Recently in cellular Category

There was a question on LinkedIn today about the MVNO model making a comeback. It seems that Sprint buying Virgin Mobile has sparked a slow news day. 

Let's not forget that SK Telecom dropped almost $300M on the Earthlink MVNO formerly known as Helio, which was given to Virgin Mobile last year. SKT was looking for a foot hold in the US market (just like every other international player). If SKT decided to sell its one stake, what chance does the MVNO model have?

As more minutes move to the cellular networks from the wireline network, how does that scale or make financial sense for a virtual operator? (Many analysts note that it hardly makes financial sense for the network operators).

I'm thinking that Sprint bought it to prop up some pre-paid revenue (short term). Or that Sprint needs to just embrace pre-paid altogether in which case they need to go buy some more players including Yak.

After Google Voice was rejected by the Apple iPhone store, the new FCC - Chairman Julius Genachowski, and Commissioners Michael Copps, Robert McDowell, Mignon Clyburn, and Meredith Attwell Baker - was prodded into action by Google. The FCC sent a letter to Apple about the GV Rejection. (Read it here). The Letter (DA No. 09-1737) has nine very specific questions to be answered by Apple and AT&T by August 21.

The New FCC also sent a Letter (DA No. 09-1739) to Google concerning Apple's rejection of the Google Voice for iPhone Application.  The questions are not nearly as pointed but are specific. It seems the New FCC wants to make certain that VoIP isn't excluded from handsets. It also seems like the New FCC wants other "carriers" to have a fair shot at the cellular network. (It's our spectrun after all; the carriers are just leasing it).

This makes me think that FreedomVoice should complain about their Newber app that was stalled in the iPhone store process as well.

After dumping New England on Fairpoint and cashing in on that garage sale, Verizon bought Alltel. Now it is dumping more rural lines on Frontier. All of this is just Verizon's way of shoring up its stock report. Without the kickers from the Fairpoint transaction and the spurt from Alltel, my bet is that the company would be showing a loss. CNET reports that its profits are down.

It's pouring money into M&A, FiOS, LTE, 3G, International backbone, and Advertising. Especially Advertising. I get something everyday from Verizon. Even at 50 cents per mailer, that's almost $10 per month on one prospect. 

It's about to dump big bucks in a conversion to LTE for its VZW network to keep saying its the best network. But that is after it integrates the Alltel network. Oh, and after it settles things with the rural cellular companies who are tired of VZW squeezing them. Remember that they just built the 3G network, so that debt isn't paid up yet. And cell phone subsidies are increasing to compete with the fact that folks want the iPhone or the Android. 

The FiOS build out is costly. I read that VZ claims it is under $900 per home passed. No one else in the industry has a number that low. Most are closer to $2000 per home passed. Customer take rate is about 21-22%. How many of those are just upgraded DSL subs? 2.5M FiOS TV subs now - some from cable but some from DISH Network, I'll bet. (Still no mention of the 500K voice lines Bright House took from VZ in greater Tampa Bay).

Lots of M&A activity to hide the fact that its growth is stalled and that it has to be taking on huge debt from Alltel, upgrades and Customer Acquisition.

The deal that was supposed to save VOX Corp. (parent company is Pervasip). After Networld World questioned whether the mobile VoIP service could actually work, the company stripped data from its website (as reported by both PC World and Network World).

PC World further reported, "Earlier this week IDG News Service reported that it's unlikely that Zer01 could be technically able to offer the unlimited mobile voice and data service that it is advertising. The service, originally targeted for a July 1 launch, does not appear to be available yet. In addition, it's being marketed through a multilevel marketing program run by a company called Global Verge whose founder, Mark Petschel, in 2005 pleaded guilty to securities fraud. Petschel is currently on probation."

The other issue being raised is that the MLM program has more questions than answers. When Lightyear is selling cellular via MLM, you at least have a very clear picture of who the parent company is and other company transparencies. That is not the case with the Zer01 MLM program. Again PC World, "It's not the only related Web site that has changed since the original report on Monday. The Web site for UTG no longer features executive bios, company addresses, some previously provided telephone numbers or links to related companies such as Yorkshire Investments or the Yorkshire Foundation."  And it goes on and on with PC World checking up on UTG facts. The Consumerist has a diagram of the MLM program.

Even Engadget points out that Zer01 will be undercutting its own MVNO partner - a losing strategy if ever there was one - and using VoIP on AT&T's 3G network, that has already seen issues from too much iPhone traffic, let alone VoIP calls streaming and tunnelling through its network.

Stacey at GigaOm writes about the data problem for cellular companies. On the one hand, data revenue of $40 to $60 more per month from an account seems pretty good; on the other hand, 70% of the traffic on a tower is from data cards (about 3-4% of subscribers). This seems like they should have known this.

Voice calls take up less than 10K per stream. 3G data takes up to 3MB. AT&T sees how much bandwidth an iPhone pulls off its network (read: a lot!). So are they just getting us addicted to a flat rate service and smartphone access only to charge us per byte later? It would seem so.

Once again they designed a voice network instead of a data network. (Remember the busy signals on dial-up?) And misjudged how people would use it.

With the workforce becoming more mobile and virtual each quarter, cellular data will increase. As households drop landlines, cellular usage will climb. I hope they have a plan for this.

Like terrestrial broadband not having a good enough business model for the network operators, it looks like cellular broadband will have to be re-tooled -- now that folks are addicted to 24/7 unlimited access.

We see the consolidation in the rural landline business. Verizon has dumped unwanted regions on Hawaii Telecom, Fairport (New England), Alltel (old GTE areas like Eastern KY), and soon the Frontier deal.  

Centurytel and Embarq just merger. It was May, 2006 that Sprint spun off its wireline business into Embarq. Alltel followed suit with a spin-off of its landline business to Windstream which was a merger of Valor and Alltel. 

The RBOC's have tried to staunch the landline slide, but I think now that they have declared themselves wireless companies, have given up the ghost. Verizon is now advertising to consumers to cut the cord. VZ has been selling Naked DSL longer than AT&T, but not as long as Qwest. I think VZ is betting entirely on FiOS and cellular.  We'll see because Comcast is now bundling Clearwire and Sprint 3G with its triple plays.

I'm watching two conversational threads right now. One about Google Wave, which as Andy Abramson writes:

I'll refer to Wave as transformational, as its not revolutionary, but moves work flow from asymmetrical to both symmetrical and asymmetrical universes simultaneously, changing how you work both in real time and offline time.

Google has built a "communications" object that is full of capabilities that creates hybrid communications that are going to be a blend of games, email, IM, blogging, wikis, and a lot more.

I haven't seen the Wave demo (see a review here), but the reactions have been nothing short of WOW, even more than when Google Voice launched. Google Voice probably made a few ITSP's cry, because it delivers features that they don't, but surprisingly people want. The me-too mentality of telco has slipped into the VoIP World. Except for a few mash-ups, VoIP has remained ho-hum to me for the last two years. The only surprising thing was how few VoIP Providers could get it right and deliver reliable service. And how few could attract more than 10,000 lines.

That takes us to the second thread about the Zer01 mobile service, which is VOX VoIP over the GSM data network of its partners (AT&T and T-Mobile). It is an unlimited plan for $70. No voice calls go out the GSM network, all tunnel back to go out VOX's network via a VPN, which should be taxing on the GSM system. Why? Because cellular calls are moved from tower to tower as you travel, but a VPN call would need to stay at the original tower or drop - then tunnel to each new tower.  This may not be taxing if most calls are off the one tower and don't move, which is possible. And if many UTGI customers are not dense in any area.

The UTGI contract with VOX calls for "a renewable "take-or-pay" obligation for at least 50,000 lines in the first year of service". (IP Business)  "Ben Piilani, UTGI CEO, stated, "With over 100 distributors already committed to over 500,000 lines in the first year, we could easily exceed one million lines in year one, and we are targeting five million lines by the end of the second year."

I question that number because Nextel's Boost is offered Unlimited for $50, all the big guys have Unlimited for $100 - data and voice. Virgin Mobile USA is adopting a $50 plan as well. Two drivers seem to be Price and Handsets. Nice handsets like Blackberries and iPhones come with a $100+ monthly price tag, but you can get service for $50 per month with a lesser phone.

I'll tell you where I see the problem: it's pitched on price ($70 unlimited) and there are cheaper plans. It's pitched as cheap International calling, where there are numerous competitors - i2, Skype, Fring, TruPhone, etc. And how big is the market to call International from your cell phone?

One thing UTGI probably doesn't understand is that having an ILEC as a vendor means your largest competitor is also your vendor. And he doesn't play nice. Most MVNO companies including marketing giants like Disney/ESPN have closed because competing against a cellco is difficult. (Wait until UTGI sees the billing error machine at work!)

MetroPCS has 6M lines. It took them a long time to get there. MetroPCS "ARPU fell from USD 42.51 to USD 40.40", significantly lower than $70. It's churn rate is 5%. I would love to know its Customer Acquisition cost and its Advertising budget.

You can get details of the UTGI/VOX Zer01 plan here. (Pervasip's SEC filing on it is here.) My skepticism comes from: can VOX's proprietary system and its company (which laid most folks off recently) scale to accommodate the UTGI plan IF UTGI can actually sell that many lines, which seems doubtful under the current flat market of cellular that is seeing higher churn, lower ARPU, higher customer acquisition costs, higher handset subsidy rates - it's a zero sum game of take-away. 

Finally, while Google's Voice and Wave services are Wow-ing people, UTGI isn't doing anything magical to the consumer experience. It's another arbitrage game. What's the reason a consumer would care how the call is carried? Consumers care about the handset and what they can do with it - text, take pictures, surf the web, and lately the apps.

How does this work?

"AT&T Inc said Friday it will buy the bulk of Alltel Wireless assets being divested by Verizon Communications Inc for $2.35 billion, and will sell some Centennial Communications Corp assets to Verizon Wireless for $240 million." [telecomengine]

When they say divest assets, it's suppose to increase competition. Swapping assets between the two biggest players is not what was meant. "Verizon previously had said more than 30 companies had expressed interest in the Alltel assets." I guess only one was REALLY interested. (This burns my rear. Copps needs to say something - maybe block Ma Bell from buying Centennial.

Also, one is CDMA (VZW) and the other GSM (ATT). How do they even use the assets purchased?

"Under terms of the deal, AT&T will buy licenses, network assets and 1.5 million subscribers in 79 service areas, mostly rural areas in 18 states, the company said in a statement. .... Verizon now expects to buy former Centennial wireless properties, including licenses, network assets and nearly 120,000 subscribers in five service areas in Louisiana and Mississippi."

I was told that when you hear rumors about a merger, it's just bankers raising a balloon to see about interest. It's there way of testing the waters so they can "earn" some money with a little M&A action.  (You wonder why banking is in trouble? What do they actually produce? Nothing. Very little value comes from companies merging. It only results in lay-offs, market share gains, and bankers pocketing millions).

This week - besides the swine flu hysteria - was the rumor that VZW would get an Apple device to sell.  AT&T and T-Mobile run on GSM like most of Europe; VZW and Sprint run on CDMA, like nowhere else.  It would be difficult to roll out one CDMA model for VZW. Anyway.... who benefits from these rumors? Well, everyone. According to John Gruber, Apple and VZW definitely benefited from the rumors. AT&T just gets added pressure to secure exclusivity on the iPhone for more than one more year. [More here]. Rumors: someone always benefits.

There are so many mobile voice apps I cannot even keep track. Some are convoluted. Some are callback services. Some are pure packet based VoIP that eat up data usage. Others actually use up minutes.

With all the hype about Skype on the iPhone, I have to wonder why you would need it. Most cellcos offer an unlimited plan. Are you making THAT many international calls on your cell phone? How many people could that possibly be?

Don't people work in an office at all? Couldn't or more correctly shouldn't important phone calls be made at the office? Here are the benefits of calling from the office: the background noise is less, the sound of flushing toilets is minimal, and no one can overhear your conversation. Oh, yeah, HD calling! At the minimum, you have better call quality than a cell phone at the office.

I know that people travel more than I do - Rich certainly does - but how much international dialing are you doing? It would seem that any domestic calling can be done via your cell plan. Conference calls? How about Google Voice or other conference platform that dials out?

It just seems like there are so many mobile VoIP apps and not enough benefit to the caller. Also, as Gary Kim writes here, this will likely result in more expensive data plans. What Gary didn't mention is that the cellular network is based on a finite bandwidth schema. Voice calls take up less than 10K. VoIP calls have to take up at least 35k, so every VoIP call is taking up about 4 voice calls. That's a huge displacement. Add in backhaul costs that have now quadrupled and the cost structure (or more precisely the RBOC profit structure) just went out of whack.

At the end of the day, I don't understand the mobile VoIP app.