Congress to Hold Closed Door Meetings on Communications Policy

Communications policy will be examined by the U.S. House and Senate behind closed doors June 25, 2010. Presumably among the issues to be examined are the Federal Communications Commission's proposed common carrier regulation of broadband access, which a majority of Congress already say they oppose.

Among the organizers include Senator John D. Rockefeller IV, Chairman of the Senate Committee on Commerce, Science, and Transportation; Rep. Henry A. Waxman, Chairman of the House Committee on Energy and Commerce; Senator John F. Kerry, Chairman of the Senate Subcommittee on Communications, Technology, and the Internet; Rep. Rick Boucher, Chairman, of the House Subcommittee on Communications, Technology, and the Internet.

BroadbandBreakfast.com: Congress to Hold Closed Door Meetings on Communications Policy Issues

BT Has Same Cost Problem as AT&T, Verizon, CenturyLink

BT has said that there is a commercial case for it to upgrade about two thirds of its national network to fiber-to-the-cabinet and fiber-to-the-premises networks. The rest of the country, though, is too sparsely populated to justify wholly private investment, BT insists.

People sometimes forget how sensitive infrastructure costs are to the vagaries of population density, terrain, soil composition and duct or pole access. In the United States, as elsewhere, loop length (distance from customer location to the nearest central office) is inversely proportional to population density. So are capital requirements. The cost of serving the last 10 percent of customers is extraordinarily high compared to the cost of reaching the most-dense 30 percent of locations (click on image for larger view).

Whitehall invites broadband subsidy goldrush • The Register:

Smartphone Navigation Features Up 10X in 2010

Smartphone-based navigation systems are set to grow by a factor of 10 in 2010 and boom by nearly 40 times in 2014, iSuppli Corp. predicts.

The number of smart-phone-based OEM and aftermarket on-board navigation systems is projected to rise to 81 million units in 2010, up from 8 million in 2009. By 2014, usage will increase to 297 million.

“Smartphones over the next decade will rival PCs as a market for hardware, software, communications and location based services,” said Danny Kim, analyst and global manager for automotive research at iSuppli. “In the last two years alone, the smart phone has become the most important platform for map and navigation usage. With maps becoming a standard feature in a growing number of smart phones, the number of smart phone map users is increasing sharply.”

Smart Phones Become the New Location Based Services (LBS) Battleground

Verizon Offers new FiOS Customers "No Contract: Service

Verizon Communications now will allow customers to sign up for its FiOS television and Internet services on a month-to-month basis at the same price as long-term contracts and without early termination fees. Though Verizon might have preferred the revenue stability contracts tend to provide, consumers hate them, especially the early termination fees.

And though many observers do not believe there is sufficient competition in the fixed broadband access market, the Verizon move seems clearly a result of marketing by its cable competitors blasting the Verizon requirements and touting the ability cable TV customers have to buy without contracts or early termination fees.

Verizon in January 2010 raised the early termination fees for FiOS customers to $360 from $179. To be sure, Verizon's economic rationale was the cost to activate a location. But that's a business issue Verizon has to deal with, as all providers incur additional expense to activate a customer.

But market pressure seems to have had effect. Effective immediately, all new Verizon FiOS customers can opt to pay for a bundle on a month-to-month basis, at the same prices charged to customers purchasing a term contract, and receive price protection for one year without an early-termination fee.

New FiOS consumers who order a Verizon bundle as part of a two-year contract can take advantage of the "Worry-Free Guarantee," allowing them to cancel their service within 30 days of the date of activation, with no termination fee.

The month-to-month option and "Worry-Free Guarantee" expand upon offers introduced earlier this year in Florida and Pennsylvania and that have met with very favorable customer response. It's hard to imagine those offers getting anything less than that reception, given the distaste consumers have for contracts and termination fees, despite the "goodies" that sometimes are part of the overall offers.

http://newscenter.verizon.com/press-releases/verizon/2010/new-verizon-fios-customers.html

Apple Wants to Sell Razors (iPads), Amazon Blades (Media)

Some observers will point out that about half of Amazon's total revenues come from selling media (books, for example) and that the Apple iPad is an obvious danger to the extent that digital content distribution moves out of its control.

To be sure, Kindle inventory can be bought on an iPad. But Apple is going to push its iBooks offering, shifting sales away from Amazon.

To be sure, notes Citi analyst Mark Mahaney, Amazon enjoys a lead for the moment in product breadth and depth. Comparing Kindle and iBooks, using the New York Times best sellers list as the data source, Mahaney notes that 88 percent of New York times  fiction and non-fiction best sellers are available on Kindle, compared to 63 percent from iBooks.

The average price for eBooks on Kindle is $11.23 compared to  $12.31 for iBooks, a 10 percent advantage for Amazon.

About half of NYT fiction and non-fiction best sellers are available for both platforms, and 80 percent of those items are priced identically on each platform. About 20 percent of the items that are cheaper on Kindle are about 11 percent cheaper, on average.

That's probably not a sustainable advantage, as a 10-percent price advantage on a $12 item is just $1.20, not likely a sustainable "moat."

The iPad is not exactly a "give away the razor, buy the blades" strategy. Apple very much wants to sell razors. Amazon, on the other hand,  really wants to sell blades. That illustrates an interesting difference in business models. Apple would merchandise content to sell media consumption devices. Amazon really would rather merchandise the platform and make a living selling the content.

Apple sells devices in the $500 to $800 range, while Kindle sells in the $189 to $489 range (basic version or the Kindle DX). Others may disagree, but it would seem Amazon has incentives to figure out how to "destroy" its hardware pricing to grab more media sales. That certainly makes more sense in the near term than trying to move upmarket directly into the iPad space.

Amazon Cuts Kindle Prices to $189

The reaction didn't take long: Barnes & Noble Inc. cut the price of its Nook e-reader to $199 on June 21, 2010. So did Amazon, just a few hours later. Amazon's standard Kindle e-reader now costs to $189, down from $259, though the "Kindle DX," featuring a larger screen and global mobile coverage, still sells for $489.

The strategic issue is whether e-book readers essentially wind up even cheaper than current levels as e-book and e-content purchase volume grows. It wasn't so long ago that would-be e-book reader suppliers thought a $400 or higher purchase price would still be viable.

Obviously the rapid emergence of a potentially-rival tablet market, exemplified by the Apple iPad, at about the $500 price point, plus Amazon and Barnes & Noble marketing at the $260 price point, has dashed a few business plans.

Of course, ask yourself which device you'd rather use, despite the higher price of the iPad. There's nothing wrong with the Kindle, but it is a monochrome e-book reader.

The iPad is a multi-purpose device that also doubles as an e-book reader.

Did Skype Rip $143 Billion a Year Out of Global Voice Revenue?

Skype CEO Josh Silverman offered a few statistics at Communicasia about how disruption works. Today, 12 percent of the world’s international calling minutes are on Skype, and Skype users spend seven to eight minutes of "free" calling for each minute that is a "paid" minute of use.

Skype’s on-net international traffic (between two Skype users) grew 51 percent in 2008, and is projected to have grow 63 percent in 2009, to 54 billion minutes (TeleGeography has not yet published 2009 figures).

Already the world average retail price of an international call is under one-fifth of the $1.20 per minute price of 15 years ago, says Telegeography. Which leads to an interesting exercise.

Assume for the sake of argument that an "average" international long distance call today costs 22 cents a minute.

Assume that, over the last 15 years, competition alone would have driven average prices down by 50 percent, so that the average price of an international call dropped to 60 cents a minute, even without further price pressure from Skype and other IP voice providers.

Then assume the "Skype effect" (overall pricing impact caused by Skype and other VoIP providers) is 38 cents a minute, the difference between the "natural" decrease to 60 cents a minute and current 22-cent rates arguably lower because of Skype and other VoIP providers.

Using those assumptions, the global telecom industry now "loses" $142.9 billion a year in revenue because of overall lower rates caused by VoIP competition, even assuming that Skype market share is simply a shift of some traffic and revenue ($11.9 billion imputed value) from the incumbent providers to a "new" competitor.

It's just an exercise, as it is impossible to determine precisely how much lower prices would have affected demand, in the absence of the impact of VoIP on average calling prices, or how much prices would have fallen for other reasons.

The point is that disruption can create an "okay" business out of a "really good" business, looked at from the standpoint of an attacking provider. If a firm has zero market share, then creating a business worth nearly $1 billion in annual revenues is not a bad thing.

Obviously we are dealing here with "imputed" revenue, not actual revenue, since Skype doesn't today make anywhere near 22 cents a minute, on average, across all of its traffic. Indeed, seven to eight times more zero-revenue calls are made, compared to "paid" minutes of use.

The overall impact is quite a bit more dramatic on legacy providers, though obviously good for buyers and users of trans-border voice service. Losing some amount of market share is not the most-important impact. The bigger issue is the overall decline in average prices per minute.

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