Telecom Timeout

A blog

January 15, 2009  5:10 PM

Nortel Bankrupt: Now what?

Posted by: WPeterson

What would have been unthinkable only a few years ago was, when it came about yesterday, merely “not surprising.”

Nortel filed for bankruptcy protection.

The signs were everywhere, from its plummeting stock to its irate shareholders who hounded CTO John Roese from his first blog post until the day he resigned. But as Tom Nolle observed, the best indication might have been their steadfast strategy:

While the proximate cause was the deferral in spending by carriers worldwide, which Nortel’s reserves simply could not handle, the true cause was a persistent refusal to deal with market conditions as they were. Nortel stayed with its core competences despite the fact that those areas were becoming core irrelevancies.

There is a lesson here for every other player in the telecom space: If you cannot promote service features and monetization you must inevitably be a player in a commodity market. Nortel will likely try to sell off additional business elements, and may even refocus on the enterprise, but unless it can become more strategic, it is unlikely to regain stability, much less stature.

This morning, I got an e-mail from the International Nortel Networks Users Association (INNUA), explaining their loyalty and dedication to Nortel during this “transition.” I have to wonder if telecom customers will be so forgiving — particularly when it means gambling on the ability to properly service and equip their investments for years to come?

Further Reading:

January 14, 2009  7:13 PM

Telecom Timeout Weekly Video Update: 1/14/2009

Posted by: WPeterson

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January 14, 2009  5:31 PM

Proposed FCC head is an FOB

Posted by: KateGerwig
broadband, digital television, FCC, net neutrality, Obama Administration, regulation

The rumored new head of the FCC is an FOB. That’s “Friend of Barack,” people, as in a former Harvard Law School classmate of the president-elect, who definitely knows his way around Washington D.C. (Yes, he’s on Facebook, but has he friended you?)

The nomination of technology exec Julius Genachowski is still an official secret, which is obvious because it’s been blasted all over every website and publication that has any interest in communications policy. The Genachowski nomination will be no big surprise, as he is already Obama’s chief technology advisor already.

Genachowski already knows the FCC drill, as he was chief counsel for Reed Hundt, the FCC chairman under former President Bill Clinton, and has worked at IAC/InterActiveCorp and other technology companies. He also co-founded LaunchBox Digital, a venture capital firm in Washington, D.C.

What policies does Genachowski favor? We’re hearingnet neutrality (government mandated?, cheap broadband for everybody, and media ownership rules that favor diversity.

Even before Obama’s inauguration, telecommunications policy and regulation has been in the spotlight, as the new Commissions will need to immediately deal with the conversion to digital television and the Obama universal broadband strategy.

The FCC is supposed to ensure that the digital television conversion on Feb. 17 goes smoothly (only an estimated 20 million people to switch and the government fund that provides conversion box coupons running out of money). The Obama transition team made it clear that the president-elect would like to push the conversion deadline back to the summer, citing readiness and funding concerns.

In the longer term, building out broadband is part of Obama’s economic stimulus package. The new FCC chairman will hear every possible viewpoint on how to accomplish a broadband buildout and arguments who should be allowed to get tax credits or other incentives to do so. Navigating that free-for-all alone will show us what Genachowski is made of. Stay tuned.

January 12, 2009  1:49 PM

Broadband stimulus: Let’s get it done, not repeat history

Posted by: KateGerwig
broadband, network infrastructure, Obama Administration, Telecom

I live in the policy belt where there’s no rust in sight and the river of policy statements flows with honey. There’s never a recession in the policy-wonk biz, so with that setting, let’s talk about President-elect Obama’s broadband stimulus package.

As the new administration works with Congress to get a potential $1 trillion economic stimulus package in place, telecom and cable lobbyists will be pressing the flesh over talk of broadband expansion as one-part U.S. economic revival and one-part show the world the U.S. isn’t a has-been in a global economy.

What’s good news for telecom is that unlike the automotive industry, product demand is growing. Obama has been clear that he wants to make sure broadband access is universal so inner cities and rural areas are served as well. Harsh but true, most telecom providers offer broadband in the most lucrative locations. And why wouldn’t they? Again, unlike the automotive industry, they have to pay for their own network infrastructure, so to build every where, even if they lose money doing it, they’re going to need incentives.

A broadband stimulus package that would extend network coverage or increase speeds in existing areas may be in the $20-to-$30 billion range, if reports are true. It sounds like infrastructure-building tax credits are on the table, anywhere from 60% for new builds and 40% for speed increases.

Already, the scramble for who can benefit from potential tax credits has begun. There are always public interest groups that cry foul about giving an advantage to companies that already have and know how to build and run networks. Weighing in already are organizations including Public Knowledge and Free Press. That’s their job.

The behind the scenes rumor-mill says that for the ObamaAdministration, this isn’t about increasing competition. Bravo. I’ll take network expertise any time. Verizon, AT&T, Cox Communications and Comcast — to name only four in what appears to be a working cable/telecom broadband duopoly — know how to build broadband networks. So let them do it, with tax credits if it gets it done faster.

I don’t want to sound like Father Time or anything, but, did we not learn a lesson in the 1990s when anyone with a backhoe decided to build a high-speed, fiber-optic network? Lest history repeat itself so soon, let’s remember who went bankrupt and who ended up picking up those new fiber optic networks for a song. Building, maintaining and running a broadband network isn’t a no-brainer, so I’m all for keeping the hyperbole down and getting the job done.

U.S. telecom and cable companies are already struggling to figure out how to monetize their networks, and they’re still cutting jobs. Maybe this demand-driven industry can even create jobs.

The bottom line is, broadband in the U.S. needs to grow, and if the plan gets bogged down in bickering about who should be allowed to get a tax break in this often razor-thin profit business, I swear I’ll be blogging on the Capitol steps in protest, and I hope I see you there.

January 8, 2009  7:11 PM

Search Wars: The Empire Strikes Back

Posted by: WPeterson
mobile search advertising partnerships Google Microsoft Verizon

The search wars are heating up again, and this time, the battlefield is mobile, with Microsoft becoming the official, default search engine for the Verizon, the United States’ largest wireless provider. The real winners of the spoils of war, however, might be the telecoms themselves, at least in the short run.

In the Verizon deal, for example, the wireless operator picked up around $600 million after Microsoft outspent Google to become the carrier’s default mobile search provider. Back in 2001, Sprint chose Google as its official search partner, while T-Mobile has sided with Yahoo! in an ad revenue sharing deal, as has AT&T.

And what do these pricey contracts buy the search providers? They typically become the default search engine on all, or most, of that service provider’s handsets, but users are still free to switch to another search engine. In fact, while T-Mobile’s deal with Yahoo! covers a variety of Yahoo! services, the fourth-place telecom’s flagship device is the G-1, running Google’s Android operating system and closely linked in with that company’s services.

And while mobile search is relatively small potatoes today, increasingly sophisticated phones — and the data plans they’re tied to, might propel the mobile search advertising market to balloon to billions in revenues over the next several years.

January 8, 2009  3:27 PM

Global optical market declines? Let’s not get global

Posted by: KateGerwig
Network equipment, optical networking, packet optical networking

The recession feels like it will go on and on, yet so does the demand for bandwidth. So when it comes to the optical networking market, service providers need to put their recession anxiety on hold and move bravely forward.

Yes, analyst firms have huddled and are now predicting declines for the global optical equipment industry, but this is definitely not the abandon ship mode of the 2001 optical networking crash. Analyst firms are still pointing to bright spots where growth will occur anyway, despite dismal financial credit markets and capital investment projections. It all depends on what segment of the optical market you look at.

Right before the new year, Ovum revised its optical equipment forecast downward, so rather than 11% growth in 2009, Ovum says a 5% decline is more realistic. Even so, Ovum believes the optical market will start healthy growth again in 2010 to create a market worth more than $23 billion in 2013.

It’s no surprise that Ovum sees the smallest decline in metro wavelength division multiplexing (WDM) gear since metro networking is front and center for service providers this year as they gear up – literally – to handle more high-bandwidth traffic like video closer to users.

On the very long-distance end of the market, the submarine systems submarket may actually grow this year, due to transoceanic investment from traditional telecom players, as well as companies like Google. And it’s worth mentioning that submarine systems require a whole lot of optical components.

Infonetics Research is on the same page in terms of optical segment inclines and declines. Global sales of packet optical transport systems equipment should continue to grow, which means there will be gradual decreases in SONET/SDH equipment sales, according to Infonetics Research President Michael Howard, who calls the recession’s impact on the global optical network market “minimal.” Consumers and businesses are contending with more bandwidth-intensive applications, and service providers aren’t abandoning their IP transformation projects as much as maybe delaying certain expenditures for a quarter or two, but not cancelling them.

The 2009 outlook for the optical market could be called the best of the worst.

January 7, 2009  8:39 PM

U.S. leads the world in broadband revenues

Posted by: WPeterson
telecom broadband revenues Pyramid

The United States continues to lead the world in broadband revenues even as the U.S.’s subscription rate rank continues to drop, according to a new report by Pyramid Research.

As Light Reading reports:

According to data compiled for the report, Global Fixed and Mobile Broadband Outlook, the U.S. generated more than $32 billion in broadband revenues in 2008, a long way ahead of second-place Japan, which generated $23 billion in broadband revenues.

Germany was third in the chart, with more than $11 billion in revenues, followed by China with $7.9 billion.

Revenues in Billions by Country

The per-capita revenues, when thrown against total country population numbers, was quite a different story, with Japan’s revenues almost 80% higher per citizen than in the United States, while China’s per-person revenue came in at just $5.91 per person, a number that will likely rise dramatically as the country works to improve on its broadband penetration of just 3.7%.

Revenues Per Capita by Country

Finally, I ran Pyramid Research’s numbers against the total of number of actual broadband subscribers and came up against some really surprising trends: While the complaint is often leveled that U.S. telecoms are gouging customers for less service, service providers in Japan and Germany, particularly the former, are seeing much higher annual revenues per user.

Revenues Per Broadband User by Country

January 5, 2009  5:07 PM

With Alltel acquisition closing, Verizon just days from wireless top spot

Posted by: WPeterson
Alltel, mergers & acquisitions, Verizon, wireless

The Network gets a little bigger.

As DSL Reports notes, Verizon will close the Alltel acquisition on January 9th, creating the United States’ largest wireless carrier with a combined 83 million customers, 13 million of which come from Alltel.

It’s a big day for Verizon, which will be finally surpassing AT&T but also taking on $22.2 billion in Alltel’s debt as well as selling off assets in 22 states, per deals with the Justice Department and FCC.

“The Department said that the transaction as originally proposed would have substantially lessened competition to the detriment of consumers of mobile wireless telecommunications services in those areas,” the Justice Department stated in release last year, “and likely would result in higher prices, lower quality and reduced network investments.”

Verizon managed to work out a deal that satisfied both bodies, however, and was upbeat about the partnership’s prospects. Lowell McAdam, Verizon Wireless president and chief executive officer, released a statement:

“This move will create an enhanced platform of network coverage, spectrum and customer care to better serve the growing needs of both Alltel and Verizon Wireless customers for reliable basic and advanced broadband wireless services.”

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