They tried and failed with UBB. Now they are at it again with "speed boost" technologies. The two technologies at question are Verizon's "Turbo” service and Roger's "SpeedBoost”. There are very few technical details, but it appears in the former case that users will be able to purchase additional instantaneous bandwidth to the detriment of other users on the same shared service. Whether this will make a difference to actual throughput is another matter because the slow video may be due to server problems and not network congestion. And if you are in elevator with very poor connectivity, you will unlikely get any faster download speed, no matter how many times you press the turbo button. But will Verizon give you a credit if you don't get the advertised speed boost? I doubt it. Similarly the Rogers' service, while still free, seems to imply faster speeds if they detect you are streaming a video, particularly from their own on-line service. Will users who are not streaming video, but using other real time applications get the same benefit such as VoIP or Telepresence? I doubt it.

The carriers continue to have this brain dead idea that bandwidth is a scarce resource — which is only true to the extent that were the ones who created this artificial scarcity. Building a business case around an artificial scarcity is as stupid as trying to make a premium market from air we breathe. Customers aren't interested in buying bandwidth or quality of service to enhance their user experience. Just as with electricity they want and expect that just about any appliance or application will simply work — with no need for special speed boosts and other gimmicks. Imagine negotiating with the electric utility for a little extra power when you needed to turn on your stove or TV.

It is last mile packet loss which has the biggest impact on the customer's user experience — NOT bandwidth or congestion. The Internet (TCP/IP) is designed so that packet loss is used as a signaling tool to reduce packet throughput. Regardless of where the packet loss occurs the Internet is designed to slow down any data stream, that is affected by a lost packet. However the rate to which a data stream is slowed down is greatly dependent on distance. This is why moving caching boxes as close as possible to the user affects end-to- end throughput, particularly if there is ongoing packet loss.

Although bandwidth and congestion can be a factors affecting packet loss, there are much more clever ways of reducing the impact of packet loss, especially in wireless environments. There are two much simpler solutions. The first is to locate caching/cloud servers as close as possible to the end users. Something that companies like Akamai and Google do already — at no charge to the carrier. Decreasing wireless distance from the wireless node is the other critical factor. This is why integrating WiFi with 3G/4G is so important.

A good example of a carrier that "gets it" is Free.FR in France. Free.FR is redefining what the idea of a carrier in the 21st century is, thanks to these innovations I have been talking about and pioneered by R&E networks like SURFnet. Integrating a blend of Wi-Fi, 3G and its all-fiber backbone, Free will offer unlimited voice, texting and data over the mobile networks. Free.fr deploys their own set-top box for automatically sharing a portion of one's broadband connection via Wi-Fi with other Free.fr customers. Over five million set-top boxes means Free.fr has a free Wi-Fi cloud covering major cities such as Paris. Even when away from home, you can easily get broadband instead of resorting to an expensive 3G network. Their set top box will also allow extreme local caching, to further enhance the user mobile experience. This is the future of broadband. Not silly gimmicks like TurboBoost or SpeedBoost.

Written by Bill St. Arnaud , Green IT Networking Consultant

But is Google doing the deal at least partly to give it leverage over wireless providers? I think so. The biggest threat to the growth of Smart Phones and tablets and other Google businesses like YouTube is the imposition of data caps and metered pricing by wireless providers like at&t and Verizon Wireless.

The providers would like to charge by the number of bytes transferred — similar to the way they charge for voice minutes today. Content providers (including Google) don't want an expensive impediment in the way of their content distribution. Providers of software and hardware for tablets, Smart Phones, and computers (including Google) don't want these devices to be less useful because content delivery to the devices is expensive. Not a moral issue here but a business one, although — in the long term — I think unlimited data plans lead to more growth for everyone (and proved that to my own satisfaction with the launch of AT&T WorldNet, which popularized all-you-can eat pricing way back in dialup days).

Today the handset manufacturers, with the exception of Apple, are at the mercy of the carriers, especially in the US where most phone are locked to the wireless network that subsidizes their initial purchase. If the manufacturer doesn't have a deal with Verizon or at&t, they can't get the volumes they need to be a serious player in the US market. iPhone as a must-have device for networks began to upset that balance of power; but Steve Jobs hasn't yet used Apple's muscle to build a US market for open iPads or iPhones which can run on any network given the right prepaid SIM card.

But Google is much more in the content business than Apple is — even given iTunes. Google has more to gain by stopping the spread of bandwidth caps and metered pricing before they become universal for wireless and spread to wireline as well. Google knows that the wireline providers, especially the cablecos who don't want their chokehold on content delivery loosened, would like nothing better than to move to metered pricing themselves.

A handset maker owned by Google can introduce a product without carrier backing and without the need to lock into any network. The product can be cheap to grab marketshare; the product can be subsidized through ads delivered rather than voice or data minutes sold. If the product is incredibly compelling as well, the major carriers will be forced to let it onto their networks as an open device. Customers who bought their phones from Googlerola will find it easy to switch between networks to get the best deal. Competition between carriers will then be based on service quality and pricing only; competitive pressures may well force them back to offering unlimited data. Google wins both as a content provider and as a client provider.

The announced at&t/t-mobile deal will, if approved, shift power to the carriers by eliminating a disruptive competitor and concentrating spectrum ownership. The Google/Motorola deal shifts the balance of power away from the carriers.

Dan Frommer speculates:

"If Google and Motorola can push the price of smartphones down even more, and if carriers can accelerate the uptake of mobile data plans, this could be good for them. But there's also the chance that Larry Page has a long list of wacky, disruptive ideas he wants to try, focused around handset distribution and pricing, ad subsidies, etc., which could take real leverage away from carriers. Their path toward dumb pipe status seems to be increasing by the deal. This will likely end up better for consumers but could be annoying for the carriers."

But it doesn't stop there. As Peter Kafka points out on All Things D, Motorola Mobility, the company that Google is proposing to buy, is the world's largest provider of set-top boxes. Suppose set-top boxes were not subsidized by or distributed through cable and satellite companies. Suppose they came from Googlerola and were so good at what they did and so cheap on the open market that the content distribution networks had to offer them without a specific lock to their content in order to stay in the broadband ISP business (even though they'd still be able to charge for content). That would be the end of any thought of metered pricing for wireline Internet service. Another threat to Google would be eliminated. More content opportunities would open up.

The acqusition be all about the patents as most people are saying and as Google broadly hinted; but, as Stacey Higginbotham and Katie Fehrenbacher writing on GIGAOM say: "if Google wants to use Android as a way into the home, Motorola's home automation, set-top box and broadband gear businesses now gives Google a platform from which to jump."

Written by Tom Evslin

Company further reports that currently, Real-Time Entertainment applications consume 49.2% of peak aggregate traffic, up from 29.5% in 2009 — a 60% increase [see figture below]. Sandvine forecasts that the Real-Time Entertainment category will represent 55-60% of peak aggregate traffic by the end of 2011.

Other findings include:

• In Latin America, Social Networking (overwhelmingly Facebook) is a bigger source of traffic than YouTube, representing almost 14% of network traffic. Real-Time Entertainment represents 27.5% of peak aggregate traffic, still the largest contributor of traffic in that region.

• In Europe, Real-Time Entertainment continues a steady climb, rising to 33.2% of peak aggregate traffic, up from 31.9% last fall. BitTorrent, a peer-to-peer (P2P) file sharing protocol, is the largest single component of both upstream (59.7%) and downstream (21.6%) Internet traffic during peak periods. In the UK, BBC's iPlayer is 6.6% of peak downstream traffic, reflecting the demand for localized content in many markets. Overall, individual subscribers in Europe consume twice the amount of data as North Americans.

Internationally, there are already a number of large Video-On-Demand (VoD) providers, including Netflix, Amazon, Wal-Mart and Apple, which introduced a rental streaming service via iTunes in early 2008.

A sign of the times came with the 2010 bankruptcy of Blockbuster, once one of the largest move rental companies. In April 2011 it won final approval to sell its assets to Dish Network Corp for $320 million. Blockbuster attributed its bankruptcy to the economic downturn and increasingly competitive environment in the US, via services from NetFlix and Coinstar's Redbox. At the time of bankruptcy, Blockbuster had 5,600 stores in operation.

The Blockbuster name is a marketing tool in itself however, as it has strong brand recognition attached to it. Dish Network hopes the acquisition of Blockbuster's assets will provide an opportunity to expand its services and cross-marketing initiatives while also complimenting its existing video offerings.

Other digital media players showing renewed interest in the VoD sector include the industry heavyweight, Google. It initially launched an online movie rental service in 2010 called YouTube Rental and in April 2011 it increased its competitive position by forming partnerships with large Hollywood studios Sony, Warner Bros and Universal.

Not to be undone, Facebook has entered the VoD market via a partnership with Warner Bros; signalling the beginning of merge between social networking and VoD services. By using Facebook credits, users can purchase a movie and watch it in their browser. Titles are available for both purchase and rent. Some points to note regarding the Facebook service include:

• Facebook users must allow the Warner Bros App access to limited personal information, just as with other apps.
• At this stage only Facebook credits can be used to purchase movies. While this system allows for international users to make purchases as it is not based on currency — it also limits consumers to those who are prepared to purchase credits.
• In the future the combination of using demographic data might be tied into the VoD service and prompt suggestions for other movies that consumers may like.

The Hollywood studios have long generated a large revenue stream from physical DVD rentals and it will be quite a task for online channels to make as much money. However the economics of online distribution seem to be improving and with DVD rental kiosks like Coinstar proving popular and services like Netflix gaining in popularity; it certainly appears that the writing is on the wall for traditional video outlets.

Written by Paul Budde, Managing Director of Paul Budde Communication

All the cable companies easily beat all the phone companies with the exception of Verizon where we're seeing a mix of DSL and FiOS results.

And just in case you believed the hype about 4G, notice that Clearwire's Clear service comes in below DSL.  There is no reason to believe LTE networks will do any better once they have customers, i.e. once they are carrying commercially viable levels of traffic.

Written by Brough Turner, Founder & CTO at netBlazr

1) Consumers pay Internet Service Providers ("ISPs") a monthly subscription with the expectation that the fee covers access to available content, i.e., the conduit. As the World Wide Web evolves and content options diversify to include full motion video, consumers simply expect their ISPs to make sure the download distribution pipes are sufficiently robust to handle high bandwidth requirements and commensurately large monthly download volume. Cable modem service agreements may have a cap on downloading per month, but consumers generally assume "All You Can Eat" access rights, plus the expectation that video streaming will work, i.e., no blurring, frozen frames, or blue screens.

2) Because upstream requests for content are narrowband and because the typical consumer downloads much more content than he or she uploads, ISPs serving end users, such as Comcast, typically will have a large traffic imbalance with more downstream traffic to deliver than upstream traffic that the end user serving ISP might want other ISPs, such as Level 3, to handle.

3) Until such time as Comcast's "Television Anywhere" takes off and generates lots more traffic that Comcast will need other ISPs to handle-whether on a peering or transit basis-Level 3 vastly contributes to Comcast's download "surplus" delivery burden to end users. Of course Level 3 replaces another content distribution network so the total volume of Comcast's downloading burden does not change in the short term. However, in the context of peering and transit between Comcast and Level 3, the traffic volume relationship changes with a greater imbalance resulting from the new Netflix traffic Level 3 now delivers to Comcast.

4) The Comcast- Level 3 dispute distills to a disagreement over whether and how much either should pay in light of changed traffic patterns. Because the parties already have traffic agreements, modification of terms might require additional payments from Level 3 to Comcast, absent Comcast's need for Level 3's upstream transmission services. Of course Comcast does need the services of Tier 1 ISPs like Level 3, but until Comcast starts distributing lots more of its cable television video product over the Web, Netflix downloading to Comcast subscribers will predominate.

5) Cooperative ISPs typically align inbound and outbound peering traffic with an eye toward creating a balance, but either or both ISPs might also want to expand transiting services as these paid arrangements are based on the unlikelihood of balanced traffic loads.  Digital Society Policy Director George Ou reports that Comcast and Level 3 have both peering and transit agreements. George lays blame on Level 3 for expecting Comcast to absorb the newly increased volume of traffic delivered to it by Level 3 without additional payment by Level 3, or the offer of additional free upstream capacity.

Reasonable people can disagree as to the mutual exclusivity or substitutability of peering versus transit. George considers the two types of traffic arrangements mutually exclusive and has chided me for thinking that the parties could recalibrate both to mitigate the traffic imbalance if they wanted to (read more).

The Comcast- Level 3 dispute confirms that there is no such thing as a free lunch. It also highlights disagreement over who has to pay when consumers' download requirements increase with full motion video access. George considers it a nonstarter for Comcast to raise end users cable modem rates, despite a vast increase in the value proposition created by IPTV.  Some economists consider it a given that Comcast has the "right" to demand compensation from both sides of its market position, upstream from Level 3-and possibly the real instigators of greater bandwidth requirements Netflix and Google-and also downstream from end users, i.e., cable modem subscribers, co-conspirators with Netflix and Google.

Bottom line: one or more players in the Internet "network of networks" will have to pay for greater capacity. Early on in the Internet's development, avoiding payment strategies were depicted as "hot potato routing." Carriers unwilling to upgrade facilities to accommodate greater demand sought to hand off traffic as soon as possible. Level 3 has no such option of passing the packets off to several different carriers for the last mile to end users. Comcast knows this and true to form the company exploits its position to the fullest extent possible.

Written by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law

An early indicator of a popular service straining fixed-line networks was provided by the BBC's very popular iPlayer, soon to become international. The service was a focus of telco ire since users consumed enormous bandwidth. Telcos responded by demanding, more in hope than expectation, that the BBC and, by the same token, Google and other companies like them, should pay a form of rent in recognition of the bandwidth demands on their infrastructure which their services generated. The BBC, conscious of these accusations, is developing a system to show users, by colour code, how efficiently the latters' ISPs are handling the service to them. By using adaptive bitrate streaming technologies, the BBC hopes to help reduce network congestion.

Yet the government assumes that as long as there is sufficient competition among ISPs, and that consumers are clear about the service given them, there is no need to have net neutrality regulations. The difficulty with this reasoning comes down the way the broadband market has developed, both in the UK and elsewhere in Europe. In the UK alone there are more than 500 ISPs with access to nearly all households. Yet despite the competition engendered by LLU, market forces, the economies of scale and the cost of furnishing sites with equipment has led to considerable consolidation within the sector, with the result that about 75% of all subscriber lines are provisioned by a triopoly of BT, Carphone Warehouse and Virgin Media.

Ofcom's position is partly fence-sitting: it wants ISPs to be transparent to customers about traffic management, and is edging towards allowing them to work out their management protocols by themselves, without introducing a standard system or minimum service. It assumes that consumers will simply decamp to another provider if the service received is poor — if their ISP discriminates against particular traffic because they have struck commercial deals with certain content providers — but in most areas outside a number of urban zones with congested exchanges there are generally no other ISPs available for consumers to turn to.

Written by Paul Budde, Managing Director of Paul Budde Communication

Read full story: External Source

On the one hand we are now starting to see the more widespread availability of digital TV and this has revealed a clear point of difference between the strategic directions being taken by the telecoms and the broadcasting industries. Less emphasis is being placed by the broadcasters on the Internet-based opportunities and more on adding TV-based entertainment to their offerings. They do have access to good quality entertainment, which is protected through rights and royalties, and this helps them to withstand the tsunami of technology that is undermining their business model.

So the effort of the broadcasting industry is now clearly focussed on digital TV.

However, at the same time the TV set is now turning itself into a multiple function screen. In the USA it is estimated that in 2010 more than a quarter of all TV sets will be Internet-enabled.

The focus of the broadcasters seems to have moved away from their fear that DVR was going to enable viewers to skip advertisements. However, their next worry will be that viewers will move away to Internet-based TV — in other words, they will lose them, not just for the ad breaks, but from traditional TV entirely.

The launch of Apple TV is going to further undermine, not only the traditional broadcasting model but now most certainly the pay TV (cable TV) business model and new telco models based on IPTV also. Through an unobtrusive and cheap box (US99), with a simply click on the screen, apps can be activated that will deliver TV Apple TV content on the normal TV screen.

Link this to the new Internet TV sets and think about the iPhone business model with the Apps and it is not too difficult to envisage that a myriad Apple TV apps will become available. Apple has not yet launched the business model for this service but the other IPTV and VoD models are certainly going to find it extremely difficult to compete with Apple TV. The exclusive content arrangements the broadcasters enjoy will save them for a while but in the end if Apple TV becomes commercially interesting allegiances will start to change.

Also important to realise is that soon there will, no doubt, also be an 'AndroidTV' model, this will further open up this market and even further threaten the traditional TV models.

Hopefully the broadcasters will not concentrate their activities on trying to stop this from happening. It is to be hoped that instead they will embrace the opportunities that these new developments offer by linking their content to the new technologies, become TV Apps providers over these new distribution models. They will need to look at broadband/Internet/apps as just another medium to deliver content to their viewers.

Cable and Pay TV operators in particular will be under pressure to drop their bundled packages and offer their content on an à la carte model.

In countries where broadband infrastructure is lagging behind broadcasters perhaps have an opportunity to become players in this market via the digital TV technology.

Obviously the broadcasting business models that based on geographic licences will need to be changed as well.

However, it looks as though Apple TV will demolish the IPTV and VoD models that telcos are now trying to establish in order to generate new revenue streams. It is again a case of too little too late. The telcos have been looking at these models since the 1990s (triple play) but, similar to the mobile portal models for mobile phone content, they have not been able to build the appropriate business models that would have propelled them to the forefront of these developments.

Written by Paul Budde, Managing Director of Paul Budde Communication

KT was banking on real-time Internet TV services because growth in the traditional broadband and telephone markets had slowed. The company planned to invest more than KRW1.7 trillion (US$1.5 billion) in IPTV services by 2012 as part of efforts to cultivate new sources of revenue.

Competing in what is already a saturated pay-TV market, with more than 15 million households signed up to cable television, proved to be a difficult challenge. Despite these initial problems, IPTV was starting to take off by mid 2010. By mid 2010 KT had a 54% market share, having overtaken SK Broadband’s previous market dominant position in early 2009. LG Telecom has experienced steady growth but has gained market share over SK Broadband as well.

Broadband penetration figures are high in South Korea and the operators are keen to find new revenue streams, in particular to offset losses from traditional PSTN lines. IPTV will help them develop bundled packages with mobile and broadband services and as such the number of subscribers is expected to reach 3.34 million by end 2010.

The increase in IPTV subscriptions is partially driven by the operators’ offsetting declining PSTN revenues, but also due to the government pushing for the services to become more popular. The government has urged the companies to market the IPTV services more. These services still account for less than 15% of the cable TV subscriber base.

New 3D technology is a big bet both for the television industry and the broadcasting segment looking for the next big thing, but the lack of content, high prices and the required use of glasses remain big hurdles. KT, LG Telecom and SK Broadband are however desperate to secure market share at expense of profitability in the short term. Already KT and SK Broadband plan to double their investments in IPTV services in 2010. These budgets would have to be further boosted for 3D deployments.

Written by Paul Budde, Managing Director of Paul Budde Communication

In my work on network neutrality I have considered what ISPs can do to provide upstream content providers service enhancements. When March Madness arrives with the college basketball tournaments I want content providers to have the option of securing priority treatment of their video bits. Streaming video has greater bandwidth and bit rate requirements and ISPs should have the option of providing greater assurances that the bits will arrive on time. IPTV consumers will not tolerate a slide show presentation of video streams coupled with frozen frames, artifacts and other service glitches.

So what's fair and what's not?

It should be a foregone conclusion by now that ISPs have the option of diversifying service away from a plain vanilla, "one size fits all" business model. Better than best efforts traffic routing can represent a legitimate response to consumer requirements. Put another way many forms of price and quality of service differentiation seem reasonable if ISPs operate in a transparent and nondiscriminatory manner. This means that ISPs should have the option of offering better than best efforts, but not solely to one "most favored" venture, and in a way that guarantees increasingly inferior service to everyone else. ISPs should not deliberately drop packets to discipline or punish specific content providers who have opted not to pay more for superior service. ISPs should not partition their bandwidth so that the plain vanilla users face certain congestion.

I do not recall reading or hearing any network neutrality advocate condemning the services of Akamai and other ventures that enhance Internet traffic routing. Perhaps all these companies limit their enhancement to reducing router numbers and distributing content closer to end users so that the final leg or two, still routed via best efforts, will not degrade performance. So if Akamai offers permissible enhancements what is wrong with ISPs themselves providing similar enhancements? Perhaps it is ISPs' ability and incentive to engage in harmful meddling of traffic coupled with opportunities to do so in a stealth mode not easily detected, or remedied by regulatory agencies. So distrust and at least some instances to corroborate it drive some of the network neutrality advocacy.

ISPs cannot simply provide reassurances voiced by CEOs, that they would never block or degrade service, particularly now that the FCC lacks jurisdiction and the FTC apparently lacks interest in enforcing such commitments. Similarly I am not keen on the FCC brokering some grand deal negotiated by select stakeholders. Ideally Congress should enact specific and narrow mandate for the FCC to enforce ISP transparency and non-discrimination, not as Title II regulated common carriers, but as information service providers subject to specific, straightforward and reasonable expectations.

If the Google-Verizon deal results in legislation, or specific and enforceable ISP commitments, then the outcome won't be all bad.

Written by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law

In the U.S., for example, Verizon and AT&T are telling similar stories. Wireline losses continue to mount, and wireless is driving most of the growth. Heavy investments in fiber to capture video and power Internet users are necessary, but will take some time yet to become major bottom line producers. Verizon, in fact, lost $198 million in Q2 — this time last year, they made $1.48 billion. Not surprisingly, to stem the tide, layoffs continue. Their job rolls are about 25,000 employees lighter from last year, and they anticipate another 11,000 will take early buyout offers. Wireless growth aside, the story is similar for Canada's major telcos, but the losses aren't quite as steep.

Cable, on the other hand, is booming. IPTV rollouts from the telcos aren't hurting them as much as they're hurting the telcos by winning away landline phone subscribers. At this point, I'm just going to focus on the U.S. market, as the dynamics differ from Canada in a key way. U.S. cablecos are not in the wireless game to the extent that Canadian cablecos are. Rogers is actually Canada's largest wireless operator, and the other three MSOs of note are all on the verge of making major wireless entries.

In essence, the traditional telcos are evolving into mobile operators, whereas the cablecos are building a pretty strong hold around the home environment. It all lines up rather neatly, actually. The triple/quad play bundles are clearly a winning strategy, and the convenience makes sense for the consumer. All the home services are rolled into one package — TV, Internet and home phone. The cablecos have managed to do this very well, whereas only a fraction of telco subscribers can say the same. When you think about the technical challenges behind these services, the outcome really isn't surprising — it's much easier for cablecos to add telephony than it is for telcos to add IPTV. Let's not forget long distance — well, actually you'd better. This used to be a cornerstone of telco profits, but no more. Sure, there is some money to be made with international calling, but domestic long distance is now an oxymoron, as everyone pretty much offers it for free.

So, where does this leave carriers? They really are in a precarious spot, at least in the U.S. On the defensive side of the ledger, they seem to be conceding the landline business outright. The trend is only going in one direction, and they're been taken down by three forces. First, they're losing subscribers to cablecos — this is the toughest loss of all. By definition, incumbents will be the last players to offer VoIP, simply to avoid cannibalizing their core subscriber base. So, while they stayed on the sidelines, the cablecos simply walked in and took the business away. OTT operators like Vonage got the ball rolling, but it's the cable operator's world now, and the OTT's just live in it. Bottom line — the cablecos did a great job figuring out how to offer VoIP. In the early days, there was a question of trust as to whether consumers would take them seriously as telecom providers. Nobody feels that way today.

There are two other factors to consider in the demise of telcos. The second is wireless substitution, which will continue to drive landline losses. However, at least here the telcos have a fighting chance of keeping their subscribers. Finally, there is the white flag scenario, where incumbents are simply exiting the landline business. Divestitures such as Verizon selling off wireline operations to Frontier Communications illustrate how this trend is unfolding.

Now, it looks like the telcos have all their eggs in one basket. Wireless has been their savior, and the growth story simply gets better when you layer on mobile broadband, and game-changers like the iPhone, iPad and Android. Subscriber growth remains healthy, the smartphone market is far from saturated, margins are good, and demand exceeds supply. Countering this, of course, is the endless catch-up that operators need to do in terms of expanding network capacity and transitioning to the all data worlds of 3G and 4G.

As a result, the world of telcos is much different now than ten years ago. The diverse base of services and revenues is gone, and the competitive landscape is far more challenging. Wireless is a great business, but I would argue that telcos have shifted from a position of strength to weakness. By conceding wireline to cablecos they have lost the foundation of their traditional relationship with millions of households, and it's hard to see how they can win this back.

Wireless can be a fleeting market, given the competitive options, especially from MVNO's and prepaid plans — which have no contracts. Profits attract competitors, and the wireless market will only get more crowded, not less. Furthermore, telcos have less leverage with wireless than wireline. Ever since Apple disrupted the status quo with the iPhone, the balance of power has shifted away from carriers to the handset vendors. The mobile device is now a more powerful driver of demand than the service itself, and a mobile operator's success depends heavily on partnering with the vendors, with the right models, at the right times. For better or worse, the cablecos do not have these problems.

If there's one thing that telcos can count on at present is the seemingly insatiable appetite for mobility and the cool gadgets we've become addicted to. Circling back to Canada, I'd like to cite a feature article in last week's Financial Post that talks about how out of control our spending is around these services. This really isn't news, but the article provides a nice breakdown about how much it's really costing to use all these services. To some extent this reflects the downside of bundles, where the monthly bill for everything amounts to sticker shock.

That aside, the main message here is that we're spending much more today to talk — and communicate — than ever before. Despite how IP has led to lower basic subscriber costs and eliminated a lot of long distance and extra feature charges, our bill is now orders of magnitude higher. Even more telling is how little impact our weak economy has had here. We've simply become too addicted to these services, and demand is proving to be inelastic. When times get tough, we cut back on a lot of things, but mobility doesn't seem to be one of them.

So long as the scenario holds, telcos will survive. I'm leaving IPTV out of the equation here — it's too early to tell if this will turn out to be a major or minor revenue producer. However, despite good growth from wireless, I don't see them building off this strength to invest in what remains of their landline franchise. That's the part that concerns me, as I still think there is value in this service, and with some creative R&D and partnering, I believe there are ways to reinvent landline. I just don't think it's good business to abandon landline service in the pursuit of quick, easy profits from mobility. That scenario will not persist indefinitely, especially if consumer backlash takes hold in an attempt to pare back these huge monthly phone bills. If that day comes, and the landline franchise is all but gone, the trusted telcos we grew up with may go the way of the rotary phone.

This article of mine originally ran today in my Service Provider Views column on TMCnet.

Written by Jon Arnold, Principal, J Arnold & Associates

In Indonesia, India, Pakistan and most of Africa, the scarcity of landlines mean "wireless broadband" will be dominant. "Wireless broadband" — especially LTE — could become a player in developed countries if priced right. Rob Pegoraro (Washington Post) finds that Clearwire WiMax could be serious competition to broadband sold by incumbent phone and cable companies. He's getting a consistent connection of about 5 meg down, 500K up, on the current, lightly loaded network. He sometimes has to look to see which wireless network his computer is connected to, Clearwire or his 15/5 FiOS.

Large uploads are painful because of Clearwire's slow upstream, but 4G will do better in time. However, wireless speeds are likely to fall if many people watched quality video over the net.

How much wireless could compete with landlines, especially as all cable connections are moving to 50 meg, was a crucial question for the broadband plan. The consensus of several good engineers is that 4G competes fine with DSL if not many people expect video or other high-bandwidth apps. Wireless certainly can't keep up if many people want to watch their TV over the net, so it's only a partial substitute.

Making wireless an important substitute for DSL requires raising bandwidth caps from today's typical 5-10 gigabytes to several times as high as LTE makes the cost reasonable. If Verizon follows AT&T with an abusively low cap of 2-5 gigabytes and Sprint etc. don't clobber them, the whole broadband plan falls apart because that's not enough for competition in the future.

I doubt Julius understands this, because he would be doing everything in his power to avoid low caps. It's just one more strike against "affordable" broadband, like the recent Comcast and Verizon price increases. People need to laugh out loud when Genachowski says "affordable" while tolerating continuous price increases.

Written by Dave Burstein, Editor, DSL Prime

World Cup and Mobility

Q. How will World Cup viewership demand impact the mobile community from a network capacity standpoint?

A. There has been speculation for years that increased demand for mobile video would tax and possibly crash current networks and infrastructures of mobile operators. A predictor may be The World Cup games held in South Africa. "We know that AT&T, VERIZON, SPRINT, MobiTV and QUALCOMM FloTV teamed up to work with ESPN to offer mobile video coverage of the games." Real-time research conducted by ESPN on World Cup video demand has produced the following statistics:

VIEWING SOURCE - WORLD CUP GAMES
Source	Company	%
Internet	ESPN-ESPN3	31%
Radio	ESPN Radio	8%
Mobile	ESPN Mobile Sites	6%
"Traditional TV remains the dominate source of viewing for the games

MOBILE VIDEO TRENDING
Event	Source	Total Views	Total Days
Vancouver Olympics	Mobile	2.0 Million	17
World Cup	Mobile	1.8 Million	7

"What is interesting in these statistics is that not only are people watching on mobile video, but they are spending an inordinately long period of time watching video on their mobile device, which is significant. Speaking to network capability in handling this viewership, think of over one-hundred thousand cell towers in the U.S. alone, not to mention globally, to handle this demand and you can see the network is not currently being impacted significantly."

Q. Where does mobile traffic go from here and what are the demands going to be for video in both near and long term?

A. Cisco predicts that sixty-six percent of mobile traffic in the future will be video and whether the FCC's reclamation of needed spectrum is enough is not yet known. Kevin goes on to explain that whenever you have a delivery method that leverages a finite resource, such as spectrum; there will always be increased contention depending on what people are doing over that network at any particular time.

It's important to remember that video over wireless can be taxing on the entire network, not just the radio interface. One example is the backhaul network, which is always provisioned with some level of oversubscription. There are technologies that can be used today like video optimization and multicasting technologies which can help a service provider better distribute and deliver mobile video. Other solutions include moving from streaming video to more adaptive protocols like fragmented MP4.

Video and the Network

Q. Why should we look at mobile video as just another application within the network and not a bandwidth hog that could potentially crash the network during peak usage?

A. As an analogy to building strong video infrastructure, Kevin points out that Cable Operators have invested tremendous amounts of capital in their video delivery platforms. It is important to understand that cable has the revenue models which support this kind of investment. Wireless on the other hand has not developed the kind of revenue streams for video since the demand has not been sufficient to support that investment, albeit on a smaller scale.

However, research indicates that as mobile video continues to grow, these kinds of investments will be needed to upgrade current networks to both capitalize on revenue streams and handle the burgeoning demand for video over increasingly diverse devices. Long-term, video might not be looked at strictly as an over-the-top service for mobile, but instead an opportunity for mobile service providers to insert themselves into the value chain; if this successfully occurs, the infrastructure investments which need to take place will happen.

Cisco's experience with operators continues to indicate a focus on optimizing the entire network, including the backhaul, which needs to be a primary consideration in subscription models. Cisco is helping operators control the impact of video by implementing intelligent network capabilities in the core, mobile services and gateways, and backhaul networks. These solutions add immediate value by conserving the RF itself, but also provide the foundation for new monetization capabilities. He adds that adding more spectrum is helpful to the problem, but should not be the only focus of mobile operators.

Kevin points to a consistent theme across all models whether it's Docsis3 or LTE in that the Internet Protocol (IP) is becoming less about a transport mechanism and more about a service delivery platform. He compares Docsis3.0 carrying cable signals to a modem which becomes your access point, where mobile will use the cell tower as the same type user access point. In essence, from the access point back through the network, IP will be the primary technology for service delivery.

Net Neutrality and Regulation

Q. What is the potential impact of Net Neutrality possible legislation which could affect service provider ability to manage their networks?

A. The crux of Cisco's policy release takes a practical view regarding any initiatives that would control service provider network management strength. In essence, "Cisco supports competition within the marketplace and believes that any regulation based on any perceived or potential future abuses are not in the best interest of logical network management practices."

At best the outlook for where technology will be in the future is uncertain, but as progression in technology evolves as a result of private market forces, any attempt to regulate those forces would dampen private investment as a natural evolution. It is inherent that networks be managed in a way to promote bandwidth optimization which fills the needs of both casual and heavy users. Fair usage will be critical to enabling any network of the future and requires an intelligent IP infrastructure. This also sets the stage to use tiered pricing to offer expanded services critical to a B2B and B2C economical model.

Tiered Pricing Models

Q. Why is tiered pricing important for Service Providers in the Future?

A. Quoting Bernstein Research to predict the evolution of mobile data and how fast it is growing in a shift from a voice dominated model to a data dominate model, Kevin conveys that 50% -70% of future revenue will begin to come from a data model with a de-coupling of mobile revenue and traffic with revenues now accounting for $.43 per Megabyte. Bernstein predicts that by 2014 those current revenues will drop to $.02 per Megabyte and points to current revenue models as becoming deflationary.

While networks are moving from circuit to packet models as they continue to upgrade their infrastructure, the amount of capital invested as compared to resulting ROI is expected to decrease 30% by 2014. Increasingly mobile service providers will be looking for ways to monetize their networks. While the tiering trend has been with the cable industry for quite some time, it has not yet evolved within mobile markets.

Kevin predicts this will change as the industry evolves to the tiered approach beginning with flat-rate for basic users and progressing to higher level packages as individual demand increases. Using the 80-20 rule, Kevin compares how only 20% of all users can demand an exorbitant amount of bandwidth and tiering is an inevitable market force in the future. In reality, this will not affect the majority of users where pricing will be very competitive, but will take the heavy users to an appropriate bundling strategy that can handle specific demands at a relative price model.

Creating New Revenue Models becomes Critical

It can be surmised that current pricing models within the mobile industry is driving traffic to higher levels especially with the amount of rich applications being afforded customers due to the iPhone and Android appearance on the scene with open source development driving those applications.

However, mobile operators are only covering their costs with current revenue models and will need the new service offerings and pricing models to create additional revenues and ROI in the near future. Kevin, shares that tiered pricing is only one model of the total business spectrum service providers should be looking at to grow ROI. Cisco is committed to helping providers find other businesses and models to extrapolate the potential of future networks.

That being from a standpoint of B2B services in environmental, energy savings and monitoring services with which both businesses and consumers could reap much higher benefits from these kinds of services. Mobile data penetrations are nearing 50% and voice penetrations are already at 95% which brings further credence to understanding the need for service providers to differentiate mobile service offerings, including mobile data, to retain existing customers, grow their subscriber base, and increase their revenues.

Written by Leonard Grace, Founder & Editor - The Cable Pipeline

The construction of FttH currently stands at around RMB2,000 (US$290) per household, while for FttB it costs around RMB1,000 (US$145) per household. As costs decline due to an improved value chain, the use of FttH will grow more substantially from 2011. The trend towards FttX is being driven by the increasing requirements for bandwidth by new applications and services such as IPTV and High Definition TV (HDTV). The cost of the optical components used for FttX has also fallen dramatically in the past few years making large-scale deployment more economically viable.

On the whole, China is not constrained by needing to make use of massive copper infrastructure investments. Due to the continued pace of construction activity in greenfield sites, fibre is a cost effective means to provide broadband services.

FttX is very popular in Asia. China had the largest FttX market in the world with over 23.2 million by end March 2010, representing 37% of the global FttX market. Japan reported the second largest FttX market with 17.7 million subscribers or 28.3% of the total market. South Korea was third with 8.3 million subscribers at 13.3% of the market.

The Chinese government plans to invest more than RMB 150 billion (US$22.0 billion) in 2010-2011 to establish fibre-optic networks around the country, with aims to increase the number of FttX subscribers by over 50 million to more than 80 million by the end of 2011, according to the MIIT. The average FttX download speed is expected to be 8Mb/s and 2Mb/s for home subscribers in cities and rural areas respectively as well as 100Mb/s for business users. This is a high target from an end 2009 base of around 15 million subscribers and quite possibly rather optimistic.

The MIIT has had grand visions in the past too. The planned numbers for 3G subscribers was around 150 million by end 2011 but actual operator deployments are falling well short of that and looking to reach only 75 million by that time. As a result, BuddeComm has forecast a lower value for FttH subscribers by 2011.

Written by Paul Budde, Managing Director of Paul Budde Communication