Voice Is Not a Commodity

One of the enduring pieces of conventional wisdom in the communications business is that "voice is a commodity." That perception typically is the result of even a casual analysis of "per minute" fees for long distance or even mobile usage over the last decade or two. 

Service providers in the wholesale space often sell their product based on per-minute fees as well, so it is easy to see why the working hypothesis is that voice actually is a commodity.

Despite all that, the way people use voice communications is anything but "commoditized," in the sense that one application is a fully functional substitute for another. 

People who use landlines also use mobile and IP-based communications as well. People who use IP communications also use mobile and fixed calling. Likewise, mobile users avail themselves of IP communications and fixed services as well. 

Beyond that, people tend to use each of the applications at different times, at different places, with different applications and different devices, to talk to different people, for different reasons. 

Not enough attention typically is paid to the ways all those use cases can be differentiated in marketing. Usage already is differentiated in fact.

Users Would Pay for Twitter

According to this poll taken by Guy Kawasaki, technology marketing consultant, people would pay to use Twitter.

As it true for other communication services, people do not seem to mind paying a fair price for services and applications they value. 

That also suggests a possible business model for Twitter, as well. 

Broadband Now Demand Constrained

Most of the time, we seem to be more concerned with the supply side of broadband: what penetration rates are, what speeds are, what prices are.

But consumer broadband arguably is demand constrained, not supply constrained. In Kentucky, for example, 65 percent of adults have broadband access.

Household broadband penetration tops 44 percent and another 21 percent of Kentuckians have dial-up service (keep in mind that most U.S. households have more than one adult in them).

Logically, the 21 percent of dial-up users are the primary customer segment to be targeted for an upgrade to broadband. About 70 percent of Kentucky households have at least one PC.

But that leaves 30 percent or so of homes that do not report having a PC. That is a demand problem, not an access supply problem.

$69 billion in 2007 Unlicensed Music

The value of unlicensed or pirated music trafficked on P2P networks in 2007 was $69 billion, according to new MultiMedia Intelligence research.
 
"Content owners of TV episodes and full length movies are seeing a growing impact as well," says Rick Sizemore of MultiMedia Intelligence .
 
MultiMedia Intelligence's new research also found the number of unlicensed full length movies "shared" will grow almost four times from 2007 to 2012.

Not all P2P content is unlicensed, though. P2P Internet traffic, despite having grown at a torrid pace for years, will grow almost 400 petrcent over the next five years, growing from a level of 1.6 petabytes of Internet traffic per month in 2007 to almost 8 petabytes per month by 2012. 

Covad Launches Channel Offer

Covad Communications has launched a new integrated access service for its channel partners. The new service features a new online quote and order system that Covad says can cut days to weeks off provisioning time.
 
The service is aimed at firms with up to 35 employees per location. Covad delivers the service over a voice-optimized T1 line, and the service works with customers' existing phone systems.
 
Customers can start with as few as four phone lines, and new lines can be added one by one, rather than in the more typical "blocks".

Covad completely overhauled its ordering process for this service. The new online ordering system handles quotes, pre-qualification and contracts all in one place and all in real time. Partners can store and manage quotes and orders through the website, and can check potential deal-killers—such as number portability—at the beginning of the process, rather than at the end.
 
"This is the voice and data service we've been asking for. The new online ordering system is easy to use and lets us know right up front that we can make a deal work," said Dan Keane, Director of Partner Sales with Keane Telecom Consulting, LLC, in Atco, New Jersey.
 
Covad Integrated Access now also utilizes SIP trunking and supports a wide range of IP, digital and analog PBXs.
Pricing starts at $435 per month with no installation fees.

The service uses Covad's voice-optimized technology to dynamically allocate bandwidth between voice and data.

Consumer Electronics Dip Predates "Economy"s

As evidence mounts of business slowdowns, it will be tempting to point to "economic weakness" as the reason for consumer and business spending weakness.  There will, to be sure, be such effects.

But not all spending changes are the result of the near-term economy issues, as some trends predate the such pressures.

Consider consumer buying of digital cameras, camcorders, audio players and hand-held game platforms. Sales of all four categories of devices have been declining for three years.

That could suggest product saturation, with the corollary that upgrades need to move beyond incremental changes.  There will continue to be replacement buying, to be sure. But incremental upgrades to memory or megapixels of resolution, for example, might not provide as much sales lift as one might have seen in prior years.

Category saturation is a normal part of the consumer electronics business, which is why consumer electronics retailers always are on the look for the next big "gotta have it" product.

DT Results: Still Tough to Sort Out "Economy" Impact

As further evidence of just how complicated it now is to figure out what actually is happening operationally in the communications business, Deutsche Telekom's overall year-to-date revenue has fallen about 2.5 percent. 

But international revenue has grown 1.1 percent, despite an unfavorable currency impact from U.S.dollar and U.K. pounds sterling denominated revenues. 

Deutsche Telekom generated revenue of EUR 45.6 billion in the first nine months of 2008, a decrease of EUR 1.2 billion or 2.5 percent year-on-year. To put the currency effect in perspective, revenue was negatively affected by exchange rate effects totaling EUR 1.5 billion. 

DT's T-Mobile USA revenue grew by 13.7 percent, but partly because of the acquisition of SunCom.

T-Mobile reported a 1.2 percent drop in its U.K mobile customer count, year over year. Mobile subscriber counts grew 8.3 percent, year over year. 

But mobile revenue was up 1.1 percent, year over year, overall, though there was weakness in the German, U.K., Austrian and "other" markets. 

So far, it might be reasonable to conclude that competitive conditions explain much of the weaker performance, though economic conditions could be contributing. 

We don't have the data yet, but what will be instructive is whether the overall mobile revenue in each of the countries is available, as that will provide a better sense of whether there actually is some slowing of consumer spending. 

Right now, all we can tell is that DT operates in competitive markets, has a secular wired voice lines problem as do other telephone companies, and that broadband access remains fiercely competitive.  

Economy Not Responsible for All Revenue Shortfalls

The temptation these days is to blame the "economy" for every slowing or decline in sales of communication products. We have to resist that temptation. At least so far, more companies reported robust third quarter growth in broadband, mobile and video sales than slowing. And there always are market share shifts to account for, a trend that should be in play for at least a year.

The content delivery business, for example, has to be judged a disappointment for Internap Network Services Corp., which saw sales in its contend delivery network segment decline for the third straight quarter.

Internap reported third-quarter revenues up eight percent to $65.4 million. But CDN sales in the quarter dropped to $5 million, down from $5.4 million in the second quarter and $5.6 million in the third quarter 2007.

We may well see economic effects in the fourth quarter or in 2009. But not all the negative impact will be a direct result of economic factors. In many cases, simple shifts of market share will be the driver.

Cbeyond: No Evidence of Slowing

If one wanted to point to a highly-successful provider of small business VoIP service, it would be hard to pick any single company doing better than Cbeyond. Third quarter revenue growth of $90.2 million represents 24.6 percent over the third quarter of 2007. 

Total adjusted earnings before interest, taxes and amortization of $16.9 million during the third quarter of 2008 was an increase of 25.5 percent from the third quarter of 2007. 

Cbeyond  had net customer additions of 1,993 in the quarter, to reach 40,569 in total.

The company also had average monthly revenue per customer location of $760 during the third quarter of 2008, compared to $754 in the second quarter of 2008 and $749 in the third quarter of 2007. 

Monthly customer churn of 1.3 percent in the third quarter of 2008 was stable compared to 1.3 percent in the second quarter of 2008. That is significant as Cbeyond experienced a temporary increase in churn several quarters back when it tightened credit polices. 

Windstream Results Point to Possible Shift

Windstream Communications third quarter results, like those at Charter Communications, do not yet support the theory that economic stress is changing basic consumer habits in the video entertainment and communications areas. 

Also, Windstream might finally be approaching a time when its voice lines stop shrinking. So there might be something to the argument that if executives think "lines will keep shrinking," they will.  Conversely, a belief that line losses are not inevitable might lead to efforts that in fact produce that result. 

Keep in mind that both Charter and Windstream operate in more-rural areas, so it may be that "big city" and "rural" patterns are diverging. 

Beyond that, neither company seems to be seeing any real slowdown in growth for broadband or video products, as some might expect in the face of the economic slowdown. 

Windstream added 28,000 new high-speed internet customers in the quarter, bringing its total broadband customer base to roughly 963,000, an increase of almost 16 percent year-over-year, and Windstream executives believe there still is room for additional growth. 

Windstream also added nearly 21,000 digital TV customers in the quarter. Long distance service revenue also increased five percent year-over-year.

To be sure, traditional voice lines declined by approximately 38,000, but that was an improvement in absolute lines lost of more than 8,000 units  year-over-year. In total, Windstream access lines declined by 4.8 percent year-over-year. But note: Windstream thinks it might finally have turned the corner on landline losses. 

Though competition has increased, Brent Whittington, EVP, thinks the company might have "turned the corner" in the third quarter, in terms of landline losses. That would be a significant development indeed.

Though some probably reflexively think telcos will keep losing voice lines forever, logic suggests the losses will stabilize at some point. Keep in mind the example of broadband access. Aggressive cable operator marketing of high-speed access went virtually unchallenged by telcos for some time. Then telcos decided they simply could not ignore getting into the business, despite some qualms about cannibalization of existing special access services.

As it turns out, the cannibalization fear was overblown. T1 lines in service increased even as cable modem and digital subscriber lines proliferated. Something along those same lines will happen once telcos decide it is time to market VoIP and IP telephony aggressively. As a byproduct, the shrinkage of voice lines will slow, then halt. 

Maybe Windstream is getting close to that point, even in advance of a major technology shift to IP-based voice.

Broadband Prices Drop 20%

Global broadband access prices have dropped about 20 percent, on average, in the first three quarters of 2008, say researchers at Point Topic. Digital subscriber line prices have dropped from $66.75 in the first quarter to $53.32 in the third quarter. Average subscription prices for cable are down just over 12 percent and fiber-to-customer prices declined by 6.5 percent.

Keep in mind that the Point Topic analysis is based on stand-alone tariffs. Customers might be paying less if they are buying their broadband access as part of a bundle.

DSL prices have declined the most in 2008, though Point Topic researchers say it still is the most-expensive broadband option, on a price-per-megabit basis.

In the Middle East and Africa, for example, consumers are paying over $46 per megabits per second basis, compared to $6.23 per Mbps in Western Europe.

Prices in the MEA region have dropped by seven percent on average in the year and speeds are up 13 percent. In part, the price declines for DSL reflect the greater degree of competition in that segment, compared to cable or fiber-to-customer alternatives.

In North America, cable modem price-per-megabit metrics are close to Western European levels. Western Europe prices of $4.80 per Mbps are close to North American prices of $4.89 per Mbps.

In Eastern Europe, cable modem prices declined about 25 percent.

Will Consumer Electronics Hold Up?

With the current economic slump, this holiday season is expected to be a tough one for most retail sectors, but will consumer electronics be one of them? 

Maybe not. A recent study by the Consumer Electronics Association found that although consumers may be spending less overall this season, they are planning to spend more on electronics. 

Some even argue that that the weak economy will make home entertainment products, like video games, even more popular this year, as some will see it as an affordable alternative to spending on concerts, movies and other events. 

So far, Compete.com data shows a normal pattern for the year. But people are right to be worried. 

According to the ICSC-Goldman Sachs index, retailers had their weakest October performance since the index's inception in 1969. 

Charter: Countervailing Evidence About Consumer Behavior

The problem with isolating economic from other drivers of consumer behavior and provider success is obvious enough when looking at Charter Communications third quarter 2008 results. You can't complain about the results.

For the third quarter of 2008, total revenue was $1 billion $636 million, an increase of eight percent over the third quarter of 2007. Phone and high speed internet, Charter's highest margin services, accounted for about 65 percent of Charter's revenue growth in the quarter. Telephone revenues totaled $144 million for the third quarter continuing as Charter's largest revenue growth driver with 55 percent year-over-year growth.

For the third quarter our commercial business revenues climbed 16 percent to $100 million driven by the expansion of commercial telephone product in the business bundle.

One of the broader assumptions about times of economic stringency is that consumers will be cautious about upgrading service to higher tiers. But that doesn't seem to be the case at Charter.

Demand for high definition continued in the third quarter with HD customers increasing nearly 50 percent year-over-year. Orders for on-demand content increased 57 percent and the number of users climbed nearly 30 percent over the year ago period. Orders for the DVR feature was up 33 percent.

Charter added 71,000 high speed customers during the quarter, more than 30 percent greater than net ads for the same quarter of 2007. And though you might expect customers to signing up for lower speed, less-expensive services, Charter says that wasn't the case. The majority of net gains came from higher speed products, company executives say.

Charter also added about 100,000 telephone customers in the quarter, consistent with year ago net ads, while voice customers increased nearly 60 percent year-over-year.

Early indications so far for the fourth quarter suggest that the economy may be having a "modest impact."  New connects were down year-over-year.

In the first two quarters of 2008 Charter did see losses in the broadcast basic tier, but the trend did not continue in the third quarter.

Charter made rate adjustments that might have lead customers to disconnect or possibly upgrade service in the first two quarters.

Third quarter customer retention and bad debt were generally in line to favorable with year ago levels, the company says.

Charter also increased its marketing spend in the third quarter, spending something like 4.8 percent of revenue on marketing, where Charter typically spends about four percent.

So there's some countervailing evidence about the impact of a recession on consumer spending for video, voice and data. Whatever else executives at other companies might think will happen, so far, Charter Communications has not seen anything yet that supports the theory that consumers are downgrading or postponing buying of higher-priced Internet access or video services.

14% Telco IPTV Share by 2013

Telco IPTV will grow from three percent overall share of the multi-channel TV business to 14 perent share in 2013 at the expense of cable TV, which will decline from 76 percent penetration to 61 percent between 2008 and 2013, say researchers at Pyramid Research. 

If that seems unremarkable, consider that virtually all of that gain will come from just two telcos, AT&T and Verizon. There are, of course, many small and independent telcos offering IPTV services. But their subscriber gains will be a small percentage of overall U.S. IPTV subscriber counts. 

“Pyramid Research estimates that IPTV will drive a global total of nine million net subscriber additions in 2008, 40 percent of which will come from markets in the Asia-Pacific region," says  Özgür Aytar, Pyramid Research senior research manager.

18 Mbps for New U-verse Access Service

AT&T has launched a new U-verse offer, boosting downstream speeds up to 18 Mbps. The new service can be purchased as part of an AT&T U-verse TV bundle. The new service replaces AT&T's 10 Mbps offer, and costs $65 a month as part of a TV bundle. The new service includes free Wi-Fi hot spot access. 

Professional installation is included for new U-verse TV customers, and existing U-verse Internet customers can upgrade their package at any time without additional installation costs or appointments, AT&T says. 

Time Warner Cable Lowers Forecast

Cable is generally considered to be recession-proof, but Time Warner Cable President and CEO Glenn Britt says its "naïve" to think that way now, and Time Warner Cable is reducing its 2008 earnings outlook. Still, the pattern of loss suggests nothing out of the ordinary. For the most part, it is service upgrades that are slowing, with a single exception.

"As we moved into the fourth quarter, we saw a significant slowdown in subscriber growth compared to last year, particularly for our video and voice services," Britt notes. The operator signed on 124,000 new digital video subs, just under the 128,000 it added a year ago. 

Time Warner Cable also warned that it has seen orders for premium video services, including pay-per-view, video on demand, and digital video recorders slow down. The MSO added 150,000 DVR subs in the period, off from a year-ago gain of 211,000. One would expect to see that, in a downturn. 

On the voice front, the MSO signed on 207,000 subs, 25 percent less than a year ago and about 15 percent lower than analyst expectations. It isn't clear whether this reflects economic conditions or a natural slowing of voice segment growth for an operator with fairly high voice penetration already. 

The MSO lost 31,000 basic video subs, better than the 83,000 basics it lost in the year-ago quarter, ending the quarter with 13.3 million total. Most of the video losses, though, come from the "antenna basic" tier, not the mainstay of a cable operator's video revenue. About 70 percent of the video subscription losses came from the antenna basic package, which runs about $13 per month. 

So far, video behavior is as one would predict for a downturn: less demand for premium services, but stability for basic subscriptions. The sharp increase in antenna basic disconnects, though, is noteworthy. 

Cable voice services are new enough that there isn't a baseline for behavior. Still, slower net addtions would not be unexpected. Had Time Warner reported negative voice growth, that would have been more worrisome. 

Comcast Corp also has reported a sharp fall in basic video subscribers. Comcast's basic video subscribers fell by 147,000 to 24.4 million in the third quarter, a sharper decline than the year-ago period's 56,000 drop. 

CEO Brian Roberts says the issue is not churn or disconnects but a slowing rate of new additions, caused by the weak economy, competition with phone companies and hurricane impact, which reduced new home construction as well as usability of existing housing. 

The hurricane impact accounted for 15,000 of the basic video losses in the quarter.

U.K. Broadband Growth Slips 20%

For those of you looking for signs of how a possibly-significant recession will affect sales of consumer broadband, the United Kingdom might offer a glimpse of what can happen.

The growth rate for U.K. broadband access subscriptions fell 20 percent in the third quarter, say analysts at Point Topic. To keep pace with net additions earlier in the year, the United Kingdom needed to add 390,000 broadband lines in the third quarter. Point Topic estimates that the actual number was only 313,000.

Local loop unbundling is the main driver of continuing growth in broadband, and represented gross 323,000 lines added in the quarter. Point Topic estimates that Virgin Media may have added another 60,000 cable modem customers while BT and smaller players actually lost about 70,000 net subscribers.

As a result, Point Topic is now forecasting that only 620,000 broadband lines will be added in the second half of 2008. The forecast for 2009 as a whole is 1.1 million, 200,000 down on the earlier forecast. By the end of 2009 there should be about 18.4 million broadband lines in Britain, 300,000 short of what was expected six months ago.

T-Mobile Wants to Jump From HSPA Straight to LTE

Reflecting the sort of thinking that parallels discussions of whether to upgrade from 10-Gbps Ethernet to 40-Gbps, or simply go straight to 100-Gbps, T-Mobile International AG indicates it now wants to upgrade directly from high-speed packet access (HSPA) to the 4G Long-Term Evolution standard.

Basically, T-Mobile says it will do what it can to wring all the efficiency it can out of HSPA and then move directly to LTE, rather than migrate in two stages to LTE, as some other mobile carriers propose to do.

The decision basically means T-Mobile will attempt to move directly from peak downlink speeds of 14.4 Mbps to LTE supporting 50 Mbps or 100 Mbps.

New Federalized EC Telecom Rules?

The European Union might on Nov. 5, 2008 get a new proposal from European Commission Telecom Commissioner Viviane Reding for creation of a pan-European telecom regulatory body that would have some measure of control over telecom rules in the EU's 27 member states, each of which is currently regulated by its own national organizations.

Those plans would create a single European regulator, along the lines of the U.S. Federal Communications Commission. The new body would not have the right to dictate regulation, but could block plans proposed by any member nation. In essence, the proposal aims to further the aim of creating a unified telecoms market thoroughout the EU, much as U.S. competitors have in the past preferred a single federal set of rules to 50 possibly-different sets of rules set by States.

Clearwire-Sprint, Verizon-Alltel Deals Approved

The Federal Communications Commission has approved the merger of Sprint-Nextel Corp. and Clearwire Corp. WiMAX assets.  The Commission also approved the Verizon Wireless merger with Alltel, on the same day it approved the unlicensed use of TV "white spaces" for broadband access and services. 

The decisions collectively mean even more competition in the broadband access space, especially in rural areas, as "white spaces"--spectrum typically used to support terrestrial broadcast television--are ideal for long-distance transmission and penetration of solid objects such as walls.  

Some work still needs to be done on the network design front, as lower-power broadband devices used by consumers and businesses will not be able to transmit as far as a TV transmitter can. That suggests network designs typically used by "cellular" operators will be needed. 

So use of the spectrum will be "free." The networks will not be.  

What Broadband Shortage? FCC Approves White Spaces

The Federal Communications Commission has unanimously voted to approve use of vacant TV broadcast spectrum on an unlicensed basis, clearing the way for development of broadband data devices and services that could be used by businesses and consumers.

The rules permit the operation of unlicensed devices in the TV white spaces on both a fixed and portable basis. Such devices generally must include a geo-location capability, the ability to access a data base of the licensed users and services and spectrum-sensing technology, all to avoid interference with licensed users and services.

Those users include full-power and low-power TV stations and cable system headends.

Wireless microphones will be protected in a variety of ways. The locations where wireless microphones are used, such as sporting venues and event and production facilities, can be registered in the data base and will be protected in the same way as other services.
The Commission also has required that devices include the ability to listen to the airwaves to sense wireless microphones as an additional measure of protection for these devices.

All white space devices are subject to equipment certification by the FCC Laboratory. The Laboratory will request samples of the devices for testing to ensure that they meet all the pertinent requirements.

The Commission also will permit certification of devices that do not include the geo-location and data base access capabilities, and instead rely solely on spectrum sensing to avoid causing harmful interference, subject to a much more rigorous approval process.

Generally speaking, initial devices are expected to operate at lower power. But device manufacturers may continue to provide additional information to the Commission to support the use of higher-power devices in adjacent channels. In addition, the Commission will explore in a separate inquiry whether higher-powered unlicensed operations might be permitted in TV white spaces in rural areas.

The proposal, approved on a five-to-zero vote, is expected to offer new opportunities for broadband data services in both urban and rural areas.

Though some conventional wisdom continues to assert that the United States has a "broadband access" problem, the FCC's decision suggests, along with other data, that broadband access is not a terribly big problem. A recent survey of about 146 rural telcos shows 100-percent availability of broadband. Fully 93 percent of those providers report there is broadband competition already, in their markets.

And now we will have "white spaces" to contend with.

More Mobile VoIP: Truphone for BlackBerry

Truphone has launched a beta version of its mobile internet telephony service, Truphone Anywhere, for BlackBerry smart phones. Truphone Anywhere works in 33 countries worldwide and provides international call costs for as little as six cents a minute.

The Truphone Anywhere application provides a prompt screen whenever a user dials an international number. If the user accepts, Truphone connects the call.by connecting to a local Truphone server, which then connects the long-distance part of the call over the Internet.

Truphone for BlackBerry smartphones is available to download for free from www.truphone.com/blackberry.

What is Capex Trend?

In addition to worries about what conceivably could happen to consumer demand for various communications services over the next year or so, suppliers to the telecommunications industry undoubtedly are worried about what happens to carrier demand for hardware and software.

Some, such as ABI Research, anticipate a mild dip of perhaps 1.3 percent in capital spending in 2009, compared to 2008. Others, such as Ovum, think the most-likely scenario is a reduced rate of growth through 2009.

There are other possibilities, though, with a return to 2007 levels of spending in 2009 or a severe dip of as much as 28 percent.

To be sure, carrier capital spending fluctuates over time, and many analysts believe U.S. service provider capital spending, which has been on an upswing over the past four to five years, will start to decline soon, as part of a natural part of the completion of some major upgrades by Verizon and AT&T, for example.

Looking at the average capex as a percentage of revenue, the five largest telecom providers in North America spent 18 percent of revenue in 2005, 17 percent in 2006 and 12 percent in 2007.

Capex at firms such as AT&T and Verizon in recent years has been running at 14 to 18 percent of revenue, a higher level than typically is the case, historically, and which at least some observers think will back down to more-normal levels after next-generation access network investments largely are made.

Those sorts of underlying drivers are not driven by short-term economic fluctuations, so one has to be careful extrapolating too much if a dip in capex should occur over the next several years, as that might be explained by a natural reversion to more-normal rates, not financial or economic conditions, necessarily.

iBasis Says Voice is Not a Commodity

iBasis has introduced its expanded portfolio of international voice products designed to address the needs of all telecommunications market segments from cost-driven wholesale carriers to retail mobile operators worldwide.

The iBasis portfolio now includes four basic products, each addressing a different market segment. Worth noting: if voice really were a "commodity," this sort of differentiation would not be possible. The implications are equally clear: voice actually is not a commodity or a single product. Rather, voice is a range of products, and they are not functionally identical substitutes for each other.

So if your voice strategy is based on it being a commodity, you might want to rethink your strategy.

Direct Voice provides wholesale carriers access to iBasis’ lowest-cost routes and direct pricing for highest possible savings, though capacity and coverage are managed to minimize costs. The product is aimed at providers whose primary concern is absolute lowest cost. "Direct Voice gives access to our direct routes at lowest cost," says Chris Lengyel, iBasis product manager.

"We engineer the product so one in three calls might be rejected for rerouting to another vendor or one of our products," Lengyel says. This might the case for some calling card providers or users of Web-based voice features.

Value Voice provides increased coverage and greater consistrency of key voice metrics. Value Voice features prioritized vendors to provide more stability of calling experience as well as a broader footprint.

Certified Voice provides full calling coverage, high route stability, call completion and capacity. Certified Voice is sold to consumer VoIP providers such as Skype and cable operators. It is ideal for retail VoIP traffic and "more of a tradtional wholesale product," says Lengyel.

Premium Voice offers mobile and retail operators guaranteed features and exceptional voice quality using direct connections with incumbent carriers and qualified providers. Includes advanced features such as guaranteed calling line information, fax and roaming. "Premium Voice" is sold to service providers whose primary concern is stability and quality.

Premium Voice often is bought by mobile operators because "it cannot fail," Lengyel says.

The new products recognize that some customers want price while others want coverage. Some want stability while others want roaming, fax or guaranteed CLI.

"What you see here is that there are varying levels of quality required for different applications," says Lengyel. "Skype doesn't care about fax or CLI, for example, but voice really isn't a full commodity," he says. "A minute isn't just a minute; there are lots of nuances."

"The mobile space needs quality," he says. "People will pay for quality, for some applications."

3G iPhone Cannibalizing Fixed Broadband?

At least some of us believe that mobile broadband someday will be as prevalent as mobile voice now is. Where broadband once was a service delivered to "places," it will be delivered to "people."

The immediate issue, though, might be whether at least some users will decide to substitute mobile broadband for fixed broadband. 

That, at least, is a possibility as the number of lower-income 3G Apple iPhone users increases. 

Ownership of the 3G iPhone rose 48 percent from June 1 to the end of August among households earning between $25,000 and $50,000 a year, compared to 21 percent overall.

Since iPhone ownership disproportionately has been concentrated among higher-income households, the shift might suggest that users are making rational decisions about value and price.  If a 3G iPhone provides mobile music, voice, email and Internet access, then the cost of using it is balanced by cost savings from avoided landline voice and broadband spending.

Ultimately, personal broadband might mean some amount of cannibalization of fixed broadband. And we might be seeing just that at work, among 3G iPhone users.

Up to 33% of Mobile Broadband Buyers Have Gripes

More than 10 percent of mobile broadband users feel that they were mis-sold, according to a survey sponsored by U.K. mobile provider O2. Nearly a third complaining that the ongoing cost was higher than expected while 20 percent found they were unable to use mobile broadband where they wanted it despite being told by providers that there would be coverage.

Another 13 per cent were frustrated that there was no returns guarantee if the service wasn’t right for them and around half wanted inclusive Wi-Fi as a standard option.

In response, O2 is changing practices to address the complaints, including a price reduction on core mobile broadband tariffs, the launch of a new coverage checker and a 50-day "happiness guarantee."

International roaming has been a key element in "sticker shock," so that feature will not be automatically enabled for all new O2 Mobile Broadband customers. New customers will need to contact O2 Customer Service to have roaming activated so that O2 can explain the likely costs.

For heavy users, O2 is also introducing a new 10 GByte package for £30 per month on a two year tariff and is also the only provider to offer all its customers unlimited Wi-Fi through any of the 6,100 hotspots through an exclusive partnership with The Cloud.

In addition, O2 is reducing the price of its core Mobile Broadband tariffs, with 3GB packages costing just £15 per month. Customers purchasing an 18-month or 24-month contract will also receive a free USB modem (or £99.99 on a rolling monthly contract).

An improved coverage checker will provide what O2 calls "an honest assessment" of the likely coverage customers will receive at their home locations.

The 50-day guarantee allows users to terminate service without penalties and return adapters for a refund.

Internet Gains 23% as News Source

Many more Americans are turning to the Internet for campaign news this year as the web becomes a key source of election news, say researchers at the  Pew Research Center for the People & the Press. Television remains the dominant source, but the percent who say they get most of their campaign news from the Internet has tripled since October 2004, up from 10 percent then to 33 percent now.

While use of the Web has seen considerable growth, the percentage of Americans relying on TV and newspapers for campaign news has remained relatively flat since 2004. In March, 26 percent of survey respondents cited the internet as a main source for election news, while the percentages citing television and newspapers remain largely unchanged. 

Not surprisingly, the Internet is a considerably more popular source for campaign news among younger Americans than older ones. Nearly three times as many people ages 18 to 29 mention the internet than mention newspapers as a main source of election news (49 percent for younger respondents, 17 percent for older respondents). 

Nearly the opposite is true among those over age 50: some 22 percent rely on the Internet for election news while 39 percent look to newspapers. Compared with 2004, use of the Internet for election news has increased across all age groups. Among the youngest cohort (age 18 to 29), TV has lost significant ground to the Internet. 

European Mobile Behavior Might Shift, Temporarily

Forrester Research analyst Pete Nuthall does not think economic stringency will dent
European mobile penetration rate of 84 percent. But he does predict there will be some reduced usage and spending. Purchases of more advanced handsets and services also might dip.

Mobile providers are responding to the anticipated changes by de-emphasizing mobile data services and expanding the variety of SIM-only offers.

Send and Receive Text Messages from Google Chat

At least some Gmail Chat users now can send text messages to buddies on their mobile phones using Gmail Chat. Recipients also can respond to those text messages just like they would respond to messages sent directly from a mobile phone, as well. As is typical for new feature introductions, the feature is being rolled out in phases, so not every Google Chat user has access to the feature right now.

Google appears to enable that function by providing a virtual phone number. The feature also works for mobiles responding from outside the United States, but the operation isn't quite so automated.

The ability to send a text message from a PC is not new. The ability to receive text message replies to a PC is.

To send text messages, users enter a contact name in the "Search or invite friends" box in "Chat," and select "Send SMS" from the box of options. If a chat window already is open for that contact, users just click "Video & more," and select "Send SMS."

If your contact replies, the text message response will appear as a reply in "Chat." These conversations are stored in your Chat history just like regular chats.

Age a Factor in New App Adoption

Just to confirm what you already know, a new study by ABI Research shows that, when it comes to viewing TV and video, growth in consumer markets is more limited by consumers’ ability to create new habits than by technology availability or ease of use. 

“The willingness to adopt new forms of entertainment delivery is in many cases determined by the age of the consumer,” says Steve Wilson, ABI Research principal analyst.  “That means that market growth is simply a matter of time.”

Still, there are some new changes. Game console penetration in the 18-to-25 year old segment showed no gain over last year, whereas penetration in the 65-or-over segment grew more than 200 percent.    

DVR ownership likewise is up uniformly across all age groups. On the other hand, some 65 percent of the respondents over 65 have never used VOD, compared to 30 percent of those in the 25 to 29 age range. However, 40 to 50 percent of those who have tried it continue use it at least once a month regardless of age. 

Internet downloading likewise is only really popular with consumers under 30. 

Video cell phone usage: consumers in their 30s are four times more likely to have watched video on their handset than those in their 50s.  The wealthy, willing to pay the extra costs, are much more likely to watch video on their handsets than the less affluent. 

Cincinnati Bell Revenue: Only 14% Consumer Voice

In some ways, the big story out of Cincinnati Bell in the third quarter was the progress the independent local exchange carrier has had in diversifying its revenue streams. In the third quarter of 2008, just 14 percent of its revenue was generated by consumer voice.

About 20 percent of the carrier's revenue was earned providing technology solutions including data center and managed services.

Wireless service revenue in the quarter was $74 million, up $6 million or nine percent from a year ago. Cincinnati Bell had 567,000 wireless customers at the end of the quarter, which reflected year-over-year growth of six percent in its post-paid wireless customer base.

Post-paid quarterly average revenue per user was $48.82, an increase of $1.41 year-over-year and $1.46 sequentially. Pre-paid ARPU was $26.33, up 15 percent from the third quarter of 2007 while prepaid subscribers declined eight percent.

Technology Solutions quarterly revenue was $73 million, down $1 million, or one percent from a year ago. Technology Solutions segment operating income of $6 million was up two percent from the prior year quarter.

Data center and managed services revenue was up 39 percent from the third quarter of 2007. But lower-margin equipment revenue declined $10 million or 19 percent from the prior year.

Year-over-year DSL subscriber growth was six percent. At the end of the quarter, Cincinnati Bell had a total of 231,000 DSL subscribers.

Quarterly wireline revenue was $201 million, down $1 million or one percent from the third quarter of 2007. Increased revenue from data services, long distance and expansion markets partially offset lower voice revenue in Cincinnati Bell's traditional service area.

Year-over-year total access line loss in the third quarter was 6.8 percent, reflecting a decline in the company's in-territory consumer access lines. Business lines were even with a year ago while expansion market access lines increased 14 percent.

iPhone Penetration Broadening Sharply

The trend can't be identified with any precision yet, but some end users might be adopting a new form of "substitutional" behavior of the sort mobility seems to be causing to wired phone lines.

Since June 2008 3G iPhone use rose 48 percent among those earning between $25,000 and $50,000 per year and by 46 percent among those earning between $25,000 and $75,000.

These growth rates are three times that of those earning more than $100,000 per year, the original "early adopter" population.

The reason it is not clear whether a new trend is emerging or not is that some of these users, perhaps most, are buying $200 subsidized phones, which puts the devices into a range many might be able and willing to pay for some other sort of smart phone.

And while the cost of a stand-alone, single-device and single-user account might be fairly hefty for users in the fast-growing income ranges, it is conceivable that many are on family or group plans of some sort that do not represent new monthly charges as much as $70 a month.

Still, there is a suggestion here that some users might be choosing to use use a single device for a music player, email device, voice and Internet access platform, possibly cannibalizing some amount of broadband access and wireline voice service in the process.

Mobile Usage Up

Over 54 percent of those surveyed said their mobile phone usage had increased by more than 25 percent over the last two years, and one in five respondents said it had increased by more than 50 percent, says Azuki Systems, Inc.
About 62 percent of respondents say they either own or will own a smart phone in the next 12 months.

ABI Lowers Mobile Handset Sales Forecast

ABI Research has revised its expectations for fourth quarter 2008 mobile handset sales to 7.5 percent growth from the 10.4 percent it earlier expected.

Call that the expected impact of tougher economic conditions.

Year over year annual growth is therefore likely to be between 10.5 percent and 11 percent, to close out the year at around 1.27 billion.

Handset sales grew 8.2 percent during the third quarter, year over year.

Expect to see aggressive marketing and promotional activities from operators and vendors alike as they strive to lure end-users to upgrade their handsets before the year’s end, ABI predicts.

Orange Gets 72% TV Growth

France Telecom has grown subscriber take-up by 72 percent over the last 12 months As of September 30, 2008 the Orange-branded service had 1.746 million subscribers compared with 1.017 million just 12 months earlier. 211,000 customers were signed in the third quarter of 2008.

Stats like that are one reason executives at Comcast see AT&T and Verizon as their primary competitors.

Negative Growth in Third Quarter, Commerce Dept. Reports

The Commerce Department has released its preliminary estimate of U.S. third quarter gross domestic product, showing a decline to -0.3 percent. If the fourth quarter follows suit, we will be safe in saying we officially have entered a recession.

Consumer spending fell by -3.1 percent. Business investment fell by -1.0 percent, final sales were down by -0.8 percent. Disposable income came in at -8.7 percent.

The odd thing is that despite the generally-tough tone since perhaps the summer of 2007, growth has been positive through the second quarter of 2008.

Hulu Finds Less is More

Hulu, the online video site, finds that when it comes to advertising, less is more. In contrast to the multiple-ad format used by broadcast TV, only one ad is shown during each segment break on Hulu.

In a customer survey commissioned by Hulu and conducted in July and August, 76 percent of nearly 18,000 respondents said that the site had the right amount of ads given the "no incremental cost to view" format, according to the New York Times.

Just over 17 percent said there was less advertising than they expected. The survey also found a 22 percent increase in advertiser message association and a 28 percent increase in intent to purchase among users.

There might be some "novelty" element driving the findings, so everyone will have to wait and see whether ad effectiveness of this sort continues, on Hulu and other sites that may choose the same format.

Only one finding remains consistently true: consumers tend to say they "hate ads." They also prefer getting free content and will tolerate ads if that is the price of getting the content at no additional charge.

Hulu has another advantage, however. The ads are short, and there is no way to zip past them, as would be the case if viewing on a digital video recorder.

$3 Trillion Global Service Provider Revenue is Forecast

Between now and 2013, a time when global communications service provider revenue will climb from $2 trillion to about $3 trillion, wireless is going to be a key factor.

Whatever else happens, mobility services in developing regions are going to play a big part in that growth.

In developed regions, pressure on landline voice revenues will be the challenge. In developed regions, service providers will have to create new services based on wireless and broadband, especially services that combine formerly-separate experiences such as voice, image, video, audio, text, presence, location independence and devices.

Nothing is certain, in that regard. History suggests that service providers, even those deemed to the most slow-moving, can replace their revenue mainstays. Wired telephone services providers, generally considered the slowest-moving contestants, already have twice done so.

They made a transition from "dial tone" to "long distance" as the revenue mainstay. Then they made a transition from "long distance to wireless." The next transition will be to replace wireless, as inconceivable that might seem. IP services are part of the answer. Video and content are parts of the answer. Software and information technology services are part of the answer. Personal broadband is part of the answer.

It remains unclear whether, in the next iteration of industry business models, there will be a single revenue source that clearly underpins all the others, even though this has been the classic model. The only thing that is clear is that, as important as wireless is, it also will someday fade as the key industry revenue driver.

Global Telecom Capex to Fall in 2009, Accelerate in 2011

Global telecom capital spending will decline in 2009,compared to 2008 levels, say researchers at Insight Research.

Spending will accelerate in 2011, driven in part by wireless and broadband spending in developing regions such as India and China, Insight Research predicts.

Between 2008 and 2013, those investments will drive global revenue from the current $2 trillion level to more than $3 trillion, the company projects.

MDU Developers Turn to Broadband

New research from Parks Associates indicates high-tech amenities like broadband, security, and energy controls positively influence the sale and rental of multifamily properties.

Researchers found nearly 50 percent of multiple-dwelling unit developers are seeking new electronic products and services that will differentiate their properties in an increasingly competitive market.

In particular, in-unit broadband service is becoming a “must-have” feature, with 60 percent of multi-family units offering some form of high-speed Internet. Security systems and monitoring services, electronic locks, and energy/utility management systems are also becoming more common in order to increase the speed of sale or rental of an MDU property.

No Wireless Data Dip

Wireless analyst Chetan Sharma sees no sign yet of any weakening of mobile data revenues from the AT&T and Verizon wireless reporting of the third quarter.

Since the fourth quarter is seasonally strong, we might not see any slowdown in the fourth quarter, either, he suggests. In all likelihood, we'll have to wait for first-quarter 2009 results to see whether economic stringency has negatively affected mobile data.

Personally, I would bet against a dip.

Where is Telco Capex Going?

As global carriers are in the midst of capital planning exercises for 2009, one key question their suppliers must grapple with is what changes might be forthcoming. Analysts at ABI Research perhaps optimistically think global carrier capex will dip just about 1.3 percent from 2008 levels, when capex grew a bit more about eight percent.

Ovum believes the most likely scenario is a generally mild impact on the telecoms industry, with growth and spending slowing but not declining. The scenarios are described in the October edition of Ovum’s Straight Talk Monthly communication to clients.

Researchers at Ovum say they aren't yet sure, but offer three possible scenarios. In the optimistic forecast, 2009 capex will be at the level of 2007, reflecting a slower 2008 spending pattern.

The most-likely outcome is slower spending through 2009, though. In a worst-case scenario,
capex could fall as much as 28 percent, a level somewhat consistent with the "nuclear winter" years after the Internet and telecom bubble just after the turn of the century.

Cox to Launch Mobility Services

Cox Communications plans to launch mobile phone service in the second half of 2009, using Sprint network facilities. But Cox also owns its own spectrum and plans to build its own third-generation wireless network, although it also says it will test Long Term Evolution as an eventual 4G platform.

Cox executives say the management and delivery of converged content is at the core of the company's wireless strategy. "Cox customers will be able to use their mobile phone to access television favorites, program their DVR, access content saved on their home computer and simplify their lives with enhanced voice features," the company says.

A reasonable way forward would be for Cox to rely on Sprint for typical wireless voice, text messaging and mobile broadband services, while using its own network for applications more focused on content services related to what it currently delivers using its wired networks.

All Cox phones will include a network address book that automatically synchronizes with home PCs, the company says.

Cox also says that subscribers will be able to watch TV shows, and possibly full-time channels, on their handsets.

The move into mobility is hardly unprecedented. Cox joined with Comcast and Tele-Communications Inc. as equity owners in Sprint PCS in 1994.

Online Video Goes Mainstream

Online video services have gotten positively mainstream over just the last six months, according to Ipsos MediaCT.

The percentage of female Internet users ages 12 and older that have streamed a video online in the past 30 days has grown from 45 percent to 54 percent, an all-time high for this demographic and nearly equal to the percentage of men (58 percent) whom have recently streamed video content online.

Moreover, the percentage of adults aged 35 to 54 that have recently streamed video online has also shot up since December 2007, rising from 49 percent to 60 percent in that time span.

In the past, such behavior disproportionately was a younger male activity.

Skype Puts Up Numbers Most Would Envy

In the third quarter this year, and for the year, eBay's Skype has posted numbers most companies would love to have. Use of Skype-out minutes increased 54 percent, which drove revenue growth of 46 percent for the quarter. 

Revenue over the past year came in at $ 521 million compared to $332 million for the comparable prior year, an annual revenue growth rate of  56.9 percent.

Registered users increased 51 percent over the prior year and Skype-to-Skype minutes increased 63 percent to 16 billion minutes. 

Also, growth seems to be accelerating. Skype recently achieved its fastest growth rate of user activity in its history, by one measure, with an additional one million more concurrent users in just 35 days. Skype tends to measure usage by the numbe of concurrent sessions occurring. 

Skype saw 63 percent annual growth rate of minutes. Not so important, you might think, since lots of Skype usage is of the free sort. But use of paid minutes (2.2 billion SkypeOut minutes) increased 54 percent. 

Skype had third quarter 2008 revenue of $143 million and is on track to reach 2008 revenue of $570 million. In a sort of worst case scenario--if a global economic sluggishness decreases Skype use, about the opposite of what some of us think will happen--and Skype revenue growth slows, it should neverthless continue to grow annual revenue above the expected 2008 level (negative growth is hard to imagine). 

The Difference Between Voice and Video Bandwidth

In a recent conversation with a financial analyst, the matter of Internet video bandwidth came up. The simple observation was that video consumes an order of magnitude (10 times) to two orders of magnitude (100 times) more bandwidth than voice does.

The implication, of course, is that if online video consumption becomes popular, it represents a network engineering and challenge potentially 10 to 100 times more complicated than was the case for access networks built for voice. 

That isn't to say costs scale precisely that way, but it suggests the dimensions of the cost problem for any network services provider charged with adding that much bandwidth. 

The cost of deploying a fiber-to-the-cabinet (fiber to the neighborhood) network in the United Kingdom, for example, has been estimated at £5.1 billion. The cost of a fiber-to-the-home network is estimated at £28.8 billion, according to the Broadband Stakeholder Group. 

The immediate difference in potential bandwidth might not be an order of magnitude. But the potential bandwidth difference ranges from an order of magnitude and up. 

Broadband: When a "Problem" Actually Isn't a Problem

Since broadband first became widely available to consumers in the late 1990s, adoption has hit the

halfway point faster than most other information and communication technologies, one easily can conclude. 

It took 18 years for the vpersonal computer to reach 50 percent of Americans, 18 years for color TV, 15 years for the cell phone, 14 years for the video cassette recorder, and 10.5 years for the compact disc player. 

It has taken about 10 years for broadband to reach 50 percent of adults in their homes.

The point is that, looking historically at the matter, there is not now, nor has there actually been, a "broadband adoption problem." One can quibble about costs, the rate at which speeds are increasing, traffic shaping or business models. 

But as a simple historical model, broadband was adopted faster than any other popular mass market service, ever. 

No SaaS Slowdown

Worldwide software-as-a-service revenue in the enterprise application markets is on pace to surpass $6.4 billion in 2008, a 27 per cent increase from 2007 revenue of $5.1 billion, according to Gartner, Inc. The market is expected to more than double with SaaS revenue reaching $14.8 billion in 2012.

Gartner analysts say the adoption of SaaS is growing and evolving within the enterprise application markets as new entrants challenge incumbents, popularity increases, and interest for platform as a service grows, despite the challenging economic climate. 

The fastest-growing markets for SaaS are office suites and digital content creation, albeit from small bases, says Sharon Mertz, Gartner research director.

Gartner estimates that the revenue attributed to SaaS within the office suites market will reach 99.2 per cent compound annual growth rate from 2007 through 2012, with a total SaaS revenue reaching $1.9 billion in 2012. 

By 2012, Gartner estimates that web-based freeware such as Google Apps, Adobe Buzzword, ThinkFree, Zoho and SaaS offerings will account for nine percent market share of total software revenue.

Gartner forecasts 96.1 percent CAGR for SaaS revenue in the digital content creation segment from 2007 through 2012.  

“DCC software is becoming increasingly important as organisations evolve toward a more Web-centric business model," she says.

The content, communications and collaboration  markets remains the largest contributor to the overall SaaS enterprise application markets with revenue exceeding $2.1 billion in 2008, and it is expected to amount to $4.7 billion in 2012. 

SaaS will represent two percent to three percent of enterprise content management and more than 70 per cent of Web conferencing in 2007.

The second largest contributor to the overall SaaS enterprise application markets is customer relationship management. In 2008, SaaS within the CRM industry is expected to exceed $1.7 billion in total software revenue. Gartner expects CRM SaaS revenue to exceed $3.2 billion in total software revenue in 2012.

Using Cable TV Analogy for Broadband

Net broadband subscriber adds, at least for U.S. cable and telephone providers, were much slower in the second and apparently third quarters of 2008. Part of that slowdown likely can be attributed to growing saturation of the broadband access market.

But it also is likely there is some contributing pressure from general economic conditions as well. Dial-up users might just decide to hold off on a move to broadband for a little while.

Cable TV marketers long have argued that multichannel video is a bigger and better value in tough times, representing a relatively-affordable source of entertainment for a family. An argument along those lines might help marketers of broadband access as well. 

"Product strategists responsible for the success of residential broadband services can continue to grow broadband penetration in a tough economic climate by positioning their service as a gateway to cheap content and communications," argues Sally M. Cohen, Forrester analyst. 

Downturn Behavior: True to Form So Far

What typically happens in an economic downturn, in the area of communications or network-based entertainment services, is that people reduce consumption of some "enhanced" features while retaining the base service.

In the cable TV segment, consumers tend to hand on their ad-supported services but skimp a bit on "premium" service. So you might see less use of fee-based video on demand, for example.

Taking a look at mobile service, Forrester Research analyst Pete Nuthall says "the economic downturn won't put a dent in the European mobile penetration rate of 84 percent, but mobile services providers are feeling the impact of reduced usage and spending as consumers review their regular outgoings."

That's confirmation that what has tended to happen in the past just might happen again. "The price of core services,  voice and SMS, is of growing importance to more mobile users, while advanced handsets and services are becoming less important to fewer mobile users than a year ago," he notes.

"Product strategy professionals are responding by de-emphasizing mobile data services and expanding the variety of SIM-only offers," he points out.

Using the same sort of logic, it is conceivable that some broadband users will downgrade their service plans. And it isn't hard to imagine some users ditching landline service, at least for the moment, so long as they can afford a mobile calling plan that covers their typical usage.