Global Revenue Now Lead by Mobile

Global telecom services revenue now is lead by mobile services, at 46 percent of total revenue, say researchers at Analysys Mason.

Wired voice revenues now account for 21 percent of total revenues.

Business services account for 14 percent of revenue, while consumer broadband now represents eight percent of total, the firm says.

Video represents about eight percent of total.

Net Neutrality and Free Speech: Issue More Complicated Than You Might Think

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

Most of us likely think we understand what the First Amendment to the U.S. Constitution actually means. Most of us might be surprised at how complicated the matter has proven to be. It comes as no surprise that there is vociferous debate about what speech is, what a "speaker" is and whose speech is to be protected.

Among the issues jurists and courts have had to wrestle with are "whose" rights of speech are protected. Originally, it was the rather narrow right of political speech, a right possessed by the speaker, that was protected. Over time, though, there have been refinements or travesties, depending on one's point of view.

The classic example is free speech restrictions based on time or place, for example. There is no constitutional fight to "yell fire in a crowded theater," settting off a panic.

Over time, courts have had to grapple with what a "speaker" is. Under the law, a corporation, for example, is a "person." Does a person have the right of free speech?

Over time, the definition of "speech" has widened, and now is a mix of the rights of the speaker and the "rights" of the listener.

To the extent that network neutrality touches off yet another round of debates about how the right of free speech applies, we likely will find serious debate yet again. It's a lot more complicated than most of us might think.

Junction Networks Adds Standard Conferencing Features

Junction Networks has added new features to its business voice service packages at no additional cost, providing users features they have asked for, the company says.

“Our goal is to deliver the most cost effective, business-class phone service for 5-100 users. Now, our customers benefit from more features like conference bridging for 15 people and acd queues while still paying under $20 per user, monthly,” stated Michael Oeth, CEO of Junction Networks.

The "Small Business" OnSIP package, which costs $99.95 a month, now includes 15 voicemail boxes; four attendant menus; four groups; a conference bridge and an ACD (automatic call distributor) queue.

The "Medium Business" package, selling for $199.95 a month, now includes 50 voicemail boxes,
six  attendant menus, six groups, five conference bridges and two ACD queues.

The OnSIP Conference Bridge has also been reduced to only $19.95 per month, with a 15 user limit.

The changes are based on customer feedback, especially demand for conferencing features.

The enhancements are examples of two fundamental trends. First, IP telephony providers continually strive to provide more value to their users, often at no incremental cost, sometimes at low cost.

Second, end user demand for conferencing features illustrates the more-important role one-to-many and many-to-many communications now are assuming in the business world. Though much voice and email communications continues in one-to-one mode, lots of other activity has moved to one-to-many channels. Blog posts, microblogging, social network updates and podcasts, for example, are augmenting traditional one-to-one communications.

Are Fixed and Wireless Broadband Equivalents?

Consumer desire to substitute a wireless broadband connection for a fixed connection remains a question whose answers are yet developing. There are few markets, except Austria, where fixed and wireless broadband really are viewed widely by consumers as equivalent products.

So answer the question "yes" in Austria, where wireless and fixed products are seen as a single market, not two. In most markets, though, especially those with robust fiber to home availability, regulators at least do not see the existence of a single functional market.

In most developing markets, wireless might continue to be the preferred access method, so again there is no functional equivalence between fixed and wireless modes.

But at least in some European markets, consumers are, in fact, starting to choose their broadband connections based on price, rather than on whether the service is delivered using a fixed or mobile networks, says Pyramid Research. For fixed network operators, there likely is no good news in those findings.

First, fixed has to compete with mobility, head to head, and it that fight, mobility offers some value fixed services cannot provide, namely the ability to use the broadband connection outside the home. The other bad news: consumers see so little differentiation they are buying based on price.

Such equivalence is highly unusual. The European Commission, which recently deregulated the broadband access market in Austria precisely because it is so competitive, admits that the Austrian situation is unusual. It is the only European Community market where wireless broadband is widely deemed to be a functional substitute for wired services that price regulation is not needed.

Pyramid likewise argues there is a "strong link" between fixed and mobile broadband adoption. So strong a connection, in fact, that these markets can no longer be looked at in isolation, though today's broadband access market still primarily is a matter of competiton between fixed line providers.

But mobile broadband increasingly will affect the fixed sector, Pyramid believes, especially in markets where overall broadband penetration is low. That includes markets such as Russia, Slovakia and Ukraine. In such markets there is only limited opportunity for fixed-mobile broadband bundles, because the services are competitive more than they are complementary.

What remains to be seen, though, is what happens to a highly-competitive market for fixed and wireless broadband when fiber-to-customer services become available. Even the EC says it will continue to monitor the situation and might reimpose regulation if optical fiber is widely deployed. The reason is a belief that, in such a scenario, where wireless competes with fiber-to-home, the products will naturally diverge again.

Wi-Fi Hotspot Market Increasingly Provides "Mobile Offload"

Some proponents once touted Wi-Fi hotspots as an alternative to mobile or out-of-home broadband service. It increasingly look as though the Wi-Fi hotspot is emerging as a way of offloading traffic from the mobile network, as well as a way of supporting mobile devices that do not have data plans.

In-Stat estimates that hotspot usage will increase in 2009 by 47 percent, bringing total worldwide connects to 1.2 billion.

“Mobile operators have become increasingly involved in the hotspot market globally as they assess the potential of hotspots to offload wireless data traffic from overburdened 3G networks," says says Frank Dickson, In-Stat analyst.

Also, mass market adoption of Wi-Fi-enabled smartphones has significantly altered hotspot usage, with these devices accounting for the majority of access sessions in some locations,” he says.

Total worldwide hotspot venues will reach 245,000 locations in 2009, while AT&T is on course to experience 500 percent usage growth, year over year, In-Stat notes.

Communications Key for Smart Grid, Survey Suggests

There's a key reason wireless service providers believe process automation (machines communicating wtih machines) will power the next great wave of wireless growth. It will.

According to a Pacific Crest Mosaic survey, electrical utilities consider two-way communications the most important technology in creating a fully operational "smart grid." About 60 percent of executives say that is the case. Smart meters, by way of contrast, are seen as "most important" by only 15 percent of respondents.

That should come as no surprise. Meters are a basic part of the utility business. So meters, at least for upstream reporting,  as such are widely in use. It is the ability to control the flow of electrons on the grid which is lacking. Local switches for such purposes already are available, allowing utilities to remotely turn on and off home air conditioning units at times of peak load, for example.

Two-way communications designed for power grid use also have been available for some time, allowing utilities to conduct such on-and-off operations. What is needed are more-granular ways of assessing, in real time, the state of the grid and power consumption, so the network of switches can be controlled.

That can be done using either wired or tethered communications. But wireless will appeal because the network already is available.

Why Enterprises Buy Cloud Computing Services

Why are enterprises interested in any sort of cloud computing service? For the same reasons they are interested in just about any other computing or communications tool: they think it will reduce costs and create more value in the information technology investment.

Of course, enterprises don't buy "cloud computing." They buy tools that help them run their businesses.

Email might be an area ripe for a cloud shift, in that regard. It is a necessary function, but a function without compelling strategic advantage.

Typically, necessary but non-strategic functions are the sorts of processes one can think about outsourcing. And it is getting more burdensome to manage email processes, with growing  enterprise regulatory requirements relating to storage of email. The other issue is that email, like most other applications these days, "suffers" from bandwidth creep.

Over time, people are appending larger attachments, for example. Cisco's WebEx Mail service, for example, has full Outlook support. That means users will see no changes, nor will IT departments need to deal with massive training issues and client software updates.

But it isn't the "cloud" that makes the the change interesting. It is the savings in time, labor, money and functionality that will be key. "Cloud computing" as such will be interesting for some enterprises that want to shift capex into opex, that are growing very fast or that are primarily Web based.

For others it might be a way to offload server or computing center chores. But I suspect most users will find they prefer to use a cloud-based application or service because of the value the specific applications represent, because of the consumption or pricing model.

No Bandwidth Hogs?

Some would argue there is no "exaflood" and no such thing as a "bandwidth hog." 

I have no more detailed data from any Internet service provider than anybody else does, so I doubt anybody can prove or disprove the thesis definitively. But I also have no reason to think the usage curve will be anything other than a Pareto distribution, since so many common distributions in the physical and business world conform to such a distribution.

Vilfredo Pareto, an Italian economist, was studying the distribution of wealth in1906. What he found was a distribution most people would commonly understand as the "80/20 rule," where a disproportionate share of results come from 20 percent of actions. The Pareto distribution has been found widely in the physical and human worlds. It applies, for example, to the sizes of human settlements (few cities, many hamlets/villages). It fits the file size of Internet traffic (many smaller files, few larger ones).

It describes the distribution of oil reserves (a few large fields, many small fields) and jobs assigned supercomputers (a few large ones, many small ones). It describes the price returns on individual stocks. It likely holds for total returns from stock investments over a span of several years, as most observers point out that most of the gain, and most of the loss in a typical portfolio comes from changes on just a few days a year.

The Pareto distribution is what one finds when examining the sizes of sand particles, meteorites or numbers of species per genus, areas burnt in forest fires, casualty losses: general liability, commercial auto, and workers compensation.

The Pareto distribution also fits sales of music from online music stores and mass market retailer market share. The viewership of a single video over time fits the Pareto curve. Pareto describes the distribution of social networking sites. It describes the readership of books and the lifecycle value of telecom customers.

So knowing nothing else than that the Pareto distribution is so widely represented in the physical world and in business, I would expect to see the same sort of distribution in bandwidth consumption. As applied to users of bandwidth, Pareto would predict that a small number of users in fact do consumer a disproportionate share of bandwidth.

I certainly can't say for sure, but would be highly surprised if in fact a Pareto distribution does not precisely describe bandwidth consumption.

Social Media Now Regularly Used by 65% of People at Work

Social media are well used in virtually every industry vertical, reports Business.com. Nearly 65 percent of respondents reported using social media as part of their normal work routine, including reading blogs, visiting business profiles on sites like Facebook or LinkedIn or using Twitter to find information and/or communicate about business-related matters.

Among respondents using social media for business purposes in their day-to-day jobs, 62 percent visit company or brand profiles on social networking sites and 55 percent search for business information on these sites.

Among those using any form of social media to find business-relevant information, the most popular activity is attending webinars or listening to podcasts (69 percent) followed by reading ratings or reviews for business products or services (62 percent).

The least popular activities are saving business-related links on social bookmarking sites (28 percent) and participating in discussions on third-party web sites (29 percent).

Experienced social media pros are likely to be astounded that over half of respondents indicated that they participate in online business communities or forums. This is far higher than the typical two-percent participation rate among monthly visitors to online communities. This difference may be due to how study respondents understood the word “participate”, possibly interpreting it as “visit," rather than "post."

Facebook is the dominant social network on which consumer-focused companies maintain one or more profiles, cited by 83 percent of respondents versus 45 percent for Twitter. B2B companies, however, maintain a presence on both platforms with 77 percent maintaining a profile on Facebook and 73 percent on Twitter.

Consultants and marketing communications professionals are the most active users of social media as a resource for business information, particularly in smaller firms. IT professionals have the lowest participation rate.

The average company in this study was planning, developing or running seven different social media initiatives; 65 percent of respondents staffing those initiatives, and 71 percent of companies themselves, have less than two years of experience with social media for business.

Building brand awareness and brand reputation are two of the top social media success metrics.

B2C firms, though, were ahead in a few areas: social media advertising, user ratings and reviews, and online communities for customers and prospects.

Both business-to-consumer and business-to-business companies are rapidly adopting social media, unable to ignore a major destination of Internet users, Business.com says. But the two types of firms have different social site usage patterns.

Not only were B2B firms more likely overall to maintain a social network profile, they were managing profiles across more social sites and were significantly more likely to be present on Twitter, LinkedIn and YouTube.

B2C companies were better represented on Facebook and MySpace.

Even if Consumers Will Pay $3 a Month for Online Content, It is Small Consolation

Sometimes good news is bad news. U.S. consumers, for example, say they are willing to spend about $3 a month to receive news on their personal computers and mobile devices, a new survey by Boston Consulting Group suggests.

“The good news is that, contrary to conventional wisdom, consumers are willing to pay for meaningful content," says John Rose, BCG senior partner  "The bad news is that they are not willing to pay much."

The bigger problem is that, even were such new payment models to take hold, it would not help much. In the United States, advertising accounts for around 80 percent of newspaper revenues, and that revenue source is in steep decline. Even if consumers start to pay small amounts for their news online, it would only slow, but not stop, newspapers’ decline, BCG notes.

One does not have to agree with all the assumptions analysts make about where newspaper revenue is headed, but some of the forecasts seem to assume that newspapers can arrest the slide in advertising in 2010, with slight growth over the next five years or so.

Lots of people believe the ad recession caused by the "Great Recession" now is over. But some observers, perhaps many, believe advertising as a share of overall promotion and marketing budgets is headed lower as the result of a shift in thinking about the effectiveness of advertising overall, and of advertising in physical media in particular. Time will tell.

The other issue is whether the $3 a month benchmark is what respondents think they would pay for news from every source, or whether they had in mind the sort of news they might otherwise get from a local newspaper. The answer matters quite a lot. A single local newspaper might be happy to have a new $3 a month subscriber revenue stream. But if that amount was spread over all the interests any single subscriber might have, it is an awfully small amount.

BCG’s survey found that consumers were more likely to pay for certain types of content, specifically news that is unique. About 72 percent of U.S. respondents said they would be interested in local news, while 73 percent indicated they would pay for specialized coverage.

Some 61 percent of U.S. respondents suggested they would pay for timely news, such as a continual news alert service.

In addition, consumers are more likely to pay for online news provided by newspapers than by other media, such as television stations, Web sites, or online portals, the study suggests.

They are specifically not interested in paying for news that is routinely available on a wide range of Web sites for free, BCG says.

What's in Store for Telcos in 2010?

U.S. telecommunications service providers lost about 10.5 percent of their current installed base of voice access lines in 2009, Fitch Ratings estimates. The bad news is that losses will increase to 12 percent in 2010.

The good news is that business line losses, which accelerated during 2009, will stabilize. Also, market share gains by cable competitors lessened in 2009.

But pressure from wireless substitution and weak housing starts will continue in 2010. And there is a statistical headwind as well: as the installed base of lines shrinks, the loss of any given number of lines automatically represents a bigger percentage.

Business and residential access line losses should stabilize in 2010 and continue in the range of 3 million to 3.2 million per quarter. That's a bit better than has been the case over the last year or so. The bad news is that because the denominator (installed base) now is a smaller number, even a smaller numerator (lost lines) will result in a higher rate of loss.

Like cable companies, the growth rates for new broadband access subscribers has been slowing, and will slow further in 2010.

Fitch estimates that broadband access subscriber growth slowed in 2009 to 1.7 million net subscribers. Fitch forecasts that total broadband net subscriber additions will slow in 2010 to approximately 1.4 million. The slowing growth is reflective of higher penetration of these services and to a lesser extent a growing substitution by wireless data.

With regard to network-based video, Fitch estimates that offerings by AT&T, Inc. and Verizon Communications Inc. will grow by 2 million subscribers in 2009, but this rate will likely slow in 2010 to approximately 1.5 million. The slowing growth rate reflects increasing penetration and a slowing of coverage growth as these operators enter their final phase of deployment.

Finally, business and commercial service revenue erosion peaked in first-quarter 2009 and Fitch expects the total 2009 decline to be over six percent for wireline companies with this trend the result of growing unemployment.

It is likely that the unemployment rate is near its high so Fitch believes that reductions in business and commercial revenues should be modest, in the range of one percent, in 2010.

In total, Fitch estimates that aggregate wireline revenues will decline in 2010 near the mid-single-digit range, a modest improvement over 2009. Operators with a larger growth services revenue mix should experience revenue erosion in the low single-digit range. EBITDA will similarly fall in aggregate by a low- to mid-single-digit range for the industry as benefits from headcount reductions offset losses of high-margin legacy services.

Big Churn Potential in Wireless Business?

Despite the fact that AT&T and Verizon have low churn rates, while Sprint and T-Mobile have churn higher than they would like, the potential for huge share shifts remains latent, if consumer satisfaction bears any meaningful relationship to actual churn behavior.

Nearly half of readers surveyed by Consumer Reports are unhappy with their cell phone service. Nearly two thirds had at least one major complaint about their cell phone carrier, with about 20 percent naming price as the chief irritant.

But here's the caveat. Most surveys taken over the last couple of decades suggested there was high dissatisfaction with cable TV service, for example. And, to be sure, consumers began to churn away as first satellite and now telco video alternatives are available. Until satellite became a viable option, though, high dissatisfaction was not accompanied by high churn.

The U.S. mobile industry, though, is among the most competitive in the world, so consumers do have lots of choices. So one wonders why more do not act as theory suggests they will, which is that unhappiness will lead them to try another provider. Maybe they are churning, and maybe their continued unhappiness means the new carriers aren't demonstrably and clear better than the carriers they left.

Apparently, neither better coverage nor new smartphones have been enough to change consumer satisfaction all that much, the report suggests, with the salient exception of the Apple iPhone. So will the latent unhappiness translate into higher churn? It's harder to decipher than one might initially think.

If consumers believe all the carriers have some gaps in coverage, have roughly similar or somewhat distinct retail offers, have adequate bandwidth and availability, and all of them will experience congestion during rush hour, consumers might not be extremely motivated to change providers, even if they are unhappy to some degree. The bad news for service providers might be that network quality and reputation have some effect, but not overwhelming effect on churn behavior.

But handsets are a huge motivator of change, it appears. About 38 percent of consumers who switched phones in the past two years did so to get the phone they wanted.

More than 27 percent went shopping with a specific phone in mind, in fact. About 98 percent of iPhone users said they would purchase the phone again. To point out the obvious, some people might be really happy about their handsets, and simply put up with their service providers.

But there is another way to look at matters. If half of consumers are unahppy to some degree, and that leads them to churn, what would one expect to see? At churn rates about 1.5 percent a month,. one would expect roughly 18 percent annual churn. That would roughly equate to 100 percent churn about every five years or so.

If one assumes only half of consumers are motivated to churn, existing churn rates easily could amount to churn of half the entire customer base about every two and a half years.

So maybe those unhappy consumers are in fact deserting their current providers. The reason they remain unhappy? One explanation could be that none of the providers they are trying are demonstrably better than the carriers they left. One often encounters consumers who say "we've tried them all, and all of them have some problems."

What Users Do on the Mobile Web

About 29 percent of mobile phone users logged on to the mobile Web at least once per month in 2009, up from 22 percent in 2008, say researchers at Marketer.

So what do those people use the mobile Web? About 19 percent search for local products and services. About 16 percent say they get information about movies and entertainment.

About 13 percent get information about restaurants and bars. Some 11 percent search fro products or services outside the immediate local area.

About four percent made a purchase of a physical items that had to be shipped, while three percent used a mobile coupon.

According to BIA/Kelsey and ConStat, many of those qualify as “heavy” users—those who go online via mobile more than 10 times each week. BIA/Kelsey and ConStat say heavy mobile Internet users represent about 21 percent of the total U.S. mobile population in October 2009, up from less than 15 percent a year earlier. And the overall average number of monthly mobile Web sessions has doubled in that time period.

Heavy users of text messaging and mobile e-mail have also increased over the past year. Nearly one half of mobile users text more than 10 times weekly, while 20 percent send and receive more than 10 mobile emails each week.

Non-local product searches seem not be as prevalent as local searches, which about 20 percent of users report they did in the last month.

Basically, consumers have doubled their use of the mobile platform for non-voice communications,” says Rick Ducey, BIA/Kelsey chief strategy officer.

What Does Comcast-NBC Universal Merger Mean?

The Comcast merger with NBC Universal will be viewed in many ways: a way for Comcast to move upstream in the content business or a chance to grow the "digital" or "new media" side of the merged company's operations.

The merger also is about protecting the value of the exsiting video distribution ecosystem from destabilizing change. "TV Everywhere," the cable industry approach to enabling use of paid-for video content on any screen, is a similar initiative.

The move also suggests a view on the part of Comcast management that the cable TV distribution business has limited upside left. Revenue growth for virtually all of the cable companies now is coming from voice and high-speed data services, with the emphasis now shifting to business customers, as even the consumer elements of that business are seeing slower growth.

One might question the ultimate value of the move, either as a way of growing revenues near term, or as a strategic bridge to the future. The near term value is clearer, though.

Essentially, the attempt is to provide low-cost or no-incremental cost, convenient access to large quantities of popular professional video while baking in an indirect business model. If you think about the way metro Wi-Fi hotspot access now is positioned by cable and telco service providers, you'll get the idea. The direct revenue actually is produced by purchases of fixed broadband access service.

Then Wi-Fi access is added as a "no incremental charge" enhancement. In the same way, some mobile broadband plans might be pitched as fees for "mobile Internet" access, but then also allow no-incremental cost email access.

In other words, Comcast wants to hang onto the proven business it has--all it "cable TV"--while merchandising "new media" access to that content on smartphones and PCs, for example.

Perhaps Comcast and others would prefer to keep the old business while growing a new one with a direct revenue model, but that seems problematic for most content distributors and owners.

Some studies suggest users will pay some amount for mobile or on-demand video and TV. The issue is how much such users would be willing to pay. Consider a scenario where a typical user pays $10 a month for mobile and other on-demand access, and where the typical household consists of three people, for a total revenue of $30 a month.

Consider that for most households, multi-channel video now costs between $70 and $100 a month, and that is a flat charge for all users in the home. That works out fine if there is no cannibalization of the fixed connection.

But it won't take much substitution to wipe out all the gains from the incremental on-demand revenue. Unless, of course, the different approach is taken: keep your regular subscription and we'll give you the additional on-demand capbility for no incremental cost or low cost.

FCC Seeks Input on Transition to VoIP

The Federal Communications Commission wants public and industry comment on the policy framework for a transition from circuit-switched to voice services on all-IP networks. The FCC will use the comments to issue a possible "notice of inquiry" on the subject.

"In identifying the appropriate areas of inquiry, we seek to understand which policies and
regulatory structures may facilitate, and which may hinder, the efficient migration to an all IP world," the FCC says. "In addition, we seek to identify and understand what aspects of traditional policy frameworks are important to consider, address, and possibly modify in an effort to protect the public interest in an all-IP world."

Among other issues, the FCC will be looking at consumer protection issues such as how the needs of people with disabilities can be assured. A look at the role of "carrier of last resort" obligations in an all-IP framework also is expected.

All comments should refer to GN Docket Nos. 09-47, 09-51, and 09-137 and title comment filings
as “Comments – NBP Public Notice #25."
 
Filers using the Commission’s Electronic Comment Filing System should enter the following text in the “Custom Description” field in the “Document(s)” section of the ECFS filing page:  “Comments – NBP Public Notice # 25."

Where is Unified Communications Going?

It looks like we are in the midst of yet another acronym cycle in the unified communications business. Nobody really likes "VoIP" or "IP communications." UC had been the preferred term until a year or two ago. "Collaboration" is the term some prefer. But there are other candidates.

Some people use the term "UC4" to describe where the next wave might be building for "unified communications, collaboration and contact center." And that wave is supposed to feature tighter communications integration with key enterprise software and job functions, as well as more use of video communications and mobile devices.

To be fair, people don't agree on what "collaboration," "unified communications" or "communications-enabled business processes" actually mean. All of those phrases include elements of VoIP, audio and video conferencing, presence, instant messaging, email, voice mail, mobility, business phone functions, unified messaging and the ability to initiate and receive voice and other communications from inside a consumer or business application.

As a general rule, when something doesn't sell well, it gets rebranded. Other times, marketing staffs want to refresh an existing product, or create a different spin, to play to a particular provider's strengths. Sometimes the buyer value proposition changes, so marketing pitches are adjusted to match the new end user priorities. Perhaps some of all those drivers now are at work.

Verizon Ranked First in Consumer Reports’ "Best Wireless" Service Survey

In a survey of more than 50,000 readers spanning 26 U.S. cities, Consumer Reports found Verizon had the highest consumer satisfaction scores, while AT&T had the lowest customer-satisfaction rating in 19 cities surveyed. In fairness, the rankings are fairly close for three of the four service providers ranked.

Verizon received an overall score of 75, while T-Mobile USA got 70, Sprint got a score of 67 and AT&T got a score of 66. Consumer Reports itself says that differences of less than three points are not meaningful, so Sprint and AT&T essentially got the same score. And just three points separate T-Mobile from both Sprint and AT&T.

Another way of looking at matters is that while Verizon got scores noticeably different from the other three providers, and while T-Mobile USA was a clear number two, Sprint and AT&T were fairly close.

Comcast Launches Usage Meter: Some Users Might be Surprised

Comcast is launching a "free to use" data usage meter in the Portland, Oregon market, with plans to roll the application out nationally. . The meter will help customers understand how much data they consume in a month. It is an essential sort of tool if users someday are required to buy data packages the way they buy mobile buckets of voice and data.

That is not to say Comcast has any current plans to do so; simply to point out that since few, if any, consumers know what their usage pattern actually is, they certainly cannot be expected to be rational consumers of subscription plans that require such knowledge.

Nor will most users have any problems, even if retail pricing plans were to change, someday. Comcast defines "excessive use" as consumption above 250 gigabytes a month, and the median usage for Comcast’s customers at present is about 2 to 4 Gbytes a month.

The meter is accessible by logging in to "Customer Central" at http://customer.comcast.com and clicking on the “Users and Settings” tab. From there, click on “View details” in the “My devices” section (located toward the upper right hand of the screen) and that will go to the meter page. The meter will show usage in the current calendar month when it’s first launched. Over time, it will show the most recent three months of use (including the current month). The data is refreshed approximately every three hours.

The meter measures all data usage over a cable modem, including any other devices connecting using Wi-Fi. Online gaming consoles, smartphones using Wi-Fi,  digital video recorders, printers, cameras or the iPod Touch are examples.

The Windows operating system and most popular software applications have automated update programs. These updates often download and are installed automatically without the need for user intervention. The automation is generally designed for the convenience and protection of the consumer, but the traffic it generates may come as a surprise.

Cable modem connections supporting multiple PCs will have a correspondingly higher amount of such update activity.

Aggressive update settings, with some default settings checking each hour and downloading every possible option even though they are not all needed, could cause unexpected levels of traffic.

For example, a software program may load its interface in a dozen languages even though all household members only know how to read English.

Another possible “surprise” upstream traffic source is online file backup or uploading to photo sharing sites. Also, many news and information services preload content onto their subscriber's PC or smart phone over the Wi-Fi home network. The content often arrives overnight for convenient viewing in the morning.

Assume each night's upload is only 1GB, which takes up a modest 1GB on the device's storage, and assume too that it never consumes more than 1GB because it overwrites the old content with fresh content each night. That can add up to 30GB over a month on the meter.

A large volume of traffic may be going to digital video recorders such as TiVo. A user in the home may have rented a movie from Amazon, Netflix or Blockbuster. Renting the movie will be a known traffic-generating event. But many services also preload the start of other movies as well as trailers to make them instantly available should they be called for.

The meter will be a useful tool for managing both intended and unintended bandwidth consumption.

A Real "Google Phone" Coming?

A Google-branded smartphone running a version of Android not yet seen on other devices is coming, and it will feature a large screen, Gizmodo speculates. Since any such device presumably would be built directly to Google's specifications, it is possible the device would feature a more-tightly integrated hardware and software experience than is possible on "open" devices.

Oddly enough, such an approach would resemble nothing so much as the iPhone experience, which is just about the diametrical opposite of an open approach.

Huge Increases in Consumer Communications Value Since 1990, Data Shows

With the caveat that the product of a fraction always changes as either the nominator or denominator change, huge increases in consumer spending on communications and information technology since 1990 have been more than matched by broader increases in household income, holding the percentage of household spending on communications flat over the entire period.

(click image for larger view)

Since 1990, consumer spending on information and communications technology has grown from $197 billion to $545 billion, 5.1 percent of national disposable income in 1990, peaking at 5.9 percent in 2000, and falling to 5.4 percent in 2008.

Spending on communications services has tripled over the same period, from $77 billion to $243 billion, and at 2.3 percent of national disposable income, up from 1.8 percent in 1990 but below its peak of 2.5 percent in 2001.

Basically, the story is one of large increases in consumer value. Consumers are spending more on communications and infornation technology, but a steady percentage of disposable income.

Yet consumer value has grown exponentially in the intervening years. U.S. communications expenditures as a share of national disposable income has been flat since 1997, but users have added over 100 million broadband and video connections and over 100 million wireless connections, according to the Bureau of Economic Analysis.

Content Delivery Networks and Network Neutrality: Net Is Not Neutral

Much discussion about network neutrality seems to assume that the issue is bit or application "blocking," and from one perspective that is correct. The existing Federal Communications Commission rules about a users' right to use all lawful applications already prohibit blocking of legal applications on wired networks. The issue is whether those rules, and the other "Internet Freedoms" principles also should be extended to the wireless domain.

In another sense, popular perceptions are misguided or worse. There is a separate issue, that of whether it ever is permissible, for any legal reason, to shape traffic, either to maintain network performance, provide an enhanced service to a user, or create a new level of service.

Some will maintain there are other ways of maintaining end user experience aside from traffic shaping. That is arguably correct, but might cost so much that the entire consumer access pricing regime has to change in ways people will find objectionable.

Some argue that any traffic shaping of legal bits should be banned, because such practices have undesirable business impact. "No bits should have any priority," that line of reasoning suggests.

One might simply note that about 60 percent of video bits--almost universally served up by media companies--already enjoys such "unequal treatment." Indeed, that is the purpose of a content delivery network: to expedite the delivery of some bits, compared to others, so that a better end user experience is possible.

In fact, about $1.4 billion was spent in 2008 precisely to deliver such expedited bits. The U.S. market currently generates an estimated 55.8 percent of the global CDN traffic, though international traffic is now increasing at a faster rate than its domestic counterpart, according to Research and Markets.

And though video delivery historically has been the CDN staple, new growth areas include whole site delivery, dynamic content, "live" video, high-definition video, mobile and smartphone applications, other non-PC devices and adaptive bit rate streaming, Research and Markets notes.

Of the 22.5 billion professional video views served during 2009, Akamai delivered 31.9 percent, Limelight Networks 12 percent and Level 3 11.2 percent, says Research and Markets.. Additional CDNs active in the market include CD Networks, Velocix, Liquid Compass, Abacast, Mirror Image, Edgecast Networks, Highwinds, BitGravity, Cotendo and Internap, the firm notes.

The point is that preferential delivery of bits already is an established part of the way the Internet works. Private network users, especially businesses, also commonly set up traffic priority systems for their internal communications and content, as well.

The ability of a consumer end user to choose to use such services and applications is one of the implications of the network neutrality debate that often is lost. To reiterate, preferential treatment of bits already is happening on a wide scale, and for very good reasons: to preserve end user experience. Perhaps we ought not to be in such a rush to foreclose practices and capabilities of obvious value.

Gartner Drops "Unified Communications" from 2010 "Top 10" List

Unified communications, which was on Gartner's "top 10" trends list for 2009, has been dropped from the 2010 list, which moves "cloud computing" to the top spot. 


People will disagree about what that means, but no trend remains "top of mind" forever. Nor is the ranking an indication that UC is unimportant, simply that it might not be among the most-important priorities for the coming year.


It might simply indicate that most enterprises have figured out what they want to do, for the moment. 


It might indicate that computing architecture, and issues related to computing architecture, which always are top concerns for enterprise IT staffs, once again have moved to the forefront, and that "voice" issues related to IP telephony are largely in an advanced stage of deployment. 


In fact, four of the top-six issues are directly related to remote computing capabilities. 

Users Say They Want ISPs Offering Both Wireless and Fixed Broadband

There are some heartening implications for service providers able to offer both mobile and fixed broadband access, and disturbing implications for providers who do not have such capabilities, in a new survey of 1,000 consumers conducted by the Yankee Group.

Specifically, more than 60 percent of survey respondents indicate a strong interest in mobile Internet, and 45 percent state that for their next broadband purchase they will choose an ISP that offers mobile service.

Do Usage Caps for Wireless and Mobile Broadband Make Sense?

Consumers say 60 percent of the wireless broadband decision is based on two factors: monthly recurring charge and existence or size of a usage cap. For that reason, "data caps" are a particularly unfriendly way to manage overall traffic, says Yankee Group analyst Philip Marshall. 

A better approach, from a service provider perspective, is to offer unlimited usage and then manage traffic usingreal-time, network intelligence-based solutions like deep packet inspection and policy enforcement, Marshall argues.

Some would argue that fair use policies that throttle maximum speeds when policies are violated is no picnic, either. But temporary limits on consumption, only at peak hours of usage, arguably is more consumer friendly than absolute caps with overage charges. 

To test consumer preferences, Yankee Group conducted a custom survey that included a "choice-based conjoint analysis," which allowed Yankee Group analysts to estimate the relative importance to consumers of key wireless broadband service attributes. The survey was taken by 1,000 mobile consumers who also use broadband access services. 

From the conjoint analysis, "we found that, on average, 59 percent of a wireless broadband purchase decision depends on two factors: service price, and the presence or absence of a 2 GByte per month usage cap," Marshall says. 

The results also indicate that 14.5 percent of a typical purchase decision is affected by service bandwidth, and that the implied average revenue per user lift when increasing bandwidth from 768 Kbps to 2 Mbps ranges between $5 and $10 per month.

The results also indicate, however, that there are diminishing returns for service plans that offer speeds above 3 Mbps, though speed increases might be useful for other reasons, such as competitive positioning. 

"Our price elasticity analysis implies that consumers are willing to pay $25 to $30 more per month for plans that offer unlimited usage, compared to plans that have a 2 GBytes a month usage cap," says Marshall.

"In a competitive operating environment, consumers will tend to migrate toward higher bandwidth services, all else being equal, but they are not necessarily willing to pay a significant premium for the added performance capability," says Marshall.

Our most recent survey results indicate that consumers require 2 Mbps to 3 Mbps bandwidth for their broadband service. This is likely to increase dramatically over the next two to three years, but the consumer survey suggests dramatically-higher bandwidth does not affect decisions as much as recurring price and existence of bandwidth caps. 

For example, when offered a choice between one package featuring a 2 GByte per month usage cap with 6 Mbps bandwidth, and another package with unlimited monthly usage but just 2 Mbps service speed, 63 percent of consumers opted for the 2 Mbps service with no cap.

Even when the choice is between an unlimited package offering only 768 Kbps bandwidth, compared to an alternative plan with 6 Mbps bandwidth and a 2 GByte per month usage cap, 57 percent preferred the 768 kbps package.

Service providers still must manage bandwidth demand though, with or without usage caps

Usage caps work to regulate demand, but users do not like them.

The other approach is not to impose the usage caps, but instead to use policy managment and deep packet inspection to manage traffic flows.

If such solutions are implemented in a non-discriminatory manner, so that all like services are treated equally, they can be implemented irrespective of network neutrality regimes currently under consideration, Marshall believes.

Small Business Commits to Social Media, Email, Search

About 75 percent of small businesses will increase their spending on email marketing in 2010, while nearly 70 percent will spend more on social media, according to VerticalResponse.

The findings might not suggest small businesses are spending wildly. In most cases the firms likely are testing new media. But the testing seems very widespread.

Almost all businesses with 500 or fewer employees will use email marketing next year, the company says. Only 3.8 percent of small business executives say they will not be using email marketing in 2010.

More than 70 percent also indicated they would not use TV or radio advertising.

Search advertising is used by about 72 percent of small businesses, but banner advertising is used by about 40 percent of small businesses, VerticalResponse says.

Facebook, Twitter and YouTube, as well as other social media sites, are used by about 78 percent of small businesses, the firm says.

Best Buy Sells Phone Power Nationwide

Best Buy now is distributing the "Phone Power" VoIP service nationwide. That's a pretty big boost for any retailer, and especially so for an independent VoIP provider aware that the market is consolidating and that scale is sorely needed.

Phone Power costs $19.95 per month with no contract, $16.95 with a one-year contract and $14.95 for a two-year contract. The service offers unlimited calling within the United States and Canada and 60 international minutes in 88 countries.

The Best Buy offering includes a two-line home adapter as well as a USB travel adapter. It sells for $79.95, and comes with a $79.95 instant service credit to be applied when the customer activates service on an eligible one or two year service plan.

It isn't clear yet whether Best Buy also will be actively selling Phone Power business packages, which come in both multi-line and single-line versions, offering unlimited inbound calling and 5,000 minutes of outbound calling with auto-attendant feature, and other popular business features, included on multi-line packages.

Apple And Android Dominate U.S. Smartphone Web Traffic

It is starting to look like just two smartphone platforms "matter" where it comes to use of the mobile Web: the Apple iPhone and the Android devices, a new analysis by AdMob suggests.

AdMob’s October, 2009 measurements show that the iPhone/iPod Touch and Android phones account for 75 percent of mobile Web traffic in the United States.

Apple devices continue to dominate, with 55 percent share, but Android users in October represented 20 percent of all activity, up from 17 percent in September, 2009.

The iPhone and iPod Touch grew their share from 48 percent to 55 percent share over the same period.

The Blackberry ’s mobile Web traffic share went down from 14 percent to 12 percent, and Palm’s webOS shrank from 10 percent to five percent.

On a global basis, the iPhone operating system now accounts for 50 percent of all mobile traffic, up from 43 percent the month before.

Android has an 11 percent global share, which makes it third globally after Nokia/Symbian’s 25 percent share.

Since Verizon launched the Droid about two weeks ago, Droids now make up 24 percent of all Android mobile Web traffic. The HTC Dream, which is the oldest Android device on the market, is the only Android device with more share, at 36 percent of Android traffic. Give it a few more weeks. The Droid is shaping up to be the most-popular Android device so far.

The data suggests that the BlackBerry, though a worthy enterprise device, continues to lag as a smartphone choice for users whose key applications lean to the Web.

Why Isn't All Voice Free?

"When I wrote a story about various VoIP initiatives a decade ago, nearly every expert I spoke to spouted the same prediction: within 10 years, all phone calls will be free," says John Dvorak, PC magazine columnist. "The rationale behind the pronouncement was that the wires and systems used for phone calls will eventually be used to transfer data, just like everything else."

"You don't get charged for visiting a Web page, so why get charged for making a phone call, if both are essentially data?" he muses.

It's an old argument, but is akin to asking why a diamond, made of carbon, is worth more than a thimble's worth of oil, also made of carbon, or a tiny cube of apple.

The answer to the question of different incremental pricing or costs to use network features has little to do with the representation of symbols and everything to do with larger permissible business models mandated by government entities.

In a legal and regulatory sense, bits are never "just bits." Cable TV bits are regulated differently from voice bits that touch the "public phone network," while Internet bits are regulated differently from each of those other types of bits and from private network data.

Still, it is one thing to argue that use of communications or other bits may not impose an incremental cost to a user. That is not to say there are not specific costs associated with use of the bits. Google Voice might not charge an end user for completing a specific call. But there are actual costs, imposed by the regulatory regime. Google pays them, not the end user.

But that does not mean the call has no cost, only that the cost is indirectly paid.

As for why others, besides Skype, other instantt messaging-based call providers, have not moved more aggressively to offer various forms of "no incremental cost to offer" calling, financial interests are involved as they always are.

One might as well ask why no-incremental cost education, music, video, books or plane tickets are not available.

In 1977, for example, long distance calling represented about half of all U.S. telephone company revenue. By 2007, that was no longer true. Instead, wireless services had taken the place long distance once played in underpinning the whole business. That isn't to say long distance has dropped to insignificance. It remains important. It is to say that there must be some revenue model underpinning the business, and if it is not long distance or voice, it will be something else.

No, there is no mystery about why VoIP has not lead, over the last 10 years, to "universally-free" (no incremental cost to end user)  voice calls. Voice, though declining, remains a key underpinning of the carrier business model. Nor do government regulators permit "free to end user" calling between networks.

Google Voice might not charge a U.S. user for a U.S.-terminated call. But Google Voice is compensating the terminating networks for use of their networks. Google Voice envisions a different business model for domestic calling than "per minute" use of the network. Lack of end user charges does not mean "terminating minutes" do not carry costs.

That, in fact, is behind Google Voice's blocking of some numbers, in some high-cost exchanges. And those charges are radically higher. Some firms report that the high-cost termination charges are as much as 25 times higher than typical.

Do We Need to Rethink What We Think We Know About Consumer Behavior?

Though 2010 widely is expected to provide a recovery from the depths of the recent recession, questions logically remain about how consumers will behave in a recovery most expect will be extended.

A new study by consumer research firm Decitica suggests lasting effects that could shape consumer spending on any number of communications services, applications and devices.

"The effects of the Great Recession on consumer behavior are so profound that many of the assumptions underpinning consumer segmentation are no longer valid," says Dr. Val Srinivas, Principal at Decitica.

Among the key findings: "Price has become the dominant consideration in the purchase of all kinds of products." For this reason, Decitica predicts "a long uphill struggle by marketers to shift the focus away from price."

The recession has caused a profound, deep-rooted change in consumers' spending habits in favor a more restrained approach, Decitica says. Many have accepted this radical change as the "new normal," and not just a cyclical phenomenon.

American consumers have proven researchers wrong in the past. The issue is whether this time might be different. See full post at http://blogs.metaswitch.com/gk/.

How Strong a Recovery; What Impact on Communications and Technology?

Since 70 percent of U.S. economic activity is generated by consumers, consumer behavior will be key to the arrival of a sustained period of growth. Conversely, anything that imperils consumer spending will weaken, choke off or abort any recovery.

In the past, this hasn't been an especially tough question to answer. Historically, recessions and recoveries roughly conformed to the principle of the bigger the bust, the bigger the boom, and vice versa. That, in turn, was underpinned by the underlying robust health of the U.S. economy.

Real growth in the four quarters following postwar recessions averaged 6.6 percent and 4.3 percent over the following five years.

Those figures are substantially above what economists seem to be calling for at the moment. The current recession has lasted a record seven quarters and has been marked by a near-record average gross domestic product decline of 1.8 percent per quarter.

All of that would, by historical standards, lead to a prediction of a powerful and sustained recovery. Yet forecasts of a two-percent recovery in growth are only one-fourth as strong as postwar experience suggests.

That suggests economists believe something has changed. We can argue about what the changes might be, and what is causing them. But this is not a political issue. As a simple matter of hope for America to get back to work, the anemic growth forecast is worrisome.

As someone who historically has tracked new technology and communications, as well as a citizen who wants the best for his country, it must be said: this does not bode well for our nation, our children or faster deployment of all sorts of interesting and useful tools people can use to enrich their lives and their work.

We might disagree from time to time about what should be done. That isn't the point. Clearly, something rather important is happening; something that defies historical precedent.

Perhaps the economists are wrong. They have been wrong in the past. I hope they are wrong about this. I continue to believe in the power of technology to make a huge difference in peoples' lives, and to fuel robust economic growth, which is, first and foremost, the way we are able to increase wealth and spread it around. I hope, for our nation's sake, that this continues to be true.

For that reason, I really hope the economists are dead wrong about the recovery rate. If not, we have some serious soul searching to do. Perhaps we have been dead wrong about some of our core beliefs.

"People Don't Like Ads" Yes and No

Surveys for decades have shown that "consumers don't like ads." But there's a big caveat. People always say they don't like ads when those ads are interruptions of some desired experience.

But sometimes ads are part of the desired experience. If you are an outdoors enthusiast, ads about gear you can use outdoors are very interesting. If you are a runner, ads about shoes, clothing, nutrition and events are very interesting.

If you are a surfer, ads about surfboards are very interesting.

So it comes as absolutely no surprise that 38 percent of respondents to a Parks Associates survey say they do not want to receive ads for any reaon. About 37 percent of respondents say they are neutral about ads and 25 percent are open to getting them.

(click image for larger view)

The study also confirms the notion that people will not mind getting ads when those messages are personally relevant, timely and valuable. To be sure, 18 percent of respondents say they don't mind seeing personally relevant ads, with 39 percent reporting they are indifferent and 43 percent not interested.

The problem with surveys, though, is that they sometimes cannot capture the complexity of consumer attitudes. Just about any survey will show that people dislike ads. But if asked whether they would rather pay money to gain access to desired content, for example, or get that same access for free, in exchange for the presence of ads, most people say they'll accept the ads.

Targeting and value make the difference. If the ads are relevant, they are unobjectionable, for the most part. If the user gets something in exchange for receipt of the ads, and the ads also are relevant, surveys show people are accepting, if not entirely happy all the time.

Twitter: "What's Happening," Not "What are You Doing?"

Twitter has made a refreshing, helpful and important change in the basic question our tweeting bird friend asks us.

"What are you doing?" had been the question. The new question is "What's Happening?" That makes more sense to me, corresponds to the way I use the service, and I suspect will deepen and extend the use of tweets as a broadcast, one-to-many information service.

"The fundamentally open model of Twitter created a new kind of information network and it has long outgrown the concept of personal status updates," says Twitter founder Biz Stone. "Twitter helps you share and discover what's happening now among all the things, people and events you care about."

What's interesting here is an important, if subtle shift from "you" to "the world around you." That isn't to say people will stop posting about where they are, random musing or what they are doing, as people.

It is to say that Twitter now is poised to become a more important "news" or "media" format, as it already has been becoming.  I like it.

Another Broadband Stimulus Delay

The National Telecommunications and Information Administration told the U.S. House and Senate Appropriations Committees it will start awarding grants in February 2010, another slip from the revised timetable of December 2009.

The first round of grants was supposed to be issued in June 2009. All during the year, telecom suppliers who are thought to benefit from the program have been asked about when the funding would show up in company activity. Now we know the answer: not until 2010 and probably 2011.

The delay presumably means grants or loans issued by the Rural Utilities Service might also slip into next year. Both programs have experienced delays, perhaps inevitably, given the huge increase in workload.

The NTIA and the Rural Utilities Service say they have received roughly 2,200 applications for the $4 billion worth of grants available for broadband projects in the United States that is available in the first round of funding.

The applications ask for total of about $28 billion in broadband projects, or seven times the total funds available.

The $4 billion in grants currently available to applicants is just the first part of the $7.2 billion that the government has allotted to fund broadband infrastructure investment over the next two years.

Of that money, $4.7 billion has been given to the NTIA to award grants for projects that will build out broadband infrastructure in un-served or under-served areas; to deliver broadband capabilities for public safety agencies; and to stimulate broadband demand through training and education.

The remaining $2.5 billion in broadband stimulus money has been allotted to the Department of Agriculture to make loans to companies building out broadband infrastructure in rural areas.

Barnes & Noble Runs Out of E-Book Readers, Demand Stronger than Forecast

Barnes & Noble says it has run out of available stock of the new Nook e-book reader. Customers who ordger now won't get it until the week of Jan. 4, 2010. "Preorders have exceeded our expectations," said Barnes & Noble spokeswoman Mary Ellen Keating. The company says its $259 e-book reader "continues to be the fastest-selling product at Barnes & Noble.

That has been true for Amazon's Kindle, as well, which is the leading e-book reader at the moment. Analysts have been ratcheting up their sales forecasts over the past two years as consumers exceed earlier forecasts.

Apple, meanwhile, is rumored to be preparing a tablet style device that could double as an e-book reader, and, rumor suggests, will be available early in 2010.

So there is lots of "action" in the e-book reader space, interesting for what it implies about the future economics and distribution formats to be used by the publishing and news industries, the sustainability of "single-purpose" mobile device markets over time, contrasted with "multi-purpose devices," and the associated impact on mobile service provider business models.

There doesn't seem to be much question that distribution of print content now is at the beginning of a change that music already has gone through, and that video also is undergoing. Book distributors and publishers have to be wondering whether this is all such a good thing for them.

From an end user standpoint, one of the interesting angles is whether the e-book reader remains a stand-alone, single-purpose device or whether it ultimately becomes a feature of a multi-purpose device. The answer obviously has huge ramifications for smartphone, netbook and e-book providers.

There is no single historical pattern here. TV displays, home audio systems, microwave ovens and landline phones generally have remained single-purpose devices. The iPod has been a single-purpose device, but the "touch" and now the iPhone might be changing that situation.

Smartphones are multi-purpose devices. Portable navigation devices traditionally have been single-purpose devices, but the Motorola Droid is challenging that notion.

Apple's rumored tablet would be an attempt to provider a multi-function device, and that probably is the form factor necessary for such a convergence. Though people have speculated on smartphones becoming e-book readers, the challenges of form factor (small enough to fit in purse or pocket, light enough to use as a phone, plus large enough screen size to read) seem rather implausible in a single device.

Besides Amazon and Barnes & Noble, other companies offering e-readers include Japan's Sony, Britain's Interead, and Dutch company IREX Technologies.

Forrester Research estimates that three million e-readers will be sold in the United States this year, up from a previous forecast of two million units.

Forrester said it expected 900,000 units to be sold in the upcoming holiday season alone and for e-reader sales to double to six million units in 2010, bringing cumulative sales to 10 million units.

Citi analyst Mark Mahaney thinks Amazon will sell 1.5 million Kindles in 2009, up from his previous estimate of one million. Mahaney thinks Amazon will sell 2.7 million Kindles in 2010.

“Book applications for smartphones have the potential to become a bridge to other devices such as tablet readers and netbooks,” said Mr. Weiner. “Apple, for example, could migrate the more than 500 book applications in the iTunes store to a tablet device and Google, which recently announced a browser-based e-reader, could offer applications for Android-based devices of various form factors,” he says.

Mobile Broadband Complementary to Fixed Broadband

Over the next three to five years, mobile broadband will be complementary to fixed broadband, rather than a substitute, says William Lehr, economist and research associate in the Computer Science and Artificial Intelligence Laboratory at Massachusetts Institute of Technology.

"I expect fixed and mobile broadband services to offer distinctly different sets of basic capabilities, and as a consequence, to remain distinct services that will not be perceived as close substitutes in most user and usage contexts for the foreseeable future," Lehr says.

There will be situations where it is reasonable to expect that mobile services will be perceived as substitutes, if imperfect substitutes, for fixed connections, and will therefore result in some cannibalization, he says.

Users who are more budget conscious (the young or others with limited incomes, for example) are more likely to choose one instead of both services, Lehr suggests.

Heavy users may prefer fixed broadband access, while light users (or those who live alone) may find the mobile alternative more appealing.

Also, users who place a high value on mobility are more likely to opt for mobile over fixed services. Conversely, those whose principal mode of usage is at a fixed location and who would have a high need for a large sized display, may strictly prefer fixed broadband services.

As mobile data rates increase, some users may find that for their usage profile, mobile is fast enough to meet their needs even for shared household use. That should especially be true now that MiFi devices can allow sharing of one mobile connection by as many as five devices.

On the other hand, even though mobile bandwidth is increasing, so is fixed bandwidth. So the relative value of mobile over fixed services is greater when the fixed service is less capable. In other words, a fast 4G wireless connection might be perceived as superior to a lower-speed digital subscriber line connection, compared to a fiber-to-home connection or DOCSIS 3.0 cable modem service.

What the situation might be in 10 years is likely unknowable, but it is reasonable enough to assume that if today's smartphones are simply tomorrow's phones, and if new devices continue to be developed, that mobile broadband always will be a distinctly complementary service. If you assume today's 276 million mobile phone users in the future will simply be smartphone users with broadband connections, you get the point.

In fact, it probably makes more sense to say that fixed services are not going to be substitutes for mobile broadband, than to argue that mobile will be a substitute for fixed access. Nearly every mobile device will require broadband, irrespective of what in-home or in-office devices require.

Whatever you think about mobile broadband, it is worth remembering that mobile broadband services were not available in the U.S. market until 2005. So we are at this point just five years into the product's lifecycle.

By the first quarter of 2008, 40 million or almost 16 percent of mobile subscribers were regularly accessing the Internet using mobile broadband services, according to Nielsen.

Analysts at Forrester Research use a lower figure of 34 million subscribers in 2008. That will have grown at a 52 percent rate in 2009 to 52 million, and mobile broadband will continue to exhibit double-digit growth through 2014, when 106 million users, or a full 39 percent of all wireless subscribers, will become regular mobile Internet users, Forrester now projects.

PC data cards represent about 34 percent of mobile broadband subscriptions, while smartphones rapidly have emerged as the key driver of new mobile broadband accounts.

Is Twitter Traffic Falling?

More than one recent study has suggested that Twitter traffic is declining, after leveling off in the summer of 2009. But is it really? The answer is complicated.

According to Nielsen, traffic to Twitter.com was down a dramatic 27.8 percent between September and October 2009, falling to 18.9 million unique visitors.

Research firm comScore also noted that unique visitors were down 8.1 percent in October, while Compete reported a 2.1 percent decline.

Some might suggest the traffic decline is caused by falling interest in Twitter, while others suggest the traffic simply is caused by Twitter third-party applications and mobile access.

Crowd Science, for example, in August studied traffic patterns and found 43 percent of Twitter users accessed the service through third-party applications, and 19 percent using text messaging.

Personally, I'd bet on the use of third party apps and mobility as the explanation. Nielsen says the third quarter of 2009 was the first quarter in which more than half of mobile Internet users were accessing the Web using a smartphone, and since social network updates are a huge driver of smartphone usage, it stands to reason that traffic sources are changing.

Are Recession Driven Product Substitutions Permanent?

Whatever else one might say about it, a recession is a prime opportunity for product substitution whose immediate benefit might only be seen to be “saving money,” but which then might create a satisfying habit that leads to a permanent shift in demand, not just a temporary change of provider or service level.

In the U.S. market, the issue is whether the millions of customers who have opted for prepaid mobility will keep those plans even after the recession has past. Virtually nobody thinks consumers who have cut the landline voice cord in favor of mobility are likely to reverse course.

The poster child for substitution of mobile broadband for fixed broadband, for example,  is Austria, where  almost all broadband net adds have over the last year or two been mobile connections, rather than fixed connections.

And though the market in Austria and in the United States appear to have different structural characteristics, the danger of product substitution is amply highlighted in the Austrian market, where aggressive mobile providers, high fixed broadband prices and relatively low value of entertainment video create a sort of perfect storm for mobile broadband substitution.

And though it is not certain, past recessions were linked with, though perhaps not directly contributors to, the rise of disruptive new players in media or communications ecosystems.

Google was born in 1998, in the midst of the Asian financial crisis, while Skype was born in 2003, after the dot-com implosion, for example.

Changes in industry structure and the emergence of disruptive new industry leaders will not be ascertainable for some time. But churn is going to be easier to track, as we normally get reasonable trend data from any number of public companies every three months. We largely will have to guess at how product substitution might be occurring.

Some forms of substitution are now so commonplace as to be expected: cable companies and mobile providers gaining voice customers while telcos shed them; telcos gaining video customers while cable companies shed them while online viewing grows.

Other likely product substitutions are less visible. It is not clear there is any appreciable substitution of mobile wireless broadband for fixed broadband. But logic suggests that will become a greater opportunity and danger in several years, when fourth-generation services are more widely available.

Parks Associates research, for example, finds 80 percent of broadband users in key European markets prefer traditional video viewing to online viewing. Depending on how you want to spin it, that is a glass half empty or half full.

“Broadband has transformed video viewing habits in Western Europe, where over 20 percent of broadband households have watched a film or TV program online in the past six months,” say researchers at Parks Associates.

Mobile broadband and mobile broadband modems and dongles (including embedded devices) are growing dramatically. In several major European markets, including Austria, Ireland and Sweden, as many as 15 percent to 30 percent of broadband subscriptions are now over cellular networks, up from nearly zero a year ago, the International Telecommunications Union says.

Think about that for just a moment. From zero, mobile broadband jumps to 15 to 30 percent of total broadband accounts, in a single year.

That represents some mix of additional access accounts supplemental to fixed broadband, and some substitution. But it is significant that the ITU report believes the growth shows “mobile broadband can substitute for light-usage DSL.”

So the logical question is whether mobile broadband is to fixed broadband as mobile voice was to fixed voice.

Analysys Mason notes that one of the key success factors for the rapid take-up of HSPA (3G) has been the introduction of flat-rate pricing with either unlimited usage or very large inclusive data bundles.

So at least in some markets, the recession could be leading some significant number of consumers to trade off their fixed broadband connections in favor of mobile broadband.

The longer-term issue is more important. Once they have learned to live that way, will they continue when the recession ends?

That is the big danger on a number of fronts. And it is a bigger change than simple churn, as important as that is.

If a business customer picks another provider for one or more services, the danger for the original provider is that this particular customer never returns.

If a customer switches from cable to telco or satellite for video, does the cable company ever get that customer back? And if a customer abandons all landline service, does a telco have much of a shot at getting that customer back later?

Those issues are real enough. More challenging though is a fundamental new behavior pattern that changes the size and value of an entire market segment, application or service, not simply the market share various contenders can claim.

Sure, there will be important but temporary effects during the recession. What bears closer scrutiny are permanent changes in end user demand. The recession will provide incentive to try new things. Once that happens, we might see the behavior persist even after the recession-induced driver has passed.

We won’t know precisely how important all that is for some time. What does seem clear is that lots of people are going to try new things, maybe just to save money at first. There is no way all that behavior is going to stop once the recession is a memory.

If You Wanted to Build a National 100-Mbps Access Network, Could You?

The Federal Communications Commission says it will cost $350 billion to build a single, nationally available broadband access network operating at 100 Mbps and reaching virtually every American. The FCC also says it is studying whether telcos and cable companies should be forced to offer open access to third parties that want access to their networks.

Assuming one believes that both ubiquitous access and 100 Mbps speeds are a desirable thing, and virtually everyone might agree, in principle, that that is a worthy goal, the issue becomes "how to get there."

At some fundamental level, policymakers will have to decide whether they want maximum deployment and innovation in terms of new physical facilities, or mazimum third party access. 

Some will argue this is a false choice. That is possible. There is no way to predict with certainty what will happen if robust open access policies are instituted. 

That would be especially true if cable operators, for the first time in industry history, also were forced to open up their facilities for open access. 

Many will point to mandatory open access policies existing elsewhere in the world, and argue the same sorts of benefits can accrue in the U.S. setting. Some consumer advocates say open access is one reason why Internet service is cheaper and faster in those countries. it's a complicated question to answer, however. 

In most, if not all countries where robust open access rules apply to telcos, the competitive landscape is quite different from that of the United States. Few other countries have ubiquitous cable broadband and telco broadband. 

That might not seem, at first blush, to be much of an issue. It is, and the reason is as simple as pointing out that competitive markets are distinctly different from monopoly markets. Keep in mind that a single provider of very-high-speed access, operating on an open access model, still is a monopoly. There is one network and all comers can pay to use it. 

The issue is that such a provider, or providers, as would be the case in the United States, would not be able to operate as a monopoly, because there no longer is any such thing in the U.S. broadband communications business. 

In most communities, there already exist two fixed broadband access providers in the cable and telephone company. In addition, there are places where a third fixed operator exists, or one or more fixed wireless providers.

Then there are two national satellite broadband providers, Wildblue and HughesNet.

Beyond that, there are four mobile providers with existing or partially-built mobile broadband networks, as well as Clearwire, also in the process of building its own national broadband network.

So here's the problem. Where open access broadband networks are most successful, there is not a ubiquitous cable competitor fighting head to head for customers. Assume for the sake of argument that cable providers, nationally, have about 48 percent share of the fixed market, all telcos collectively have 38 percent, and other providers have the rest. 

Assume away all the issues of changing the business models of the whole industry so that one provider in each locality is charged with building a 100-Mbps access network, and is then free to provide service to all comers, at government-mandated rates.

Assume away the problem of the actual wholesale rate, which was part of the Telecommunications Act of 1996. That Act imposed just such an open access policy on major U.S. telcos.

To simplify what happened in the aftermath, telcos violently disagreed with the wholesale rates, while competitors argued just as vociferously that the mandated rates were too high. At the same time, investment in faster broadband facilities slowed dramatically, for one simple reason. Telcos saw no advantage to investing in expensive new facilities that provided a financial return unappealing to the entities who would have to lend the money.

All of that changed when new rules were written that exempted new fiber-based facilities from the open access requirements. Keep in mind that cable companies still do not have any open access requirements of any sort, and that any new broadband policies might well require them to provide wholesale access as well, and that they might also object to the mandatory wholesale rates. 

But ignore that for the moment. Here's the investment problem. Companies have to raise $350 billion in private capital to build the network. And when they develop their financial projections, they will have to note that the new revenue from building the $350 billion network is based on the incremental difference between what typical customers now pay for broadband access, and what they will pay for 100 Mbps access.

But there are other services on the network, you might point out. That's true. But here's the problem. The new network only replicates voice and video revenue already earned on the existing networks. No smart lender is going to okay huge sums based on replicating existing revenues. They will want to know what new and additional sources of revenue will exist. 

The providers can argue that where consumers now pay $40 a month for single-digit megabits per second of access, they will pay $100 to $200 a month for 100 Mbps access. Then the providers will have to model what percentage of customers will do so. When the number turns out to be quite small, the money will not be raised.

There just aren't all that many customers willing to pay $100 to $200 a month to get 100 Mbps when they can do nicely with 20 Mbps to 40 Mbps for lots less money. Ask people. They will tell you what they'll do.

You might argue that take rates will be very high if people can buy 100 Mbps for $40 a month. And that's correct. The problem is again that $350 billion cannot be raised if the new network has no ability to pay a return, in a reasonable amount of time, on the investment. And at anything like $40 a month, no lenders are going to cooperate. 

But matters actually are more complicated than that, as if that was not a show stopper. Recall that most people who want broadband access already buy it. Recall that cable providers, with their own networks, serve about 48 percent of the customers. 

Ask any cable executive you can find whether they would be willing to stop using their own network and just buy access from the telco. Go ahead. Ask anybody you can find. Let me know when you find anybody that says they will do so. 

But ignore that. Say the local telco is charged with building the 100-Mbps access network, and that somehow lenders are convinced that large numbers of people will buy the more-expensive 100 Mbps service. How many of its own customers, and customers of other providers, will switch to buying the 100-Mbps service? 

Be generous and say 20 percent of all broadband access customers can be convinced to buy the 100-Mbps service. That means about eight percent of the telco's own retail customers will do so. 

Say 20 percent of cable customers desert. That adds another 10 percent of U.S. broadband customers. Then assume 20 percent of all the other customers likewise make the move. That adds another three percent of current broadband customers.

What that all works out to is that about one in five homes or locations the new 100-Mbps network passes will buy the higher-priced access service. So the issue is whether an adequate financial payback can be built on serving one of five locations passed with a single new service.

You might argue there also is voice and video, but the problem is that the existing networks already provide those services. Additional revenue is not created just because the network changes.  

But assume an investment of $2700 per passing to build the network. Assume the 20 percent take rate and $60 a month incremental revenue per customer ($100 a month). 

Based on those assumptions, the network costs $13,500 per customer, since only one in five homes is a buyer. At an incremental $60 a month in revenue, breakeven (even at zero interest cost) is 225 months, or 18.75 years per customer.

Nobody will lend money for a breakeven of 18.75 years, and that is assuming zero interest on borrowed money.

An open-access 100-Mbps network might be a worthy public policy goal. But it is hard to see how money can be raised to build it.