Google Phone: Will Second Time be the Charm?

Remember Zer01 Mobile, the mobile virtual network enabler, which says it "is the first mobile virtual enabler company to offer true mobile voice over IP services at a carrier level?" I don't mean "remember" as in, "they're gone," but only in the sense that you might not have heard quite so much about them since they switched business plans and became an MVNE rather than a retail provider.

At their original unveiling, some of us thought the most interesting angle about Zer01 was the way it went about providing voice services, at that time not a classic mobile virtual network operator,. but as something else. Up to this point, MVNOs essentially have bought capacity from some underlying carrier and then rebranded and resold those services under their own names.

Zer01 Mobile did something different. It leveraged intercarrier connection rights to essentially roam on other 3G GSM networks. It's the same sort of business arrangements mobile providers create when they want their own subscribers to use other networks where the home network does not actually have infrastructure.

By such mechanisms, Zer01 Mobile essentially was able to create a VoIP offering using the data connection only, with no need to buy wholesale voice minutes.

At the time Zer01 Mobile launched, at least some of us found the approach intriguing, though we were not then, and probably are not now, convinced the company would be first to really make a wild success of the approach.

So that's where a new Google-branded phone might just make sense. Nobody knows now whether Google is, or is not, readying its own branded phone. But one thing is clear: Google posseses the carrier interconnection rights it would need to create such an IP-only phone that relies completely on 3G bandwidth for all services.

So Google might not be frontally competing with any other service providers, or necessarily with any other mobile phone or smartphone providers, in the sense that it could bring to market a "data only" device that relies solely on the data connection to handle all voice functions.

There might be occasional quality issues, for the same reason there might occasionally be quality issues for any data services running on any mobile network that is at peak load. Over time those issues can be resolved.

Ability to prioritize voice packets clearly would help, but it is not clear whether that will be permissible, going forwad, because of possible network neutrality rules. If ever there was a good reason for prioritizing bits, maintaining the quality of voice conversations on an all-data network would be one of the best.

It's all conjecture at this point: the Google phone, the method of providing service and voice prioritization. But there is a possibility that something Zer01 Mobile cleverly devised might succeed in a very-big way if Google were to do anything similar.

Mobile Providers Will Sell 60% of Internet-connected Mobile Devices by 2013

Carriers are becoming a significant channel for all Internet-connected mobile devices, including netbooks and mobile PCs, says In-Stat.

By 2013, In-Stat anticipates that over 60 percent of all the Internet-connected mobile devices sold will be through carrier channels. In large part that is because smartphones increasingly are Internet-connected devices, and mobile retail outlets account for the lion's share of sales at the moment. What is new is the addition of netbooks to the lineup.

In-Stat projects that nearly 31 percent of notebooks will be sold through carriers in 2013. That would make mobile service providers a major channel for sales of netbooks, which might otherwise be purchased through a mass market retailer.

“In the U.S., carriers are charging up to $60 per month for a two year contract with the subsidized purchase of a netbook,” says Jim McGregor In-Stat analyst. “While the subsidy costs the carrier $50–$100, it generates $1,440 or more in service fees over the life of the contract.”

The total available market for Internet-connected devices is projected to grow at a 22.3 percent compound annual growth rate (CAGR) through 2013.

fring Now Available for Android

What Google Could Do with Gizmo5

Google has bought Gizmo5, an IP communications firm with a deep understanding of Session Initiation Protocol, which has been adopted globally by communications firms as the protocol for handling IP-based communications including voice, video and messaging.

That of course means Google could do lots of things. The "grabber" headline might be that Google now wants to "out-Skype" Skype by introducing a feature-rich calling service able to communicate with standard telephone devices, but also allow all sorts of rich and affordable features for IP-enabled devices on broadband networks.

According to that logic, Google might be readying a disruptive global calling service aimed either at Skype or at the global tier one telecom providers, either mobile or fixed.

But Google has other options as well. Those options might make as compelling headlines, but could make virtually any Google application more compelling.

In any of a number of scenarios, Google might be looking at anything but becoming a challenger to traditional telecom services, and maybe not even a direct challenger to Skype. The value of SIP is that it can "communications enable" virtually any Web application.

It could add voice communications, video or audio conferencing, messaging or other message and call handling features to any other Web-based application. As eBay once described the upside when buying Skype, voice communications could be added to any potential eBay transaction.

That didn't materialize, but the point is that SIP will be easy to integrate with Web applications and global IP communications in the way communications service providers are used to providing it.

In the perhaps more likely scenario, Google would work to embed rich communications into any number of its applications. In its mobile search efforts, Google would be able to create a location-based search experience that included one click calling, for example.

The same would be true for its mapping and turn-by-turn communications feature for Android mobile devices.

SIP could help Google embed live communcations links in Google Docs, or Wave, allowing real time communications to be a simple one-click feature of collaboration.

The point is that Google likely is not looking at anything so pedestrian as a "Skype killer." Embedded voice, messaging and video communications might be a very attractive feature for any advertiser using any Google application as an ad venue.

In any of these scenarios, Gizmo5 brings Google, and Google Voice, the ability to embed communications in nearly every application. It is the mass market equivalent of "communications enabled business processes" in the enterprise space.

Sure, Google might leverage the Skype style communications to enhance Google Voice. But it seems unlikely to me to stop there. As VoIP proponents always have argued, the real value lies not in free or cheap calling, but in changing the nature of the communications experience. In all likelihood, Google is thinking that way.

Surprising Smartphone Statistics?

I don't know about you, but I found this bit of data on smartphone use surprising.  According to Nielsen, when looking at smartphone use with a baseline of 100, smartphone users  disproportionately tend to be 18 to 34 years old. 


One wonders what happened to the BlackBerry users between the ages of 35 and 54, whom one might think are over-represented among the ranks of smartphone users. 


Granted, this is an index with 100 as baseline, so it is more an example of "over-indexing" among some segments, but the findings still surprised me.


That was especially surprising given the over-indexing of smartphone used at least in part for business purposes. 


While smartphone usage is shifting from purely business use to both personal and business use, owners are still more than two times as likely to own a smartphone for business usage only.  


The study also suggests smartphone owners continue to be predominantly male, are 65 percent more likely than the average mobile subscriber to be between the ages of 25 and 34, and nearly two times as likely to make more than $100,000 a year.

Mobile VoIP is Inevitable, Yankee Group Says

Flat-rate data pricing has made mobile VoIP applications inevitable, and over time, all U.S. carriers will end up allowing them, says Yankee Group analyst Carl Howe. That, in turn, is going to have profound impact on the mobile service provider business model, as voice now is the key revenue driver.

Some of the effects are easy to predict. International call traffic will migrate to VoIP. In the U.S. market, for example, domestic voice calling minutes are cheap, but international rates are fairly high.

On the other hand, mobile VoIP also will shift international traffic from the landline networks (including use of VoIP from fixed broadband connections) to the mobile network.

Less easily quantified is the boost mobile VoIP will give to purchase and use of specific handsets, and the emergence of specific mobile VoIP user segments. For example, devices with front-facing cameras potentially can become the foundation for mobile videoconferencing services and applications.

If you think of BlackBerries as "email" centric phones, and iPhones as "mobile Web" phones, while other devices are "social networking" or "navigation" oriented, you can see where the niches might be.

It is conceivable that "flat-rate data plan caps will tighten," says Howe. Mobile service providers might try to avoid a wholesale collapse of voice revenue by trying to manage network capacity through through more-stringent bandwidth caps.

The operative word in that sentence, however, is “trying,” says Howe. Data caps and over-cap pricing are likely to receive intense regulatory scrutiny to ensure that operators aren’t gouging customers in an attempt to replace lost voice revenues.

The other big unknown is whether service providers will be allowed to create optional "voice optimized" or "conferencing optimized" service plans for users that want priority handling of their own conferencing and voice bits, or "video optimized" plans for users who deem video apps to be key.

In a sign of things to come, Verizon Wireless and AT&T now allow use of mobile VoIP. Google's Android phones running on Verizon's network have VoIP applications available on them.

AT&T also now allows use of the Skype VoIP application on AT&T’s 3G network and iPhones. Vonage and iBasis, among others, also support mobile VoIP calling.

The VoIP trend actually only accelerates an on-going trend. U.S. mobile service provider monthly voice revenue per subscriber has declined from an average of $58 in 2000 to less than $35 in 2009. VoIP might accelerate that process, but is not singlehandedly causing it.

Data plan revenue is the obvious replacement revenue source. And with more application stores offering mobile VoIP clients, it will be hard to stop users from substituting VoIP for traditional calling. Of course, mobile providers have options.

They might not want to do so, but one way to prevent substantial migration to VoIP calling is simply to lower prices for tradtional calling, especially under conditions where voice is carried on one network, and data on a separate network. Part of the overall equation is the additional load mobile VoIP calling will place on 3G networks. In a sense, providing incentives for users to use the voice network for voice offloads traffis from the 3G networks.

Ease of use will emerge as a key issue as more mobile VoIP clients are made available. For many users, domestic calling is cheap enough that mobile VoIP will not provide much advantage, as compelling as international VoIP will be. Anything other than the normal process people now use to dial calls will create huge barriers to domestic VoIP usage.

Call quality also will be an issue. People are used to mobile voice call quality being less than landline. They are used to VoIP calls being equivalent to mobile call quality. But quality less than mobile will create barriers to usage.

On the other hand, use of high-quality codecs will be an incentive to use of mobile VoIP. Anybody who has used Skype high-definition codecs might have new incentives to use VoIP calling services that offer such experiences. Adoption barriers exist here, as both ends of a circuit must be equipped with high-performance codecs to maximize the experience.

The other unknown is the impact of devices able to support multitasking and integrate data services such as instant messaging and presence functions with voice sessions.

Carriers might want to ationalize data and voice pricing, says Howe. A $30 per month data plan capped at 5 GB a month allows your typical 24 Kbps codec VoIP user to talk for nearly 21,000 minutes. That makes the $60 AT&T charges for 900 voice minutes a month look pretty expensive, says Howe.

Operators should do the math on tariffs they charge and adjust rates so VoIP arbitrage becomes less attractive.

Service providers also should build their own mobile VoIP apps, optimized to work with 3G networks as well as Wi-Fi and 4G networks they also may own. That of course assumes such optimization will remain legal once the Federal Communications Commission finishes its rulemaking on network neutrality.

Does Social Media Advertising Work?

Some observers rightly will ask whether "free to use" social networks can survive forever without a clear revenue model of some sort. The general expectation is that viable revenue models can be created using some forms of advertising or marketing by brands hoping to reach their potential customers.

So far, the evidence is mixed, if promising. Reasonable observers will note that the way advertising or marketing messages are handled will be crucial. But lots of major retailers alread are betting that social marketing will pay off.

Telecommunications firms, Web media, retailers, financial and entertainment firms, automotive and health companies are among the companies already making use of advertising or other social network promotional opportunities.

Still, social media advertising and marketing remains a "work in progress." A new study by MomConnection provides evidence on that score. According to recent findings from MomConnection.com, 60 percent of users report having used a social network in the past 24 hours, turning to online communities and social networks for advice, support and connection.

But the survey also suggests that they do not use social networks as a resource when it comes to product decision-making. In other words, social networks are used to share information about products users already have experience with, rather than to choose new products they have not used before.

Moms are four times more likely to turn to their personal offline network of friends and family than online social networks for product recommendations and buying advice.

The study found that social networks are not a channel where most moms are receptive to gathering product information, but rather is largely for entertainment and personal communication.

Still, the results suggest that social networks might be growing in influence. About 24 percent of respondents indicated that they have used Facebook for product information and buying advice, while five percent have used Myspace for product information, while three percent have used Twitter.  

The survey also found that the respondents interact with brands on a surprisingly high level, actively requesting information and resources from the companies whose products they use. Some 81 percent have visited a brand's Web site for more information while 65 percent have signed up to receive a newsletter from a brand.

Some 36 percent have posted a link or joined a fan group on Facebook. Also, it appears that users become important "influencers" once they have formed an opinion about products and services. About 94 percent of respondents report they give advice to other moms in at least one product category.

Are Android Users Different From iPhone Users? Does it Matter?

It is a bit early to determine how Android users might be different from other smartphone users, including iPhone customers. Some early studies suggest Android users are heavier Web application users than iPhone users are.

Others, such as a recent survey by comScore, suggest Android users are slightly less intensive users of mobile Web applications.

So far, the comScore study suggests, Android users are heavier users of video applications, capturing and uploading video significantly more than iPhone users do.

The behavioral pattern might be important if one assumes the Android has potential to create one or more new niches in the smartphone market.

Lots of attention now is focused on whether Android devices are "iPhone competitors." Some might argue it is more likely Androids will appeal to different types of users, for different reasons, as most BlackBerry users likely have different priorities than iPhone users.

How Junction Networks Deals with Traffic Pumping

Google Voice recently has drawn attention from the Federal Communications Commission for its practice of blocking calls to some high-cost telephone numbers used by free conference calling sites. And it appears Google Voice is not the only provider of affordable calling services that finds the high-cost numbers a problem.

Junction Networks, a provider of hosted business IP telephony, has taken another tack, announcing that it will begin charging a higher fee for outbound calls to those exchanges.

“Free conference calling and other ‘traffic pumping’ services exist because the current carrier compensation system allows rural carriers to pass extremely high fees on to other carriers, who often cannot come close to recovering the cost of calls,” says Rob Wolpov, president, Junction Networks. “As a result, we have been left with an overwhelming increase in fees for calls to a number of rural locations where these services operate.

“In order to maintain our low-cost business VoIP options and at the same time, allow our customers to call any number they choose, we have decided to charge the market rate for calls to the designated areas used by these services," Junction Networks now says.

Free conference calling services, adult chat lines and other “traffic pumping” services are often reached through the telephone exchanges of very small, rural operators. "In a legal but questionable arbitrage scheme, these calling services choose these rural exchanges precisely for their high termination charges -- the fees that sending carriers pay them to complete (terminate) the calls," says Wolpov.

Charging as much as 20 times the typical domestic termination rate, the rural telco then splits the profits with the service. While GoogleVoice has responded by blocking calls to those numbers, Junction Networks prefers the alternative: allowing customers to continue using these services at their discretion, but paying the actual cost of such calls.

Under the newe plan, Junction Networks customers can control the cost of any calls costing more than 2.9 cents per minute by simply completing an online extended dialing form.

Such traffic pumping schemes are expected to be addressed at some point. For the moment, blocking is seen as the lesser evil for some service providers who do not make a living from call termination, though cost-based pricing will make more sense for firms that do charge for calling services.

Google Voice arguably has a different problem. It provides Web-enabled calling features that sometimes require call delivery to such telephone numbers. Sometimes Google Voice provides the actual outbound call origination, rather than processing inbound calls to a user's own telephone numbers. When originating calls to the high-cost terminations, Google Voice has no direct revenue model at all.

Advertising is Changing from "Push" to "Pull"

Consumer packaged goods companies that typically have preferred mass media are making a significant move into social media messaging, says eMarketer. And where pushing ad messages to potential customers has been the dominant focus, social media allows retailers to engage in different ways.

“By looking at social media as a way to listen to consumers, respond to their needs and create ongoing dialogue—instead of as another way to advertise to them—CPG companies can reinvigorate their marketing and create new bonds with consumers,” says Debra Aho Williamson, eMarketer senior analyst.

That doesn't mean consumer retailers are abandoning traditional advertising by any means, she says. So far, social media advertising represents only a small fraction of the total dollars going to that channel, according to Nielsen AdRelevance.

And here's the difference: many mass market retailers consider social media to be "earned" media, historically the province of public relations, more than "paid" advertising. For that reason, more effort is going into blogger relations programs and promotional interactions that complement display advertising, for example.

Social media more frequently is seen as a way to “humanize their brand and create loyalty simply by being available when consumers have a problem, question or compliment,” says Williamson.

Telecommunications firms are leaders in the social media messaging space, as are Web media firms. About 20 percent of all social network site advertising over the last year (September 2008 to September 2009) has been spent by communications firms, while 19 percent was spent by Web media firms.

This is a significant shift. At some level, one might note that retailer spending is shifting from "advertising" to "public relations;" from "ads" to Web-based interactions on social sites. That means spending for Web operations overall is growing, most likely displacing spending that previously would have been devoted to tradtional display advertising.

The shfit from a "push" approach to a "pull" approach is tangible, if seminal.

New Ruckus Wireless Network: Just Like WiMAX, But Without the Cost

Ruckus Wireless has introduced a complete, end-to-end managed, wireless broadband access solution that provides a “build-as-you-grow” model for broadband access in developing market urban environments at a fraction of the cost of alternative approaches.

The Ruckus Wireless system is designed to operate using unlicensed spectrum, with carrier-class reliability, at initial capital investment that is as much as five timex cheaper than a WiMAX alternative, the company says. For full deployment, replicating WiMAX across a larger urban area, the Ruckus Wireless solution can be built for 30 times less capital than a comparable WiMAX network, the company says.

The business model for providing broadband access for billions of new users in developing markets requires matching investment with average revenue per user of a "a few dollars to five dollars a month," says Steven Glapa, Ruckus Wireless director.

The solution includes low cost customer terminals, access links, backhaul and network management able to handle equipment possibly provided by different suppliers, or even from a single provider, says Glapa.

The new element is the 802.11 backhaul system that auto-provisions and features a 30-degree beamwidth that allows trunking bandwidth of 60 Mbps at 12 km. The radios cost $2,000 a pair for backhaul and will reach 180 Mbps at 1 km.

A service provider can manage tens of thousands of access points in multiple cities from one network operating center.

Coverage of one square kilometer might cost $485,000 for base stations, antennas, backhaul gear, base stations and then capacity to the site, using a standard WiMAX platform

Using a WiMAX approach, a service provider would require $75,000 for base stations, of which the operator would need five, $6,000 for each antenna, of which six are required. Backhaul is $5,000, says Glapa.

In our case, an operator would spend $2000 for access point and the operator would need 41 access points to cover one square kilometer, he adds. Then there is an investment of $300 for backhaul per access point, amounting to $97,000 to cover a square kilometer.

Ruckus initially got its start using smart antenna technology to shuttle video signals around inside a subscriber's home, and now supplies about 100 service providers with such technology.

The point is that Ruckus Wireless was used to extreme cost pressures for end point technology, and simply has adapted all of its access, trunking and network management for such price-optimized environments. Along the way Ruckus also expanded into the enterprise segment for coverage of campus environments.

The addition of the trunking product obviously extends the range from office, home or campus to neighborhoods, while the auto-provisioning and auto-discovery features ease management chores.

Smartphone Niches Emerging

Data from ChangeWave about smartphone preferences might suggest both the existence of clear smartphone segments as well as an evolution of those segments.

By definition, all smartphones handle voice and text. Beyond that, there seem to be distinct user niches.

One might characterize the Palm user as someone whose unique application is the "organizer."

One might characterize the BlackBerry user as oriented to email, and the iPhone owner as oriented to Web-delivered applications.

Looked at this way, the Changewave data might suggest that the value proposition for the email-focused remains steady, but that the value of "organizer" functions is receding, while mobile Web is growing. We also have seen the introduction recently of devices organized around social networking and navigation, so the number of smartphone niches addressed by particular devices seems to be growing.

The Palm Pre and Motorola Cliq are among new devices pitched at the social networking niche. Garmin's nuvifone is perhaps the best example of a navigation-focused smartphone. So the obvious big question is how the growing raft of Android-based smartphones will contribute to the proliferation of devices with a lead application mode.

How demand for the Droid will shape up is hard to say at the moment. Some fragmentary data suggests that Droid users access the Web even more than iPhone users do. But its turn-by-turn navigation features might also emerge as a key drawing point.

Mobile Ad Audience Grows, Number of Resisters Also Grows

Mobile ad spending is poised to grow 27 percent to $2.1 billion in 2010, according to the Mobile Marketing Association. The good news is the audience for mobile marketing is growing. The bad news is the audience is still relatively small and confined to a limited segment of the arket, say researchers at BIGresearch.

That means there is a high probability of turning off potential consumers. Consumers who like mobile marketing tend to be young men. They are mobile phone-centered and more likely to use social media.

People who don’t like mobile marketing tend to be slightly-older women who are not as centered around their mobile phones or users of social media. Receptive consumers have an average age of 39 while non-receptive consumers have an average age of 46.

About 23 percent of receptive consumers are regular users of MySpace, compared to 10 percent of non-users. About 13 percent of receptive consumers regularly use Twitter, while just 3.5 percent of non-receptive consumers say they regularly use Twitter.

Since June of 2008, the percentage of people who don’t like mobile marketing has ncreased, BIGresearch says. About 66.8 percent of 2,200 survey respondents say they don’t like text ads.

Some 60.2 percent don’t like voicemail ads. About 60 percent say they do not like video ads. By itself, those sorts of reactions are to be expected. How many of you would actually say you like receiving, hearing or viewing most ads?

Android People Heavier Web Users than iPhone People?

The Motorola Droid is the latest smartphone to be touted as a poential  “iPhone killer.” I'm not among those doing so, not for any lack of confidence in the Droid so much as a belief that the iPhone is not just a smartphone.

Like other Apple products before it, and like some other popular consumer products, the iPhone already has carved out an "experience" and "emotional bond" that cannot be broken by a substitute product.

Still, the Droid seems to be the sort of product that will advance the use and adoption of Web content to a connected device, especially for users whose Web experiences are heavily Google-mediated.

Significantly, Nielsen data from the third quarter of 2009 already suggests Android users are heavy mobile Web users, maybe even more so than iPhone users, who, up to this point, have been the heaviets mobile Web users.

But there is still plenty of room in the market for devices that are optimized around a lead application. The iPhone might have been the best example to date of a device really optimized around Web access as BlackBerry has been optimized around mobile email and other devices are plumbing the "turn by turn navigation" app, for example.

In the fourth quarter of 2009, perhaps 40 percent of all new devices sold will be smartphones of one sort or another. By 2011, smartphones will represent the majority of phones in use, Nielsen forecasts.

"Projecting Nielsen data out through 2010, we see smartphones crossing 50 percent of the market by the middle of 2011, roughly equal to 150 million users," says Jerry Rocha, Nielsen Online Division senior director.

Sabi the War Hero Dog

Okay, I love labradors....labradors that defy death, get lost for 14 months and then get to go home is even better.

Verizon Grows Annual Revenue 5x More Than Average

Verizon's revenue growth over the last year tops, by a substantial margin, revenue growth for nearly all other service providers among the 30 largest in the world.

Annual revenue growth of about 1.6 percent is the average, says TeleGeography.

Verizon grew revenue by 10 percent. Vodafone, China Mobile and Deutsche Telekom were the other stand-outs.

Despite Shocking Unemployment, Consumer Demand for Communications Holds Up

There's a sobering statistic in the latest research from Centris about consumer spending on communications and video service consumption: 27 percent of households reporting at least one member who lost their job in the last six months.

Most of the other findings seem consistent with other surveys taken over the last two years, though. The issue now is whether recession-induced behaviors will change as we exit the recession.

About eight percent of U.S. households said they were likely to cancel their Pay TV service in the third quarter of 2009, unchanged from the second quarter of 2009. Keep in mind that a typical churn rate for video services is about two percent a month, so those findings are relatively consistent with typical disconnect plans, and most churners simply sign up with alternate providers.

Some 18 percent of households said they were likely to cancel their home phone service and replace it with a currently-used cell phone. That is an underlying trend that might have accelerated during the recession, but was in place already.

Fully 75 percent of respondents said they would not likely downgrade their Internet access service. Virtually all other studies show high resistance to cutting back, or cutting off, Internet access services.

Nearly half of all households have contacted their current TV service providers shopping for discounts and lower-priced packages, though.

If past patterns show themselves, consumers should start spending more on enhanced services of all sorts, including premium video entertainment and mobile services, as the economic recovery takes hold. The wild card are services such as wired voice, which have been under pressure for other reasons unrelated directly to the recession.

Video Now Driving Bigger Access Bandwidth Packages, says Compete.com

How much Internet-delivered video is being consumed by users of sites such as Hulu.com or Netflix.com? According to compete.com data, Hulu.com traffic has grown 210 percent over the last year.

"If Hulu.com continued this growth trajectory for another year, we could see it break into Compete.com’s top 50, surpassing unique visitor traffic to sites like the NYtimes.com and Netflix.com," says Matt McGlinn, Compete.com writer.

From September 2008 to September 2009, Netflix.com’s volume of unique visitors viewing movies and other content online increased 163 percent, says Compete.com.

The good news for Internet service providers is that these trends will keep driving end users to buy access packages featuring higher amounts of bandwidth, says McGlinn.

Will Click-to-Connect applications Replace IVR?

Yes, says Sorell Slaymaker, Unified IT Systems VP. The reason is that most consumers initiate their contact to a business using the web and then switch to some other channel only if the web does not solve whatever need, issue or problem needs to be solved.

Compared to using a phone for initial contact, "web with click to call" can store information, so it does not have to be rekeyed. The equivalent of cookies is not available when initiating a session using phone methods, he argues.

The other advantage is the ability to push content while talking, he says. Visual communication is richer and quicker than audio communication, and putting the two together optimizes the efficiency and effectiveness of communication.

Does "Open Access" Lead to More or Less Consumption of Broadband?

Samuel Clemens famously quipped that there are "dies, damned lies and statistics." Something like that seems to be at the heart of conflicting analyses of the impact of widespread open access requirements on consumer buying of broadband access services.

The Berkman Center for Internet & Society suggests robust open access regulation increases consumer buying of broadband while analysts at the Phoenix Center says the opposite is true.

The interpretation matters. Good public policy requires decisions that are based on facts, as difficult as it may be to determine precisely what the "facts" are. The wrong "fact base" will lead to policies that could harm the intended public policy goal.

http://www.fcc.gov/stage/pdf/Berkman_Center_Broadband_Study_13Oct09.pdf

http://www.phoenix-center.org/perspectives/Perspective09-05Final.pdf

Hardware Sales Flat, Software up 4.8%, Telecom up 2.3% in 2010, Says Gartner

Providers of information technology solutions likely will have to emphasize customer retention more than customer acquisition in 2010 and 2011 because of a sales environment that will remain challenging, says Richard Gordon, Gartner Research VP. That said, sales of IT hardware and software will grow about 3.3 percent in 2010, about in line with telecom service provider revenue growth of 3.2 percent.

Enterprise hardware sales, for example, will show zero growth in 2010, compared to 2009, Gartner forecasts, in part because hardware lifecycles have lengthened.

Software sales, on the other hand, should grow 4.8 percent, says Gartner.

Motorola Seeks to Sell Set-Top Unit

Motorola is looking for buyers for the part of its business that makes cable television set-top boxes, and is seeking about $4.5 billion, the Wall Street Journal reports.

For anybody who has been in the cable TV industry any length of time, the potential sale brings back memories of a company headquarters in Hatboro, Penn. and known as "Jerrold." Few companies have roots in the U.S. cable industry as deep as Jerrold did, in its later incarnation as General Instrument representing one of the two big names in the old cable TV business, in addition to Scientific Atlanta, whose assets now are part of Cisco.

The big attraction for any buyer is the chance to become a major player in the cable TV infrastructure business overnight.

Logical potential buyers would include the ranks of any number of major electronics companies who want major exposure to the U.S. cable TV industry.

It makes you realize just how long it has been since you were in the cable business.

Metered Internet Access Plans Coming?

Time Warner Cable CEO Glenn Britt says in a CNBC interview that the question of how consumers pay for their broadband is "an evolving thing." Britt still does not believe the existing flat rate for unlimited usage pricing plans are going to exist universally, indefinitely.

Verizon EVP Dick Lynch also has noted that Verizon would have to consider some form of tiered or metered bandwidth in the future.

One might argue that such plans will be available, with a premium price. But many, if not most other plans likely will move to some pricing format more nearly resembling the way people now buy buckets of wireless minutes or text messages. Consumers nearly universally dislike true metered usage plans, but have shown a level of comfort with "buckets." That suggests buckets will be the path forward for broadband services that must take some account of drastic bandwidth consumption patterns imposed by video content.

Some idea of the need for such plans, sure to be initially unpopular with some consumers, is the cost of continually providing more bandwidth, with modest increases in new revenue. At least some independent service providers have argued for years that fiber-to-home investments cannot be justified in tradtional "five year return on capital" criteria.

In that view, operators need to invest in FTTH "to keep their businesses," essentially. Yankee Group analyst Vince Vittore says that sort of refrain was current at the most recent Fiber to the Home conference.

Cable competition is a primary motivator in that regard. But experience so far continues to show that the financial return from an FTTH network is not assured nor easy. Nobody expects a return on invested capital in five years, as once was possible for many types of network investments.

Nor does anybody seem to believe it is possible to earn a return on FTTH networks based principally on incremental revenue from optical access, or even from providing video entertainment services. One need look no further than that to discern the industry emphasis on new applications, services and revenue.

Usage that is more closely tied to actual usage will happen. That doesn't mean it will be as strictly metered as electricity or water. But think about wireless buckets of use and one can conceive of metered service plans that consumers do not find inherently objectionable.

T-Mobile USA Moves to 7.2 Mbps, Plans 21 Mbps

There are times when being late to market is actually a benefit. The latest entrants in any technology-based market have access to the latest technology, and can build their business plans around that fact. There are other times when it's a bit difficult to characterize a particular competitor's position.

That is where T-Mobile USA now sits, for example. T-Mobile USA was the last of the top-four U.S. mobile providers to build a 3G network, and it has uncertain plans for 4G. But the company is on track to have faster versions of 3G up and running before some of its major competitors.

The company had no 3G customers in the second quarter 2008, though it had acquired 3G spectrum. But the 3G network now covers 240 cities and passes 170 million people, with plans to extend coverage to 200 million people by the end of 2009, at which point nearly all major urban areas will be covered.

So here's where the "last shall be first" principle applies.T-Mobile is using the faster 7.2 HSPA air interface, running at 7.2 Mbps downstream, on all its 3G nodes by the end of 2009.

At least one of T-Mobile's primary competitors is upgrading less-capacious 3.6 HSPA networks to 7.2 HSPA, but will not have that conversion completed until the end of 2011.

Likewise, T-Mobile plans to upgrade even the 7.2 HSPA network to HSPA+, a 21 Mbps network. The company says it will start rolling out HSPA+ in 2010. T-Mobile says the upgrade will be a relatively low-cost and relatively easy upgrade.

Of course, the reason T-Mobile's position is complex is that it has not yet announced a specific method for deploying a 4G network, which will require additional spectrum.

Both AT&T and Verizon are building their 4G networks for substantial coverage by 2010, while AT&T will have substantial coverage in 2011. Sprint is banking on the Clearwire network for 4G.

Still, competition in the mobile broadband market might not primarily be about "feeds and speeds." Coverage, pricing, application stores and device exclusivity arguably are more important.

Nor is it yet entirely clear that 4G will offer an entirely new consumer marketing proposition, beyond "faster." European 3G networks languished for years with sluggish uptake because the compelling new services requiring a 3G network were not in place.

In the U.S. market, it has been the mobile Web that has driven an upsurge of 3G uptake. But that adoption was based in part on applications and capabilitiesm, in part on use of particular devices, which require use of the 3G network.

The question for 4G networks is what new value or application will drive uptake.

Perhaps no new discrete driver will be required. Maybe "more" will be sufficient. But as Verizon has so far discovered with its FiOS fiber to the home feature, consumers still need a reason to buy fiber access as compared to hybrid fiber-copper access.

Providers can be last or first. Either way, the applications and device capabilities will remain the drivers of adoption.

Only 1 More Broadband Stimulus Round

As expected, the U.S. Department of Agriculture’s Rural Utilities Service and the Commerce Department’s National Telecommunications and Information Administration say they are streamlining the American Recovery and Reinvestment Act’s broadband grant and loan programs by awarding the remaining funding in just one more round, instead of two rounds.

The agencies expect to begin announcing funding awards for the first round in December 2009. The original plan had been for three rounds of funding, and observers noted that this would be valuable for applicants as they would have a chance to see what got funded, what did not, and then tweak their subsequent proposals accordingly.

Now they will get one chance to do so, not two chances. But “stakeholders will have the opportunity to provide us with well-informed feedback on how the first round worked for applicants, the agencies will be able to make improvements to the process, and potential applicants will gain more time to form partnerships and create stronger project proposals, the two agencies say.

In a Request for Information released today, the agencies are seeking feedback on procedural and policy aspects of BIP and BTOP. While inviting general input on the programs, the agencies identified specific areas for comment.

In terms of procedural matters, for example, the RFI seeks input on ways to streamline the application process. The RFI also asks whether the agencies can better balance the public’s interest in transparency and openness with stakeholders’ legitimate interest in maintaining the confidentiality of proprietary data.

The RFI also seeks comment on how to best target the remaining funds. Commenters proposing a more targeted approach are asked to quantify the impact of their proposal based on metrics such as the number of end users or community anchor institutions connecting to service, the number of new jobs created, and the projected increase in broadband adoption rates.

The RFI asks whether to focus second round funding on projects that create “comprehensive communities” by installing high capacity middle mile facilities between anchor institutions that bring essential health, medical, and educational services to citizens.

The RFI also invites input on various other issues, including whether the definition of “remote area,” which is used to determine grant eligibility under BIP, is too restrictive, how the agencies can best ensure that investments are cost effective, and ways the programs might impact regional economic development and stability.

RUS and NTIA will utilize the feedback received in response to the RFI to set the rules for the second funding round, which the agencies expect to announce through a Notice of Funds Availability early next year.

The American Recovery and Reinvestment Act provided a total of $7.2 billion to NTIA and RUS to fund projects that will expand access to and adoption of broadband services. Of that funding, NTIA will utilize $4.7 billion for grants to deploy broadband infrastructure in unserved and underserved areas in the United States, expand public computer center capacity, and encourage sustainable adoption of broadband service. RUS will use $2.5 billion in budget authority to support grants and loans to facilitate broadband deployment in primarily rural communities.

Quantifying the Carrier Wi-Fi Hotspot Business Model

Customer retention--not direct customer fees--might be the biggest part of the carrier public hotspot busimess model, says Stephen Rayment, CTO, BelAir Networks.

"Churn reduction is where lots of the value is," is Rayment. Assume churn per month of two percent a month, which means a typical customer provides 50 months of revenue, he says.

Adding metro hotspot access can provide a 10 percent churn reduction, he adds. Assume the 10 percent churn benefit on a typical subscriber relationship of 50 months, meaning the typical account now remains active for 55 months. Assume a typical customer average revenue per user of $130 a month.

That suggests an extra $650 of subscriber revenue over the length of a relationship. For a service provider with 100,000 subscribers that works out to $65 million in extra revenue.

If the average customer value is $2,000 per customer, and that service provider can use public hotspot service to reduce churn 10 percent, it adds about $200 per subscriber in terms of equity value.

For a service provider with one million subscribers, that's $200 million in incremental equity revenue.

For a service provider with one million subs, making an investment of $40 million to cover all the high-traffic spots, there is a five-to-one return on investment.

There arguably could be other revenue contributors as well, though none likely approaches the value of enhanced retention. There might be an opportunity for a small amount of additional revenue. Some customers will be willing to be stand-alone hotspot subscriptions.

Service providers might make some money from other carriers by offering hotspot access to customers roaming into the local area. There could be some advertising upside or some commercial upside from providing services to public utilities or public safety organizations, he says.

Some service providers also might look at public Wi-Fi as a way to add some mobility features to their landline service.

Mobile providers also likely will find public hotspots a useful way to offload traffic from the 3G and 4G networks to the fixed network, Rayment says.

"The networks are just choking" because of heavy new smartphone traffic, says Rayment. "People really did not see this until the iPhone, but 3 in the U.K. market also saw skyrocketing demand when it started selling the iPhone," says Rayment.

Up to this point, aircards and dongles used for mobile PC connections have been driving new bandwidth demand on the 3G and WiMAX networks. But that is changing. "Dongles drove the initial demand, but will be overtaken by the smartphone," he says.

The point is that the business model for public hotspot networks frequently is indirect.

Mobile is Not "Too Big to Fail"

Some people set up straw men that are easy to knock down, such as the big, rich telcos and mobile providers. Reality is more complex. They still are big, but they also are businesses facing cannibalization of their core revenue stream, voice, and will have to replace most of that revenue with something else.

We as a nation have made this sort of mistake before, trying to bring more competition to the landline voice business precisely as that business was entering a serious period of decline. Mobile providers now are in the same predicament. No matter how big they are, their base business is going to go away, for the the most part, meaning every single cent of revenue they now earn will have to be replaced.

If you think the telecom business is in great shape you don't work in the business. Granted U.S. wireless data revenues grew five percent quarter over quarter in the third quarter of 2009 and 27 percent year over year, to reach $11.3 billion by the end of the third quarter of 2009, according to analyst Chetan Sharma.

But overall service provider average revenue per user decreased by 14 cents during the third quarter. Average voice ARPU declined by 57 cents per user while the average data ARPU grew by 43 cents.

The point is simply that the communications business already is in the midst of a necessary transition from its traditional revenue models to new models, none of which are assured. It is going to take a great deal of very-hard work to pull this off and while consumer displeasure with such providers is understandable at times, they are not "too big to fail."

Most of that gain in data revenue was realized by Verizon and AT&T, which between them accounted for 80 percent of the increase in data revenues in the third quarter. AT&T and Verizon also now account for 68 percent of the market data services revenues and 61.5 percent of the subscriber base, Sharma says.

AT&T experienced the most growth with a six-percent increase quarter over quarter,  followed by Verizon and Sprint with five percent revenue growth each.

Overall mobile service provider revenue grew about two percent year over year. On an annualized basis, data represents about 28 percent of total mobile service provider revenues.

Analyst Chetan Sharma estimates that by end of 2009, U.S. mobile data traffic is likely to exceed 400 petabytes, up 193 percent from 2008.

Smartphones also now represent 25 percent of U.S. devices in service, says Sharma, while mobile penetration stands at about 91 percent.

The average number of text messages used in the U.S. market now averages almost 568 messages per subscriber per month.

How the Global Telecom Business has Changed Since 2000

A few statistics will illustrate just how much has changed in the global telecom business since 2000. Prior to the turn of the century, most lines in service used wires and carried voice.

By 2007, 74 percent of all lines in service used wireless access or carried data, says the Organization for Economic Cooperation and Development.

Mobile alone in 2007 accounted for 61 percent of all subscriptions while standard phone lines have dropped to 26 percent. And the change has come swiftly: in just seven years.

Mobile revenues now account for nearly half of all telecommunication revenues—41 percent in 2007—up from 22 percent 10 years earlier. (click chart for larger view)

Along with the change in access methods and applications is the sheer number of connections. The total number of fixed, mobile and broadband subscriptions in the member nations of the Organization for Economic Cooperation and Development grew to 1.6 billion in 2007, compared to a population within the OECD nations of just over one billion inhabitants.

To put that in perspective, consider that there were seven access paths in use in 2007 for every access path in use in 1980. That includes broadband, wireless and voice connections.

To put those figures in even greater perspective, consider that the percentage of household budgets devoted to communication expenses has climbed only slightly over the last 10 years. In most OECD countries, households generally spend about 2.2 percent and 2.5 percent of household income on communications, year in and year out, though one can note a slow rise since 1998.

The big exception is Japan, where household spending on communications is close to seven percent of household income. That might be something to keep in mind when making cross-national comparisons. It is true that Japan has very-fast broadband and has pioneered any number of mobile application innovations.

But Japanese households spend very close to three times as much as U.S. households on their overall communications. That’s worth keeping in mind. It always is difficult to make meaningful comparisons between nations.

Japan has very-fast broadband. But Japanese consumers also pay nearly three times as much as U.S. households do for their communications services.

Generally speaking, though, OECD consumers have added seven new connections for every existing connection in 1980, while spending about the same percentage of their incomes on those services. That’s an obvious example of an explosion of productivity.

Much has changed in the Internet access realm as well. Broadband is now the dominant fixed access method in all OECD countries. In 2005, dial-up connections still accounted for 40 percent of fixed Internet connections but just two years later that percentage had fallen to 10 percent.

Also, while many criticize the industry for retarding innovation and behaving as “nasty monopolists,” prices have tended to fall for virtually all communication services on all platforms, the OECD says.

“Over the previous 18 years, residential users saw the real price of residential fixed-line
phone service fall roughly one percent per year while business prices fell 2.5 percent per year,” the OECD says.

Mobile subscribers also benefitted from declining prices between 2006 and 2008. The average price of OECD “mobile baskets,” representing a number of calls and messages per year that normalizes features and prices, fell by 21 percent for low usage, 28 percent for medium usage and 32 percent for the heaviest users over the two-year period.

User voice behavior also has changed. The number of minutes of communication per mobile phone is increasing while the minutes on fixed networks are decreasing. In other words, the mobile is becoming for most people the primary voice device while the landline is a backup.

Some might argue that ultimately has implications for pricing. In some real ways, the mobile is the “premium” device and a landline represents a supplemental service. That probably means the value is such that consumers ultimately will think it should be priced as a backup service.

Data between 2005 and 2007 suggest people are making fewer domestic calls on the fixed network in most countries, OECD says. When people do use fixed networks they are increasingly making calls to users of mobile phones.

This trend is well highlighted by Austria where the introduction of flat-rate voice telephony on mobile networks has shifted calls away from the fixed-line network. Voice traffic on Telekom Austria’s fixed network fell 13.3 percent in 2007 as a result of the shift to mobile communications.

There was an OECD monthly average of 272 minutes of outgoing calls on fixed line telephones in 2007. This is down 32 minutes per month from 2005.

But there was an interesting landline rebound trend appearing recently in a number of OECD countries.

The number of PSTN minutes per line declined until 2005 when the numbers started rising again. For example, French minutes per PSTN line fell until 2004 when they started to increase.

One explanation is the shift in France to flat-rate national calls offered by a number of carriers. That suggests U.S. landline voice providers might stem some of the traffic erosion by offering aggressive, flat-rate, all-distance services within the domestic market, as VoIP providers generally do.

On the mobile side, the OECD average number of outgoing minutes of completed calls on mobile networks was 220 minutes per month in 2007, up 56 percent from 2005.

Subscribers in the United States make far more outgoing calls on mobile phones each month than any other country in the OECD. The average number of minutes per mobile subscription was 443 in 2007, more than double the OECD average. One might argue that is because of the reasonable cost of calling great distances. In Europe, many calls that would be domestic in the United States are international calls.

Broadband prices have fallen as well over the same time. OECD broadband prices declined significantly over the previous three years. Prices declined an average of 14 percent per year for DSL and 15 percent for cable between 2005 and 2008.

The average price of a low-speed connection (2 megabits per second or less downstream) was $32 per month in September 2008. At the other end of the scale, broadband connections with download speeds advertised as faster than 30 megabits per second averaged $45 per month.

Despite the falling price-per-unit trends, telecommunications services, about a trillion dollar market in the OECD, continues to grow at about a six-percent annual rate. That remains to be tested as we finish 2009, but there is reasonable historic precedent for continued growth, though perhaps not at a six-percent rate.

Regarding voice and new mobile and data services, we might as well note that landline voice appears to be a product like any other. That is to say, like any other product, it has a product life cycle.

To be specific, wireline voice looks like a product in its declining phase. Optical fiber-based broadband looks like a product earlier in its cycle, with 56 percent compound annual growth since 2005.

Digital subscriber line and cable modem services likely are further along their curves. DSL grew at a compounded rate of 21 percent per year while cable modem service grew at 18 percent rates between 2005 and 2007.

Mobile voice markets grew by 10 percent each year since 2005 but may be nearing saturation levels in a number of OECD markets. Mobile broadband clearly is early in its product life cycle.

Analog lines, used for voice, facsimile and dial-up Internet access, also seem to be in decline. The number of analog subscribers fell by 34 million between 2005 and 2007.

The decline of Internet dial-up services also means that many households no longer need a second analog line. The same might be true for in-home fax machines. And many additional lines once used by teenagers now have been replaced by mobiles.

Finally, the number of “mobile-only” subscribers has increased as well.

The penetration rate for fixed telephone lines (analog and ISDN) in 2007 was 41 subscribers per 100 inhabitants, which was less than the penetration rate ten years earlier.

Overall, the penetration rate rose from 43 percent in 1996 to a maximum of 47 percent in 2000, only to decline again to 41 percent in 2007. The year 2000 appears to be the turning point in the technological life cycle of fixed-line telephony.

Canada had the highest fixed-line penetration in 2007 with a penetration rate of  54 subscribers for every 100 inhabitants. Sweden, Luxembourg and the United States all had penetration rates greater than 50 per 100 inhabitants. Mexico, the Slovak Republic and Poland had the lowest penetration rates in 2007.

There’s an interesting observation we can make about those figures. Nobody seems to argue that the United States has a big problem with voice service availability. In fact, availability is not the issue: consumer demand is the issue. One doesn’t hear people complaining about the lack of voice availability in Canada or Sweden. But penetration is in the 50 percent range, per capita.

Nearly all Internet users in the United States use broadband, not dial-up. And yet broadband penetration might well be higher than voice penetration, on that score. People who want the product generally buy it.

That said, there are some methodological issues here. “Per capita” measures might not make as much sense, as a comparative tool, when median household sizes vary. Adoption by households, adjusted to include people who use the Internet only at work or at public locations, or using mobiles, would be better.

Broadband adoption, by people who actually use the Internet, might make the most sense of all. Broadband is a product like any other. Not every consumer values every product to the same degree.

DSL network coverage is greater than 90 percent in 22 of the 30 OECD countries. Belgium, Korea, Luxembourg and the Netherlands report 100 percent.

Cable coverage is extensive in some countries such as the United States (96 percent) and Luxembourg (70 percent), but non-existent in others such as Greece, Iceland and Italy.

An analysis which followed the evolution of broadband plans over four years shows that speeds increased by 28 percent  for DSL and 72 percent for cable on average between 2007 and 2008.

A survey of 613 broadband offers covering all OECD countries shows the average advertised speed grew between 2007 and 2008 across all platforms except for fiber. The average advertised DSL speed increased 25 percent from 9.3 Mbps in 2007 to 11.5 Mbps in 2008.

Advertised speed of course is not user-experienced speed at all times of day. Still, it offers some measure of changes in the product.

The average fixed wireless offer in 2008 was 3 Mbps, up from 1.8 Mbps just a year earlier.

Fixed wireless speeds grew by 64 percent but remain only one-quarter of the average advertised speeds of DSL providers. The average cable offer is five times faster.

There are some insights about mobile broadband in the OECD’s analysis. The amount of data traffic carried over mobile networks remains small in relation to other broadband data networks.

For example, Telstra in Australia reported in a 2008 investor briefing that data consumption increased from 100 kilobytes per month per user in 2007 to 250 kilobytes in 2008. Compare that to the gigabytes consumed on landline connections.

Data from the Netherlands also show relatively low data traffic in the first half of 2008. Between January and June 2008, Dutch mobile broadband subscribers downloaded 358 gigabytes over mobile networks.

It is possible to calculate an estimate of mobile data traffic per 3G subscriber per month in the Netherlands by making a few assumptions. If the ratio of 3G to total mobile subscriptions in the Netherlands is equivalent to the OECD average of 18 percent, then the average amount of data traffic per 3G subscription per month in the Netherlands works out to be only 18 kilobytes per month.

Of 52 mobile broadband packages evaluated in September 2008, the average headline speed was 2.5 Mbps. Subscribers to these plans were allowed an average of 4.5 gigabytes of data traffic per month.

Much has changed in the global telecommunications business in just seven years. Landline voice might still provide the revenue mainstay, but it is a product in the declining stages of its life cycle.

Even mobile voice, DSL and cable modem service are products at something like the peak of their cycles.

Mobile broadband and optical fiber access are early in their product life cycles. Mobility is becoming the preferred way of consuming voice communications.

That’s an awful lot of change in just seven years. And we haven’t even discussed VoIP, over-the-top applications, content or video.

Elections Matter: Competitive Carriers Challenge Telco Wholesale Pricing

In the U.S. communications business, some things don't change, and among those unchanging realities is that competitive local exchange carriers believe they should have widespread rights to use access facilities owned by the former Regional Bell Operating Companies (Qwest, Verizon and AT&T), paying wholesale prices with healthy discounts.

The former RBOCs just as vociferously argue that such access should be available, but not on a mandated basis, and only at market-based rates. Those fights were particularly fierce earlier in the decade, but have been relatively muted over the past several years. But nothing is ever completely settled in the communications business.

Eight competitive communications providers and Comptel have asked the Federal Communications Commission to adopt rules that would lead to lower prices for broadband access and transport. The petition for "expedited rulemaking" will not, as its name suggests, result in anything actually happening very soon.

The request must, by law, be circulated for response, and those responses will be vigorous. The request also comes at a time when larger issues, especially the shape of a new national broadband policy, are being weighed as well.

Comptel, 360networks, Broadview Networks, Cbeyond, Covad Communications, NuVox, PAETEC, Sprint Nextel and tw telecom have asked the FCC to create new procedures that would require the former Bell Operating Companies to offer wholesale access at "going-forward rates," plus a "profit margin or markup" of about 22 percent.

The concept is arcane for anybody who is not a communications policy expert or communications attorney, but essentially boils down to a competitor belief that prices are too high, and that the changed political complexion of the FCC will allow changes more in line with CLEC thinking both on mandatory wholesale and robust discounts on wholesale facilities used by competitors.

The perhaps unstated hope is that the forthcoming national broadband plan might address terms and conditions for mandatory wholesale access to optical broadband facilities owned by the former RBOCs, something competitive providers would dearly like to win, and which existing rules do not support.

Still, the petitioners do not expect immediate action, as the request has to be circulated for public comment, and will, as usual, face heated opposition from Qwest, AT&T and Verizon.

Still, it has to be noted that elections have consequences. The new petition might not have been deemed to have a chance of upside in the previous presidential administration.

Why Droid is Important

Lots of people position the new Motorola Droid, available on the Verizon Wireless network at the moment, as the first, or the best, competitor to the Apple iPhone. We can argue about that. What seems much less contestable is the possibility that many of Verizon's 86.5 million subscribers now will begin to create a new critical mass of users for location-based marketing initiatives.

Until the total number of smartphone users on particular operating systems or devices is reached, it will be difficult to create mobile marketing campaigns with reasonable prospects of success. And make no mistake, mobile marketing has to be different than the interruption-based advertising we are used to with place-based media.

Mobile users are not likely to appreciate mobile advertising that they haven't asked for, or worse, must pay for. The difference between mobiles and TVs, radios, DVD or game players is that mobile devices are uniquely seen as "personal" devices. Peoploe use the other devices, but only the mobile is always with a user, and typically is seen as a personal and private device.

The other important angle is that mobile media typically is consumed as a byproduct of some other activity; it is not a primary destination or activity.

Virtually any mobile marketing message is, by definition, catching users in the middle of doing something else. So the value of the messages must be situational, in context, or relevant to those other activities. On the other hand, the key change is that devices such as the iPhone and Droid incorporate location information.

Potential message senders will know whether a user is at home, at some other indoor location or moving. If moving, message senders potentially will know whether a user is moving at high speed (in an auto) and should not be interrupted, or is moving at pedestrian speed, when a contextual message might be safe to send and also relevant to current location.

Presumably it will be possible (with permission) to determine whether a person is using public transportation, even when moving at high speed, and might be amenable to messages.

It will take a bit more work, and more opt-in detail, to determine whether a business person is presently trying to figure out where to get a cab, take a client to dinner, or find their way to their hotel, or whether a person might be trying to figure out what social venue to attend after work.

So why is Droid important, beyond simple creation of critical mass? Droid, as are all Android devices, are part of a larger effort by Google to tap mobile advertising potential. Google has unusual incentives to create the sort of detailed opt-in processes needed to create granular messages of high relevance to end users.

The reason this is important to end users is that if mobile network providers and the rest of the mobile ecosystem can create self-sustaining revenue streams based on mobile messaging, the providers can justify perpetual investments in the quality of the mobile networks and devices, potentially holding down end user costs as well.

News Corp. to Block Google Indexing?

The Wall Street Journal is the salient exception to the rule that users will not pay for newspaper content online. It now appears we might find out whether the Wall Street Journal also is an exception to the rule that one wants leading search engines to find and index one's content.

News Corp., which owns the Wall Street Journal, apparently is planning to block Google from indexing content from the Wall Street Journal and other web sites, unless Google pays for the right to do so.

No matter what the outcome, this is a major test. Google obviously prefers not to pay rights holders for the right to crawl and index content. But the company gradually is finding it must, or would benefit from, do so in some cases. The ability to offer popular TV or movie content through YouTube is one example.

What Will Enterprises Buy in 2010?

It always is dangerous to make predications about what enterprises will do when extrapolating from what they did last year, and what executives say they will do in the coming year, and doubling difficult at transition points, which is where enterprise IT managers likely will find themselves in early 2010.

As IT spending clearly was under pressure in 2009,. the issue is how much growth will happen in 2010 as postponed projects must be started, and how much top-line revenue growth enterprises actually can eke out, since it is hard to see a sustained increase in IT spending without top-line revenue growth. Up to this point in 2009, profitability increases at most enterprises have come because of cost cutting, not revenue growth, and that cannot continue indefinitely.

Investments for cost cutting for that reason appear to have been a big priority for enterprises in 2009. About 24 percent of those polled say cutting telecom and network costs were a critical priority, and 48 percent say  it was a high priority.

But some underlying trends likely will re-emerge in 2010. Data center consolidation has been a high priority for cost and disaster recovery reasons, with 24 percent of respondents. saying that is a “critical” priority and 43 percent saying it is a “high” priority.

About 40 percent of enterprise executives say mobility, collaboration and voice over IP continue to be high or critical priorities.

Desktop IP telephony migration continues, while other VoIP technologies of high interest also will get attention. Some 34 percent of enterprises say they already have implemented or are implementing desktop VoIP, and an additional 14 percent are expanding or upgrading their VoIP environment.

IP conferencing, including Web, video, and audio, while not yet implemented widely, have high interest as well. 

Cost savings, faster communication, and decision speed are values that drive UC adoption, says Ellen Daley, Forrester Research analyst. UC adoption continues to see traction, as well. About 21 percent of firms report that they are already, or are currently implementing, a UC solution, while nine percent are expanding or upgrading their current UC solution.

About 15 percent say they are piloting one. An additional 39 percent of firms are interested in or are considering UC solutions.

The top motivation for adopting UC is cost savings, followed by increasing communication between users. It appears enterprise executives are more comfortable with UC as well.

Some 51 percent of executives say they understand how UC will affect the way their companies do business. Still, about 32 percent of respondents say they still have some questions about UC value.

Integrated voice, email, and instant messaging top the list of the most desired features for UC.

Web conferencing and audio- and videoconferencing capability come in second while presence, allowing others to see coworkers’ status, comes in third.

Almost half of enterprises buy managed services, and though cost savings are a factor, freeing up time to focus on core business issues has grown as a driver of perceived value.

About 62 percent of respondents say that they have already purchased or are interested in purchasing managed or outsourced telecommunication services.

Unlike in past years, the top reason isn’t cost savings, although it is still high on the list. Instead, firms are opting for managed services to enable them to focus on their core business competencies.  

Telecom and network buyers are also interested in managed services beyond physical networks and telecom services like multiprotocol label switching. Web conferencing and or collaboration are the most popular managed services among respondents.

About 52 percent of those polled say they are very or somewhat interested in the technology.

Firms also are interested in network-based security services (46 percent), storage and backup services (44 percent) and data center services (43 percent).

About 51 percent are using IP technologies for contact centers. About eight percent are piloting IP contact center implementations, 31 percent are implementing now and

12 percent say they are upgrading or expanding their existing IP contact center capabilities.

So far, though, enterprise executives have lukewarm interest in hosted contact center solutions, Daley says.

Close to half of firms (49 percent) expect their overall number of contact center seats to remain about the same over the next year, with similar portions either increasing (23 percent) or decreasing (24 percent) seats.

Outsourcing of contact center seats is a different matter, though, says Daley. About 30 percent of firms report planning to outsource more of their contact center seats, while 51 percent of firms anticipate no change.

Both MPLS and Ethernet wide area networks are popular. About 36 percent of those polled say they already have completed their firm’s migration to MPLS. Ethernet adoption is which is growing fast as well, but has not yet reached use of MPLS, Daley says.

Managed MPLS is also popular, with 30 percent of firms already using it, and 22 percent of firms using managed Ethernet service.

Cost is the most important criterion when choosing landline data service providers, respondents say. About 60 percent of buyers say that is a very important consideration.

Service level agreements are important to 49 percent of respondents. Vendor pricing models, especially clarity on service elements and options, are very important to 43 percent of buyers.

Nearly 65 percent of respondents say they have, or are implementing, wireless local area

networks. And while SMB respondents generally are not that interested in public data networking, enterprise executives are much more interested both in fixed WiMAX (23 percent) and mobile WiMAX (25 percent) of respondents.

The majority of respondents have deployed wireless email or BlackBerry applications. Customer-facing applications dominate, though there is interest in line-of-business apps as well, though little buying as of yet, says Daley.

The majority of enterprises buy vendors’ mobile versions of existing packaged applications (41 percent), but a large portion also are developed in-house (35 percent) or are custom-built by third parties (33 percent).

Cost is the most important criterion (68 percent) for choosing a mobile network service provider, followed by domestic coverage (56 percent).

AT&T, Verizon Will Gain Video Share in 2010

AT&T and Verizon are slowly gaining share in the U.S. multi-channel video market, while satellite providers DirecTV and Dish Network are holding their own, with Comcast and Time Warner Cable under a bit of pressure, but possibly facing more erosion over the next year, new surveys by ChangeWave Research suggest.

A key factor is simply that AT&T and Verizon now are able to market video services to millions more customers every year as they build out their new networks. Given a choice, some customers will exercise that choice, and switch from a current provider to one of the telco-provided services.

To the extent that customer satisfaction has a direct effect on churn behavior, Verizon, AT&T and DirecTV also stand to benefit, as their customer satisfaction ratings are at least three times higher than those of Comcast and Time Warner Cable, according to a recent Changewave Research survey of nearly 3,000 end users.

Still, market share changes relatively slowly in the video entertainment market. When asked whether they planned to switch TV providers in the next six months, about 12 percent reported they’ll be switching.

That works out to about two percent of the customer base a month, a figure quite consistent with what video operators have seen in recent years. But users rarely behave precisely as they say they will. One might expect churn to wind up being less than two percent a month, but more than one percent a month.

Also, service providers recently have found churn levels lighter than usual, in part because of slower housing starts, in part because of “save” offers made when customers call to disconnect, in part because bundles save customers money.

But prices seem to have very-high importance. According to the Changewave survey, price is the reason half of the “switchers” plan to make a change. Only about 10 percent indicated they would switch to get a bundle.

If price drives half the changes, rather than some other service attribute, many users who plan to defect will wind up staying because of a “save” offer that addresses the price objection.

Market share changes over the last year show just how stubbornly service providers are fighting to prevent churn in a saturated market that mostly is a zero-sum game.

For the U.S. market as a whole, cable TV operators retain dominant market share of 65 percent while satellite providers have 25 percent market share. Telcos now have 11 percent market share.

Comcast, with 23 percent share, slipped about one percentage point over the last year.
Time Warner Cable, with 11 percent share, gained one market share point over the same period.

DirecTV, with 13 percent market share, was unchanged over the year. Dish Network, with nine percent share, lost one share point over the last year.

Verizon’s FiOS has five percent share of the national market, while AT&T U-verse has three percent of the national market.

About 54 percent of the Changewave respondents who say they intend to switch providers say they will choose a fiber-optic service, an eight-point increase in three months.

Verizon FiOS TV remains the top provider that switchers plan to move to in the next six months. But AT&T’s U-verse service has jumped seven percentage points since Changewave’s March survey and is currently showing the most momentum among providers.

By way of comparison, just four percent of switchers saying they’ll sign up with Comcast and one percent say they’ll buy from Time Warner Cable.

Changewave researchers think cable and satellite providers will, for these reasons, face headwinds as the telcos gear up.

Fiber TV providers boast a big lead when it comes to customer satisfaction levels. Some 38 percent of subscribers say they are “very satisfied.”  About 27 percent of satellite subscribers say they are “very satisfied.”

About 13 percent of cable subscribers say they are very satisfied. So satellite subscribers are twice as satisfied as cable customers while fiber TV customers are three times as satisfied as cable customers.

The difference is even more evident at the individual company level, where Verizon has the most satisfied customers. About 47 percent of Verizon FiOS TV customers say they are very satisfied, while 39 percent of AT&T’s customers say they are very satisfied.

Some 34 percent of DirecTV customers say they are very satisfied. Just 11 percent of Comcast and Time Warner Cable customers say they are very satisfied.