Recently in telecommunications Category

So on Linkedin, Neal Lachman, asked if the $100 Triple Play was Viable in today's economic molasses. Neal writes:

Bundling voice, video, data services for a higher ARPU was an obvious, great move when broadband services and advanced digital services were first introducded......  However, the market is moving more towards a lower ARPU for the triple play services. This is especially going to play a big role in future operations. The time of high ARPUs is going, and soon it will be history.

I believe operators have to lower their ARPU estimates from 2010 onward, simply because the customer won't be willing to pay as much. Today operators generate $100+ revenue per month on their triple play services. In 2010 and later, they should be happy if they can reach ARPU of $50. One example is the FTTH service in Holland, where people do not even want to pay more than €50 for their triple play bundle.

My thoughts on it are here:

Telcos like AT&T and Verizon are actually losing money on triple-play. Think about the fact that they were getting $35 for a phone line and $35 for DSL (averages for consumers 2 years ago). Now they have to upgrade the network to offer TV, which is the least profitable service. And do that for $30.

Install and maintain the network that they will be capping. Install home equipment like ONT and STB. To give it away for $100. Now usually the telcos will add taxes and fees on that to increase their profit.  But its the MSO's who are making out. They went from the least profitable service (TV) to the more profitable services of phone and Internet.

With all of the CAPEX for DOCSIS upgrades as well as FTTx and WiMax build-outs, these companies won't be able to lower ARPU for triple play.

The cost of TV content is increasing. Must carry TV channels are now asking for a bite of the pie. You have seen the battle that NFL Network and the other sports networks are having to get carried by the systems -- and to be carried in the most popular packages.

I can see how the MSO's and telcos would have to lower ARPU averages in the face of the economic tsunami we are experiencing, but they won't be offering triple play for $50.

Remember that for the Bells, RGU's include security, cellular, and now tech support. Cablevision rolled out a $350M wi-fi network in NY. The duopoly knows that to keep churn down, they have to get sticky with ubiquitous Internet Access and to get close to a quad-play. Surprisingly, while Verizon has the quad play in my town (Tampa) - FiOS TV, Internet, phone and Cell - that is not the package that they advertise to my house Every Single Day.

 The cost of customer acquisition, retention, advertising, tech support, customer care, bad debt, security, upgrades, and maintenance are too high for the triple play ARPU to drop below $99.

Bandwidth caps have more to do with preserving TV revenues than network management business. Yes, there are issues of last mile and node congestion for both telco and cableco networks. It is also a function of the band-aid approach that these companies take. instead of one huge upgrade (like say Verizon with FiOS), there have been baby step fixes.

It's also about preserving revenue. If you switch from watching Broadcast TV to just downloading Netflix and Amazon, how do the TV Providers make money from VOD (video-on-demand)? If you are watching shows via Joost and Hulu (and the coming network to replace Showtime), how does the big upgrade get paid for? The duopoly is preserving its content revenue - plain and simple.

Personally, the FTC should be investigating false advertising by the carriers - both on cellular data and broadband. In many cases, it is sold as Unlimited, but isn't. That's false advertising.

This will present an interesting challenge as people will switch. The duopoly is doing everything it can to compete on price and not value. Neither company is trying to court customer loyalty.

The ripple effect on this may be to stymie Internet business growth. Software and Application companies (SAAS, ASP), Web 2.0, and entertainment companies will find it hard to maintain customers and grow revenyue under a bandwidth cap.

I wonder how AT&T's partner, Apple, who makes the Apple TV and owns iTunes, feels about a cap, which will eventually flatten its revenues.

Not for nothing but these companies can't bill correctly anyway. There are certain to be many folks billed for overages where there are none. An even bigger erosion of customer satisfaction is coming.I guess we forget about Customer Acquisition costs and the lifetime value of a customer.

• Cbeyond Reports $90.2 in Q3 Revenues, up 25 Percent
• Sprint Nextel $600 Million of Debt Coming Due Is Only One Worry - but they have $3B in cash??? Use it to buy a cool phone - T-Mobile, AT&T and VZW are killing Sprint because they have better phones. Handsets drive cellular. Period.
• EarthLink has a $54.7M profit last quarter!
• I forget that taxes play a huge part in mergers - that's why Embarq & Windstream didn't merge; it plays a part in XO's life (NOL's); and it certainly played a role in the VZ New England spin-off to Fairpoint.
• Sprint and Cogent re-connect but continue fighting
• JD Power's ISP Ratings are in (here). Cablevision, WOW!, Cox and bright House won.

By accident, I ran across JobVent today. On first examination, it's just one more Web 2.0 forum for employees to complain about their bosses. AT&T has 5 companies - 4 are rated as bad. Cbeyond and XO are on there. Verizon is on there with 6 listings - VZW gets good marks. How is your company doing?

Saw this commercial on TV yesterday for oovoo, which is a Skype replacement.

Why did I like it? Because it demonstrated what it does while doing what Ma Bell used to do in the old days with its Reach Out and Touch Somebody ads.

It makes a connection with the audience. The connection is an emotional bond. No talk of features or benefits. Perfect.

Luca says that there isn't room for any more players. To an extent that is true because the market is full and it will be a zero-sum game of take-away. But with marketing like this, I can see how oovoo could take market share -- but how do they make money?

In its latest financial filing AT&T claims that they sold 6.9M iPhones and added 1M new cellular customers in the quarter due to the iPhone 3G. (Apple says that 39% of quarterly revenues were due to pushing out 200M iPhones so far.)  Here's the funny part: Agents can't sell the iPhone. Agents can sell Blackberries and other phones but not the iPhone.

Once again AT&T spends money to create a "Solution Provider" Alliance Channel that demonstrates preferences to AT&T sales employees over its Channel agents. On its Alliance website, AT&T writes "Targeted customer sets to minimize channel conflicts" That's some messaging there.

Speaking to the Channel Champions, more than one is worried about what the new year will bring. One never knows what the RBOC Channel will look like year to year.

Not being able to sell the hottest phone to business execs is just one example of how the direct side is treated preferentially over the Indirect Channel. Another is on pricing. Last week, I received a phone call from AT&T about my posting pricing to my client blog. They wanted it removed immediately. Well, I am a sub-agent of a Solutions Provider; I am not direct. (Been there done that; have the scars to prove it). But the pricing did not come from an AT&T website. The pricing came from one of my customers who got it from his account exec. At that point, it's public domain. Just another example of AT&T and its control issues.

AT&T is a wireless company. If that was really true, agents would be able to sell all of its wireless products.

According to Alex Muse, DSLReports and GigaOm, Cogent and Sprint de-peered this morning in a tiff of some kind.  Cogent claimed this year that it was settlement free - coupled with its roots in the PSInet backbone network made it a Tier 1 provider. Cogent has had issues with other backbones including Level3 and Telia.

Cogent is incensed at the move,saying it violates a contractual obligation to exchange internet traffic on a settlement-free peering basis, and is taking legal action. It wants Sprint-Nextel to re-establish the link on the same basis.

So Cogent decided to make an offer:

Cogent is taking the moral high ground, and offering every Sprint-Nextel wireline customer that can't connect to Cogent's customers a free 100MBps internet connection until Sprint reconnects, though it says it can't do the same for wireless users. [IT examiner]

from today's HARO:

"The Telecom Council of Silicon Valley is now accepting applications to present to their Investor Forum on December 5th, location in Silicon Valley (TBA).

 Over the past 6 years, 50% of presenters to our Service Provider and Investor Forums have started talks with our members and 20% of those lead to a deal.
This Quarterly Investor Forum meeting attendees include both the Service Provider and Investor members of the Telecom Council who gather for one purpose - to invest in new telecom technologies and companies. As a start-up in the telecom industry, there is no better room to be in, and no better audience to pitch to. In addition to providing high level networking and quality investment opportunities to our forum members, another one of the Telecom Councils goals is to help interesting start-ups kick start their business development cycles. For an idea of who to expect at our December meeting, past attendees include AT&T, Sprint, Orange, Vodafone and many more.

It is free to apply and applications to present to the 12/5 Investor Forum will be accepted until 11/8. Please submit requests at:
http://www.telecomcouncil.com/speakers.php
All applications are reviewed by the Investor Forum steering committee, and companies selected to present will be notified on November 10. Presenter registration is free for Telecom Council members, or $500 for non-members.
Feel free to contact Liz Kerton for more information on the forum, liz (at) telecomcouncil.com."

There is a lot of activity in the International arena. Here are some highlights:

• Vodacom is acquiring Gateway Communications in West and Central Africa. 
• C&W is partnering with Vietnam Data Communications Company and BSNL in India.  
• France Telecom (Orange) acquired 51% of Telkom Kenya. 
• Telefonica now has a 9.9% stake in China Netcom. 
• XO reaches into China with China Netcom. 
• Google, Liberty Media and others are launching 03b, a satellite internet service that will consist of a cluster of 16 satellites delivering wholesale internet access to Asia, Africa, Mid-East, and Latin America.
• Verizon and Google are launching  Trans-Pacific cable (separately).

That's the round up in a nutshell (thanks to Capacity magazine).

The FCC is holding a meeting on Nov. 4. On the agenda: Inter-Carrier Compensation, Alltel-VZ merger, Clearwire-Sprint merger, and a vote of White Spaces. Lots of heavy lifting on this agenda. Martin wants to give his pals at VZ one more gift before he goes.

The VZ-Alltel merger is big, but the topic that can really rock telecom is the Inter-carrier Comp issue, which has been a stagnant FCC docket for years.

If companies can show high costs, they will continue to benefit from the subsidy program. Martin also wants to eliminate wireless providers' right to claim government subsidies for offering service in hard-to-reach areas. Martin wants all companies, wireless included, to show they have incurred losses in providing rural service before they can collect the subsidy. Without those changes, Martin worries that the subsidy fund will collapse of its own weight and rates will go up anyhow. [CNN]

It depends want the Compromise looks like -- and it will be a large compromise. Democrats want one thing. Republicans another. Cellcos versus Wireline. Rural versus Urban. Inter-Carrier Comp even bleeds into the USF issue. How? Because rural carriers count on both Universal Service Fund subsidies AND rather high call termination charges to keep afloat.

Why now? The ISP inter-carrier comp rule has been in court for six years. Earlier this year, the DC Court ruled that the FCC had to get off the pot:

The court set the deadline for an order from the FCC at November 5, 2008, six months from the date of oral argument, stated it will not grant an extension and warned that if an appropriate order is not timely issued, it will vacate the interim inter-carrier compensation rules.

Consumer groups are against another largess for the monopolies at the expense of the ratepayers.

The head of the Federal Communications Commission wants a massive overhaul of the fees that phone companies pay each other when they connect calls. Supporters say the reforms will help fund improved broadband Internet access for rural America, but consumer advocates question how much the plan will raise people's phone bills. "This could be potentially a billion-dollar giveaway to phone monopolies, paid for out of consumers' pocketbooks," said Chris Murray, an attorney with Consumers Union. [AP]

Intercarrier comp is how the various phone companies pay each other for traffic. VoIP providers and cellular carriers, especially Sprint, would like a fairer shake. The old RBOCs would like the Rural LEC's to stop getting so much money. (see Free Conference services not getting paid by RBOCs).

The National Telecommunications Cooperative Association, which represents small phone carriers, told FCC officials earlier this month that a new rate of $0.0007 per minute puts many of their members' livelihoods at risk.

And then there is the White Spaces issue. When broadcasters make the DTV transition in 1Q09, there will be unused spectrum that the Wireless World would like to use for its own bandwidth needs. However, due to bleed over (interference) with cordless microphones and other broadcasting devices, the NAB is opposed. [see dailywireless]

All of this is at one meeting while America votes.