset, contact list or speed dial directory without the additional keystrokes required by calling card and other reduced rate international calling services. Once the destination number is dialed or selected, the Packet8 MobileTalk software application identifies the international prefix being called and redirects the call to a local Packet8 network access number.

Over 450 Windows, Palm, RIM and Symbian-based mobile phone models, including the entire family of Blackberry phones running version 4.0 of the operating system and above and 25 Nokia models running the Symbian OS, are supported by the Packet8 MobileTalk service.

The plan requires a one-time $9.99 activation fee for the service and a monthly fee of $9.99 for non-Packet 8 subscribers.

Mobile VoIP is growing, no doubt, as shown by this Sound Track Partners forecast.

Belkin Annunces Skype Phone

Belkin will offer in March a new sesktop Internet Phone for Skype (suggested U.S. retail price of $99.99) that allows users to make and receive Skype calls without use of a PC, plugging directly into a router.

AOL Enhances BlueString, XDrive: More Cloud Computing

AOL announced major enhancements to its leading personal media products with new features in BlueString (www.bluestring.com), a free Website that enables users to easily upload, store, consume, manage and share digital media. Both are examples of a growing move to Web-based apps, storage and social networking.

AOL also says it will release a new beta version of Xdrive (www.xdrive.com), a "personal hard drive on the Internet" allowing consumers to store, access, share and backup their files. Both products are scheduled for general release in the first quarter of 2008.

Also, a series of embedded applications called, "My Memory Gallery," which allow consumers to access and use BlueString on Facebook can be found at http://apps.facebook.com/mymemorygallery.

Generic versions of these applications will soon be available for inclusion on blogs, other Websites and personal homepages.

BlueString will include an enhanced user interface based on Adobe Flex and Adobe AIR enabling simple drag-and-drop of photos, videos, and music across online and offline storage, and eliminating the need for consumers to explicitly upload files before they create with or share their digital media.

BlueString also will offer consumers the ability to access personal photos, videos and music from a variety of third-party media sites and popular photo, video and music-sharing sites.

The new Xdrive beta will feature a simplified and easier-to-use design. Also built on Adobe AIR, this version of Xdrive will integrate the consumer's desktop directly into the online application, giving users the ability to simply drag and drop files directly from the desktop into Xdrive.

The updated version of Xdrive will also be fully integrated into AOL Mail, allowing users to send attachments larger than the current 16 MB limit, creating a seamless email experience for people sending files up to 5 GB.

Microsoft Online Video Initiative

Microsoft Corp. says it now has partnerships with Walt Disney Co., NBC Universal and Metro-Goldwyn-Mayer Inc. giving Microsoft the ability to sell online videos to Xbox 360 game consoles.

Yahoo Launches Mobile Developer Program

Yahoo has announced a new mobile homepage and an updated version of Yahoo Go, the company’s downloadable mobile program. It also is launching a developer platform that will allow outside applications to be built for both offerings. And no, Yahoo executives are not pitching the moves as a response to Google's Android and Open Handset Alliance initiatives.

The idea is to make the company’s mobile destinations a one-stop shop for wireless users, in part by by opening them up to third-party applications.

Vodafone Data Plan Prices Slashed

In what appears to be a major bid to ignite the mobile broadband market, Vodafone NL has reduced data plan bundle prices as much as 50 percent for domestic usage and up to 85 percent for international use in 42 countries. That sort of thing might ultimately have direct implications for U.S. high-speed mobile services as well. And the reason is that if it appears WiMAX or any other mobile broadband alternative is getting traction, incumbent mobile service providers have a potent weapon: pricing.

While no carrier would be thrilled about slashing its prices in the manner Vodafone has done, the fact remains that incumbent mobile providers have and texting revenues to prop up their revenue streams. Upstart mobile broadband providers will have less margin to drop their prices. Which leads one to wonder what will happen when Clearwire and Sprint fire up their new WiMAX network on a continental basis (assuming Sprint perseveres).

All discussion of technology advantages and attributes will become irrelevant if the pricing leadership changes in any significant way. Pricing also is key to creation of some potential new mobile Web business with different pricing and use cases than today's mobile devices provide.

In other words, will WiMAX develop as a cable replacement, 3G replacement or foundation for mobile devices other than phones? In the first or second cases, pricing policy is pretty simple: offer comparable service at lower prices. In the last case, the issue is whether a sustainable business can be built around non-voice devices: cameras, game platforms, music players, navigation, mobile Web. In that case, prices probably have to be quite aggressive.

So part of the equation and business model is whether a WiMAX network can be built cheaply enough, and operated efficiently enough, to offer such lower pricing. In any event, it appears at least some leading mobile providers aren't going to wait to find out.

And as this forecast from In-Stat suggests, most of the future WiMAX market is going to be mobile, not tethered.

Pre-paid Vodafone mobile users in the U.K. last summer also found themselves offered new lower pricing of £2 per Megabyte for mobile data rather than the original £7.30 per MB. While not a complete flat rate plan, it's a possible step in that right direction.

Which Road for Australia?

It isn't yet clear which road Australian regulators have in mind for that country's contestants. An inter-modal framework such as that used in the United States is one option. So is the intra-modal, robust wholesale access model prevalent in Western Europe. In Australia, it would be Telstra that builds the fiber-to-home network that other competitors would have wholesale access to.

At some point, the log jam has to be broken or consumers and businesses in Australia are not going to have access to the bandwidth they are going to need. Up to this point Telstra has been able to rely on wireless and new Internet access services to offset declines in voice revenue. But nobody really thinks that can go on forever.

Neighbor New Zealand already has opted for an "operational separation" regime that separates wholesale network operations from retail sales operations for all players in the market that want to take advantage of the wholesale access network.

How Much Bandwidth is Enough?

It sort of depends on what sort of end user you are, as this analysis by Motorola suggests. Power users require more than lighter users, to be sure. The issue for a network engineer, of course, is that a network has to be engineered for the needs of the most-demanding user, not the least-demanding user. Which suggests that the supply of bandwidth will continue to climb, though it isn't so clear that power users will escape the requirement to pay more money for the privilege.

Motorola thinks about six percent of users require 58 Mbps by 2010, while a quarter of households will require 40 Mbps service. About 44 percent of households will be able to get by with just 19 Mbps.

Unbundling Price Impact Unclear

The American Cable Association, which represents 1100 small, independent cable operators, has called for unbundling of cable channels, though the large cable operators and programmers oppose such rules. On the face of it, unbundling seems to offer an antidote to higher retail prices.

The thinking is that allowing users to pay just for what they want will drive lower prices. Oddly enough, it probably wouldn't. Once consumers start toting up the costs of discrete channels, and assuming most people have seven favorites, costs might be higher than what they are paying to receive lots of channels they don't watch.

Advertising is the reason. When cable channels are carried on the most-popular "expanded basic" tiers, they have a larger number of eyeballs to sell advertising against. Take away that access and advertising becomes a much-smaller revenue possibility, which then means programmers will raise their rates for carriage. So prices go up.

To be sure, smaller video providers do have to pay higher wholesale rates to get program access, but programmers counter that volume discounts account for the higher wholesale costs.

Smaller operators also object to "tying" policies that require carriage of lesser-viewed channels to get access to the most-popular, "must have" channels. The policy obviously is helpful to programmers, as they gain shelf space for niche channels.

Supporters of tying policies say program diversity clearly will suffer if tying policies aren't allowed. There are elements of truth to that claim. Lesser-viewed channels might be forced to on-demand distribution, which will reduce potential revenues, again compelling those channels to raise prices.

Distributors don't like tying policies since scarce shelf space gets eaten up by channels with low viewership.

Sometimes the obvious solutions actually produce results counter to what people think.

Verizon Fiber Gamble Pays Off?

As this Wall Street Journal graphic illustrates, shares of Verizon and at&t have outperformed the shares of leading U.S. cable companies over the past year. One suspects that a changed investor understanding of the value of broadband access is at least partly the reason.

Verizon executives, in particular, took lots of heat from the investment community for embarking on what was seen as an expensive and unproven fiber-to-home upgrade. Verizon's compatriots at at&t essentially were rewarded, at least in part, for taking a less-ambitious, less-costly upgrade tack.

The cable companies have been saying for decades that all telco fiber-to-home networks were uneconomic compared to cable's hybrid fiber coax alternative.

And though other forces are at work, investors seem to have warmed to the idea that the upgrades are value-producing, after all. If we have learned anything over the last decade or so, it is that bandwidth demand can change quite sharply, quite quickly, and always, so far, in the direction of more demand.

Getting caught shorthanded could be quite destabilizing.

Also, Verizon has shown that it is able to compete effectively for consumer dollars in the video entertainment area, while the FiOS service has drawn raves from users who have access to it. There might be nothing so churn-reducing as knowing there is one provider of fiber-to-the-home in one's service area.

The point is that Verizon executives were right to stick to their guns, despite the avalanche of criticism they received for building the FiOS network. In the competitive race with cable operators, Verizon might be positioned quite well.

It isn't that cable operators cannot push their upgrades further, by pushing fiber closer to customers. It is that they will face opposition from their investors for the same reasons Verizon got slammed. Investors get nervous every time the cable industry starts talking about the need to increase leverage to upgrade the networks in some serious way. And it wasn't so long ago that the HFC 750 MHz networks were described as "the last upgrade" cable ever would have to make.

It no longer looks that way.

LG TV-to-Mobile Platform Coming

LG Electronics Co. says it has developed a low-cost way for North American TV stations to transmit digital signals to cellphones and other portable gadgets.

LG's technology, which it calls MPH for mobile-portable-handheld, requires TV stations to buy relatively inexpensive add-on devices to their digital transmitters and the makers of cellphones and other portable devices to install a reception chip. The reception technology can also be incorporated into other chips in portable device.

Embracing Failure

"We're not afraid of occasionally falling flat on our face," says Richard Branson, Virgin Group CEO. And therein lies a noteworthy difference in thinking about innovation that obviously has implications in the global telecom business. One of my business associates at Verizon would react in horror if anybody suggested Verizon itself should be more venturesome in trying new things. "We have a reputation to protect," he constantly says.

Of course, so does Virgin Group. But that's one reason why innovation is going to come from outside the ranks of the tier one global carriers, though some carriers are showing themselves more amenable to working with innovators.

Virgin, like Google, has a culture that values experimentation and risk-taking. And if the game is innovation, as I suspect virtually everybody in the global telecom business would acknowledge is the case, then the likes of Virgin and Google, which also isn't afraid to try things that don't work, is the way forward. on the innovation front.

What the incumbents can do is figure out how to work with Google. That's heresy in some quarters, but the conclusion seems logical enough. If innovation is essential, and if one knows one cannot innovate quickly, or take many risks, as a matter of policy, then one has to have partners who will do that on one's behalf.

And as the graphic suggests, even successful and important innovations ultimately can run out of steam. Dell turned the PC distribution business upside down at one point. But its competitors have long since caught up, leaving Dell the contestant that has to change.

Motorola Launches Mobile Video Device

Motorola has developed a stand-alone media player, the DH01 device that works with the DVB-H mobile video standard and also plays on-demand video clips and programs saved on digital video recorders. Motorola, Nokia, Samsung Electronics and LG Electronics already make phones that can receive live TV streams. What is different here is that Motorola wants to gauge demand for a stand-alone video device.

At some point, the user desire for simplicity will outweigh the desire for multiple functions in a single device, even as designers work to simplify inherently-complex devices so they will support multiple applications.

Up to a point users seem to enjoy having multiple functions in one device. Email and text plus voice is one example, while voice plus text plus music provides another example. What is less clear is what happens when users are offered devices that add Web services, enabled by Wi-Fi as well as mobile broadband, as well as video. At some point, the cost of a "do everything" device starts to get pretty high, while the functionality has to be balanced, possibly decreasing user satisfaction as a multi-function device will tend to perform less elegantly than a purpose-built device.

The issue is that the range of applications people want to access is growing all the time: gaming, navigation, video, audio, radio frequency identification and sensor network access. At some point, the complexity overwhelms the user experience, which has to be kept as simple as possible.

The other issue is how much tolerance end users exhibit for higher device prices when those devices break, get lost and wear out fairly frequently. It might be one thing to expect replacement or loss of a $100 device. It might be quite another to risk the loss and replacement of a $700 device. With volume and time, the issue arguably becomes less pointed, as features found in $700 devices migrate down the product lline.

Still, some point likely will be reached where users simply find "do it all" devices less desirable than carrying a couple devices that are highly optimized for the applications those people want to use most.

Is Mobile Substitution at the Tipping Point?

Something interesting might be happening in the mobile-only household segment. Wireless-only households, especially households including only a single resident or multiple young adults, have been increasing for some years.

But there is now some indication that mobile-only usage is higher in the general population than it is among more technologically-savvy users. If that trend holds up, it indicates that cutting the landline now has reached a possible tipping point.

In the first six months of 2007, 13.6 percent of households did not have a traditional landline telephone, but did have at least one wireless telephone, according to the National Center for Health Statistics.

Now here's the other bit of interesting data: The Harris Poll, which surveyed Internet users only, found that 11 percent of those respondents were mobile-only. Going only slightly out on a limb, let's assume Internet users are more open to new technology-use behaviors.

Indeed, the Harris Poll shows that two percent of Internet users only have VoIP services, and do not use mobile or landline phones. Another five percent say they use mobiles and VoIP.

Adding the "mobile only" users with the "mobile and VoIP" users gives you 16 percent of users who do not use a landline. Add the two percent who use only VoIP and one has 18 percent of Internet users who do not have a landline. So it still appears that Internet users are "different" from the general population.

That is as many of us would expect. Still, it is startling that "wireless only" usage seems to higher in the general population than among the arguably more-advanced Internet users.

Overall, the percentage of adults living in wireless-only households has been steadily increasing since 2005. In the first six months of 2007, one out of every eight adults lived in wireless-only households. One year before that just one in 10 adults did.

What might be new is some new spread of such behaviors beyond what we have tended to see, up to this point.