Real-Time Services: Bandwidth is Not Enough

Real-time services are the future of private and public IP networks. Just as certainly, users are starting to recognize that raw bandwidth is not enough. Quality of experience hinges centrally on quality of service, typically requiring class-of-service mechanisms, virtual private networks and application-aware control of bandwidth parameters.

Thinking Phone Networks might provide an example. The Covad partner offers voice-optimized access and has increased its customer base using that feature by 200 percent in the past two years.

“We believe this expansion will continue as more nationwide customers appreciate the quality and reliability of Thinking Phone services made possible by Covad,” says Steven Kokinos, Thinking Phone Networks CEO.

Thinking Phone Networks’ customers utilize its voice services to connect multi-site
locations, remote workers, and home offices. The issue there is "multiple sites." It's one thing to assure bandwidth quality at a headquarters site. It is quite another to ensure that home office and distributed associates have that same level of access to quality bandwidth.

It isn't clear how well most users understand that, yet, but greater experience, followed by word of mouth and other "social" mechanisms inevitably will create a market for "real time services" bandwidth that is different from "best effort" access.

Covad’s "Voice Optimized Access" product provides the dedicated bandwidth Internet connection that powers VoIP services from more than 50 wholesale partners nationwide.

Subscriptions, Not Ads Drive Cable, Telco Video

There is a notion, incorrect, that advertising revenues will be a big contributor to telco revenue streams as those firms scale up the size of their video entertainment customer base.

Some of the understandable confusion results from glancing at cable industry statistics on overall revenue, including programming networks and cable operators.

While it is true that programming networks derive a huge chunk of their revenue from advertising, cable operators really do not benefit as much.

As this Time Warner Cable chart suggests, advertising actually is quite a small part of the overall revenue mix, and has dropped, percentage-wise, as newer businesses such as high-speed Internet access service and voice have grown.

It's a nice revenue contributor, to be sure. But arguably not more important than churn reduction and retention, in terms of overall revenue contribution. Certainly it is not more important than voice and high-speed data services, going forward.

Time Warner Cable Expects 9% 2008 Revenue Growth

Time Warner Cable expects its 2008 full-year growth rate in revenues to be approximately nine percent, from a 2007 base of $15.955 billion, and its 2008 full-year growth rate in operating income before depreciation and amortization to be in the range of nine percent to 11 percent, from a 2007 base of $5.742 billion.

Time Warner Cable also announced that it is increasing its expectation for full-year free cash flow growth, primarily due to a reduction in cash taxes resulting from the Economic Stimulus Act of 2008. The Company now anticipates that its full-year FCF growth rate will be at least 40 percent.

That's if the newly spun off company can get all its local franchises renewed, a time-consuming if necessary formality, and then does not have time to make any acquisitions in 2008. The odds of the company making it through 2009 without making a significant acquisition or two are fairly low, many observers think.

The company will have the borrowing power and the motivation to extend its footprint.

Qwest Launches 20 Mbps Access Service

Qwest has begun selling two new broadband service tiers for residential and small business customers. Qwest Connect Titanium offers broadband speeds of 12 Mbps downstream and 896 kbps upstream at a standard rate of $64.99 a month.

Qwest Connect Quantum providers 20 Mbps downstream and 896 kbps upstream.

Bundle and annual pricing incentives are available. The company is rolling out the service to 23 of Qwest’s top markets in ten states, reaching two million customers at the end of 2008.

Charter Introduces 16 Mbps Access Service

Charter Communications has announced a 16 Mbps broadband service in its Wisconsin markets. The new offer features upstream bandwidth of 2 Mbps for both consumer and business customers.

The new service is priced at $79.99 a month for up to 16 Mbps downstream and 2 Mbps upstream. The offer is available to the majority of its residential Wisconsin customers and comes with a $10 bundle discount available for users that also subscribe to Charter’s phone or TV services.

Charter competes against AT&T 6 Mbps digital subscriber line services. AT&T has introduced U-verse access service operating at up to 10 Mbps downstream in Wisconsin, primarily targeting Time Warner Cable markets including the Milwaukee metro area.

$200 iPhone Subsidy from AT&T in June?

When the 3G iPhone is introduced this summer, AT&Twill cut the price by as much as $200, says Fortune magazine writer Scott Moritz. That would bring the phone's cost down to $199 for customers who sign two-year contracts.

Apple is expected to have two versions of the new iPhone, an 8-gigabyte-memory and a 16-gigabyte-memory model with "list" price tags widely expected to be $399 and $499.

Such a move would create significant churn potential for rivals Verizon Wireless, Sprint and T-Mobile.

The $200 rebate or subsidy would be limited to AT&T customers and not available through Apple’s stores.

The average iPhone user however, runs up a $100 tab each month due to the higher priced data and calling plan. That would give AT&T an quick payback on its $200 outlay.

Such a move also would snare more of the ultimate iPhone market as AT&T moves closer to the eventual end of its exclusive deal with Apple. And since the iPhone has proven to be such a boost for mobile broadband, AT&T logically would believe much-wider iPhone adoption will help it get where it wants to go, in terms of mobile broadband revenues.

Rich Media: 20% of Online Ads by 2012

eMarketer predicts that spending on online rich media and video ads will account for nearly one-fifth of all online ad spending by 2012, up from 9.7% of all online ad spending in 2007.

"Video ads command higher prices than static display advertising," says David Hallerman, senior analyst at eMarketer. "That both boosts overall ad spending and draws in more dollars from traditional brand marketers, who have been reluctant to commit much of their ad budgets to the Internet."

Ongoing experiments with video ad formats and a lack of standards have, in part, kept the online video ad market from even stronger revenue growth.

Other hurdles have included limited high-quality video content to attract big advertisers and unresolved issues such as traffic measurement, which will be needed to gain the trust of the most deep-pocketed marketers.

As those problems are solved, spending will increase. eMarketer predicts that US online rich media and video ad spending will total more than $9.4 billion in 2012, which is more than four times as much as the 2007 spending level.