Recently in telco 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.

Doug Mohney tweeted this morning that Verizon has a 7-day repair window which may be why they are losing landlines. I would suggest that the RBOC have been lobbying since 282 Relief for Forbearance relief as well - at both the state and federal level. For the most part they have won. 

Gone is the regulation for most telecom services in most states, which means the state PUC cannot deem that POTS lines be fixed in 24 hours (the old standard), especially when Digital Voice (VOIP) is dependent on broadband that does not have an SLA or mean-time-to-repair.

After VZ's 6-city forbearance petition was struck down in 2007, VZ legal took it to the court system and won a review by the FCC.

By letting landlines go, the majority of the existing POTS type service will go to cable or other providers, which would almost insure that VZ would get forbearance on a new review. Slick and devious.

Everyone has some plan to spend money for broadband now that the BTOP is out there.  Much of the broadband problem revolves around lack of fiber. There's no conduit and no fiber, so what do you do?

This one blog post explains the conduit and fiber access dilemma and how if it is not addresses will create problems down the road. 

Then you have a couple of Congresspeople pushing a bill to build conduit into any highway expenditures. Except the Highway Trust Fund is broke.

Maybe we need to stop looking at the federal government for broadband deployment and start looking at the business plan for after you sink all those assets in the ground. Need we forget that there is plenty of fiber in the ground from companies that have long been forgotten that lies unused (because no one knows where it is, where it goes or who owns it). 

At the end of the day, there needs to be a business plan that allows for sustainable broadband. Paying for the network usage and maintanence.

The USF contribution is now 12.9%!! WTH?  That is too much. And that doesn't include the companies that will take loans or grants under BTOP and go under (never to pay it back or deliver service). What will USF look like in 2 years?

Meanwhile, you have the NTCA saying that Google and content providers should pay into USF. Excuse me? They do pay into USF on transport billing. 

What do they think people want the broadband for? Email? Bell-heads need to figure out what happens when the system they love crashes. What happens when the Universal Service Fund collapses upon itself? Most ILEC's, including VZ and ATT, get millions from the fund.  Millions of my fee dollars go back to prop up an unsustainable system.

Former SBC chief Ed Whitacre is going to be the next Chairman of GM. Huh? According to Bloomberg, Whitacre is doing his patriotic duty and loves the challenge. Rich Tehrani thinks that Whitacre was a strategist. He dismantled the regulatory landscape, fought off (and then ate) is competitors, and turned a local Bell back into Ma Bell after numerous acquisitions that have never been integrated. (AT&T still acts like 7 different companies to anyone that has to work with them).

So how successful will an insider monopolist from SBC be at a dying auto maker? Well, less debt to deal with. Inside political track, which is the only way he plays the game. He didn't really understand the Internet and probably doesn't understand the auto industry either. 

His "partners" at SBC (authorized sales agents) are much like dealerships, who should expect the worse, since every company SBC bought tightened the screws to the agents. 

Rich writes, "For too many years GM had lousy management and created cars that for lack of a better word sucked. Americans ran away from Detroit automobiles like AT&T ran away from VoIP in the nineties." Rich, SBC (now called the new AT&T) isn't exactly known for being innovative either. No VoIP. Compete on price. Long installation intervals. Bad billing. What exactly is Whitacre going to bring to the new GM? From what I can see having dealt with all the Bell companies over the last 10 years, he was a lousy cheif exec except that he could put deals together. So what? GM is selling parts and Whitacre knew as much about internal organization and integration as Level3 execs. 

This is also the guy whose company allegedly helped the NSA wiretap the nation. I guess this is his thanks, since Crazy Ivan at VZ is still busy.

Who is my choice? How Elon Musk? How about someone from P&G or Unilever? 

Success is measured a number of different ways, but make a big, hulking, inflexible, non-innovative tech company isn't what I would consider a success. GM needs fast, flexible thinking; innovation; reach out to dealers and workers; and a huge re-branding campaign (which might be the only thing Whitacre is capable of: re-branding GM as the new GM with the same crap as before).

SUMMARY:

GM needs a creative thinker that is flexible and industry knowledgeable. Someone who can bring new partners and ideas to execution quickly, because mergers and acquisitions are not going to be the solution for GM.

GM has two prime missions: convincing people to buy its cars; making cars people want to buy despite the state of GM.

Unfortunately, the government once again shows that change has not come to Washington as they pick a crony instead of the right person - something we have seen too much of during these times of re-invention and government intervention.

With VZ shedding its last bit of rural landlines to Frontier, the blogosphere is alive with talk about Super RLEC's - Frontier, Fairpoint, CenturyTel, Windstream and maybe Qwest.

CenturyTel's coming merger with Embarq will give it the title as a top 5 ILEC is size. But these are declining assets as landlines are being shed for cellular and to some extent VoIP. How Super is that?

Telecompetitor writes, "For carriers that lack wireless assets, building the scale that can create  operational efficiencies and provide the means to profitably build and leverage broadband applications is paramount for future survival."

Building Super isn't easy. Fairpoint has been a flop. Huge debt. Broken promises. Increasing consumer complaints. Lots of line losses.  That's not Super.

I can't think of a single telecom merger that resulted in the synergies or integration that was promised. For the most part, it's just a CEO and Banker feast of bonuses. The consumers lose.

Look at Frontier. It isn't exactly innovation nation now. Sure it does some VoIP, but it's TV service is DISH TV resale.  And this RLEC has seen years of complaints at state PUC's, which means poor service. How will the integration with Verizon landlines improve that? I keep see the nightmare coming. Unfortunately, the regulators can't (or won't). (The same for the Embarq-CenturyTel deal. C-Tel's systems that I have interfaced with are older than dirt or PAPER!).

None of the RLEC's have a nationwide or even a fairly large cellular footprint. So it's just a matter of getting big and hoping to ride out the cash cow of wirelines, like EarthLink is doing with dial-up.

Remember the MCI Agents who didn't like the new deal under the Verizon Business umbrella, who were pushed aside and lost commissions? Did you know that when Verizon did their funky little deal with Fairpoint over the New England region, VZ agents were pink slipped. In fact, one agent is suing Fairpoint. It's the quote from Beth Fastiggi, a spokeswoman for FairPoint, that shocked me:

"We believe that our own local employees can better serve our local markets and, given the appropriate resources, will have the commitment and ability to increase our share of the local business market," Fastiggi said in a statement Friday.

Don't need agents. That attitude explains the lousy service, numerous complaints to the PUC, and the lose of over 100k lines - in a rural market!

Today, VZ announced it is spinning off the landline network in 13 more states - to a joint venture corporation with Frontier. I'm certain those customers are thrilled. At least, they had a slight hope of getting FTTH. Now, not so much.

Frontier does have a Business Agent Program. I don't know anyone in the program so I have no comment on how strong it is for agents.

Embarq agents are waiting to hear what happens to them with the CenturyTel merger. These mergers do impact both consumers and small businesses, especially the agent businesses.

 Thanks to the Arkansas Democratic Gazette for the chart.

Despite a big drop in earnings and revenue for the first quarter 2009, Windstream still managed to buy some more lines and customers by snatching up D&E Comm.

D&E Communications is an ICP, an  integrated communications provider, offering residential Voice, Video, Broadband and On-Site Computer Support services as well as business-class Networking, Business Continuity, IT, Security, Voice and Training solutions. D&E is an ILEC and a CLEC.

This stock-and-cash deal (worth about $330M)  "nearly doubles the company's operating presence in Pennsylvania with the addition of approximately 165,000 access lines and about 44,000 high-speed Internet customers."  That's about $2000 per subscriber.

"D&E Communications generated $148 million in revenue and $64 million in operating income before depreciation and amortization (OIBDA) in the twelve months ended March 31, 2009."  So the buy is about 2x Annual Revenue for those hoping to play at home.

"The transaction also includes six wireless licenses for 700 MHz spectrum covering a population of approximately 1.3 million in central Pennsylvania," according to the press release. 

While Windstream isn't having a strong quarter with dipping revenue, it is doing okay selling Internet and TV. It passed 1 million high-speed Internet subs by adding net 31,000 this quarter. In addition, more than 21,000 digital TV customers were added, bringing the total TV count to about 295,000. "It also recently finalized an agreement with DISH Network to sell digital TV to Windstream's commercial customers, Gardner said."

 

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."

Dear Small Customers, we don't want you. At one time, Level3 was in the mindset of: we only want big customers. Bill $25K per line of product or we don't want you. Today, it's Global Crossing.

At this time, we're not actively pursuing new customers(CLEC's et al)in Wholesale that currently bill or have the potential to bill less than $50K/month.

It gets harder and harder to deal with telcos. Changing rules. Quoting, Provisioning, Commission and Billing challenges. And they look at each other and wonder why aren't we making sales?

There are only 3 RBOC's left: AT&T, Verizon and Qwest. In the new Fortune 500 listing, telecom has 21 companies listed. The top 2: Ma and Pa Bell. AT&T has revenue of $124B. VZ is $97B. Profit for AT&T is $12.9B, and only $6.4B for VZ. I say only because the profit is half that of AT&T. I guess building out FiOS and buying Alltel costs a few bucks. And I bet it adds a huge amount of debt. Factor in the LTE buildout (after the 2.5G and 3G upgrades) along with rumor that VZ wants to buy out Vodafone's 45% stake in Verizon Wireless. I guess the New England landline sale to Fairpoint only gave them a tax credit and less debt, no real profit.

Notice that Sprint is # 3 on the F500 list but lost $2.8B on $35B.

Qwest is #6 after Comcast and DirecTV! Qwest's $13.5 billion in revenue result in less than $1B in profit -- just $681M.  But they did better than Charter which lost $2.5B; Virgin Media that lost $1.7B; and Cablevision which lost $228M on $7.2B.

We'll see how the pricing and marketing pressure affects these numbers in three quarters.