The mobile industry has been hit with a number of stories involving high monthly bills created by either a supposed misunderstandings of service terms or theft of a phone. The complaints have typically been handled badly. Carriers gripe and try to get the money even if they realize it’s not going to happen, reap a heap of bad PR, and then cave in while grumbling.
The FCC may now step in and do what most of Europe has already done, which is set a requirement for at least an optional threshold alert that would either warn a user or even suspend service use when a bill reaches a specific level.
We think this is a good idea; it could also be used by parents to enforce some discipline on kids and to insure that unwitting behavior doesn’t create a mammoth payday for the mobile operator. Operators have tended to resist this, which we think is as much a PR error as trying to collect on what was obviously an uncollectable debt.
AT&T addressed a backhaul/convergence event in New York and made it clear that the network of the future would be shaped in large part by wireless in general and LTE in particular. A network architect speaking for the provider said that wireless data was blurring the line between core and metro and between wireline and wireless. We clearly agree, given that we’ve said this for some time.
More significantly, in our view, the talk included comments that operations complexity for metro Ethernet would have to be reduced and that the QoS mechanisms of the 3GPP were too complex and expensive to be feasible. We’ve been hearing for some time that operators believed that the ROI on mobile broadband would never reach levels that could justify some of the evolution visions of the 3GPP.
The issues are bigger than standards or IMS success. It’s a broader question of whether to scrap operations in a traditional way, given the best-effort nature of the Internet traffic that makes up most mobile broadband activity, or to streamline 3GPP processes. The operators we’ve talked to favor something more along the lines of streamlining, but they concede that it may simply take too long.
Wall Street is looking at the fall as a critical time for Apple and the iPhone. What’s critical is that it may mark the beginning of a smartphone price war with highly functional models based on the Android operating system. Samsung’s Captivate will be available on AT&T, and it’s a specific push for a volume smartphone market. RIM is also expected to announce its new touchscreen BlackBerry.
All of this doesn’t spell the end of the iPhone, but it might spell the end of the margins that Apple has been able to command for its premier device. That would put Apple in the position of accepting lower margins (and likely a falling stock price) or trying to boost margins for the iPhone with new models/features.
The real news, though, will likely come from the face-off between a premium-priced iPhone and a discount-priced Android. How much do consumers value cachet? We may find out.
Apple’s iPhone 4 has done very well, but there are a lot of new competitors coming down the pipe — many available on AT&T alongside the iPhone and many available on Verizon, which still doesn’t support iPhones. Android 2.2 is going to be the OS on many of these new phones, and that’s a much better (some even say superior) phone OS.
The real issue for this particular race may be the value of Android as a broader-purpose OS. You can run PCs, tablets and a bunch of other things on Android. An Android ecosystem could benefit from the additional device breadth to create additional developer support. We don’t think iPhones are in trouble, but we do think that they’re going to be under new pressure this fall.
It looks like Telstra and the Australian government have finally struck a deal for the acquisition of Telstra’s access infrastructure for the rollout of Australia’s National Broadband Network (NBN). If everything goes smoothly, the deal may become an example for other countries struggling to get strong broadband deployment in the face of falling return on investment (ROI) on broadband infrastructure.
Telstra would get a total of $11 billion Australian for infrastructure assets and management of structural separation issues like universal service. Since the deal still needs both regulatory approval and a shareholder vote, it’s not in the bag, but it appears likely that something very similar to this package will eventually be accepted by all. If that’s true, then Australia will have taken perhaps the most radical step of any major industrial nation in creating a new broadband deployment model.
Since the FCC is tackling the issue of broadband regulation here in the U.S., it’s not out of the question that a model like the Australian one would be proposed here as well. In our view, however, there are issues with such an approach.
First, whether there’s payment or not, there was at least in the Oz case a threat that makes the move just a sanitized form of nationalization. Second, we believe that the process won’t accomplish the titular goal of “competition.” There is still only one supplier — in this case, NBN. Competitive local exchange carriers (CLECs) didn’t work in the U.S. because you don’t create competition by having one producer and a number of middlemen. That’s still the problem in Australia, unless the government can make “retail” players compete at the service layer.
Will they? Would the FCC? Neither Australia nor the latest Notice of Inquiry advance any specifics there. Therefore, we’re skeptical, to say the least.
The FCC released a Notice of Inquiry on net neutrality, the first step in taking affirmative regulatory steps on the matter under U.S. law. The NOI is a response to the Comcast decision of the U.S. Court of Appeals that declared the FCC acted without proper statutory foundation in its order to cease P2P traffic management.
The NOI essentially asks for three things:
- 1. Whether the previous classification of broadband as an information service offers sufficient protection for net neutrality;
- 2. Comment on the legal and practical consequences of reclassifying broadband Internet as a telecommunications service and regulating it under Title II;
- 3. Comment on a new approach it calls the “third way.”
The third way is a proposal where the FCC would affirm the general policy of keeping the Internet unregulated but would identify the “interconnectivity service of wired broadband” and classify only this as a telecommunications service. It would then exercise the forbearance provision (Section 706 of the Telecom Act) to largely immunize the Internet from regulation.
We are of the view that this NOI is either an appeal for rational legislation or a clear demonstration that such legislation is needed. The extent to which the FCC pleads for guidance and proposes what can only be described as arcane and circuitous methods of achieving what is clearly a result in the public interest is unbelievable.
Meanwhile, a study by New York Law School, likely paid for by lobbyists in some way, predicts dire consequences in regulating Internet services. It’s almost apocalyptic, in fact. The issue here, we think, is that the study and the timing show how many people are lobbying on this process, and the process itself is antiquated in terms of its ability to quickly respond to critical requirements of the market. We all need to hope that the players involved here all conspire now to simply move forward and operate during the time (a long one, likely) that will be needed for this all to play out.
The tone of this NOI is unique, in that the FCC complains, seems to ask for legal advice, and gives the impression it is a wronged party adrift in confusion looking for a way out. It might even be seen as an appeal to the industry to back an FCC initiative or face legislation. In all, a strange document.
ZTE, according to Ovum data, has taken the second spot in wireline broadband after Huawei, displacing Alcatel-Lucent from that position and creating more momentum for Asian giants in the space. The problem is that wireline broadband ROI is exceptionally low and still falling, and operators have little choice but to look for a way to control costs.
There’s obviously no end to the pressure on ROI, and so far no vendor (including Alcatel-Lucent) has managed to develop a real strategy for lowering opex broadly. The result is that operators are pinching their capital budgets.
We noted in our spring survey that operators who had already selected either Huawei or ZTE tended to believe they had the best ROI option in hand and proceeded with their projects, while those who’d selected other vendors were still sharpening pencils. That means more non-China capital spending is likely to slip into 2H10.
Canada is considering lifting all restrictions on offshore ownership of its telecom and broadcast companies, a move that would presumably help an industry that’s struggling with low ROI and corresponding challenges in investor interest.
Three proposals are in play:
- The first restricts foreign ownership on companies with more than 10% market share;
- The second limits ownership to non-controlling interest;
- And the third lifts all restrictions.
The averred purpose of the change is to improve competition, which in our view is a fancy way of saying the country will allow offshore interests that would be willing to enter a low ROI market. To us, the issue is clearly one of creating the kind of broadband the public wants at prices the public is willing to pay, and that means a low ROI in any market but one with a high demand density—which Canada certainly is not.
The U.S. also has ownership rules, as do many countries, and it will be interesting to see if this is a trend. So far, we’re getting indications that U.S. policy isn’t likely to change any time soon, but a Canadian example could provide some stimulus for change even here. The U.S. has the same ROI problem, for sure.
Google has arguably had its eye on the VoIP space for more than a year, and the acquisition of Gizmo5 only made a move more likely. Now the story is that an announcement is imminent—as early as later this summer.
The new service is expected to compete with Skype but also to include at least integration with if not absorption of Google Voice, a UCS-like service that’s still in an extended beta. The decision by Google to enter the market would likely threaten Skype, but whether it would also threaten Vonage and even erode telco voice revenues will likely depend on whether the service attempts to provide E911 capability, a prerequisite for replacing existing voice services. We’re not getting much scuttlebutt on that particular point at this stage, but we’ll keep you posted.
For years now, EU operators have told us that they’ll need to make better use of Wi-Fi to unload traffic in areas where there are large congregations of users, including all hospitality areas and even some public transportation. One interesting development we’ve noticed in Europe is that the interest in Wi-Fi seems to be sapping some of the interest in 4G/LTE femtocells. The reason we’ve been given for that is that the problem of traffic already exists, and will continue to tax 3G services even when 4G rolls out.
Given that, and given that nobody believes 3G femtocells are a good idea, it makes sense to look at a more persistent Wi-Fi hotspot approach. That could have an impact on femtocell players, of course, but it might also promote public Wi-Fi considerably by ensuring that compatible devices continue to be deployed.
If you listened to the media, you’d think Congress was about to rewrite the Telecom Act.
To be sure, the Telecommunications Act of 1996 is one of the most egregious examples of regulatory irregularity in the whole of the federal commission world. We live in a broadband age, one driven by Internet-based changes in information and communications, and neither broadband nor the Internet are even mentioned in the Act. The goals that were set 14 years ago to guide the next generation of public networking are totally obsolete, and yet the same rules remain in place today.
That’s the rub, though. In 10 of the 14 years since the Act was passed, legislation has gone before Congress to amend or replace it. In a couple of those years, the total number of co-sponsors of the legislation alone would have been enough to pass the bill had they simply voted for their own submission. But the bills never passed, because none ever came to a vote.
Telecom is simply a mechanism to extort campaign contributions, apparently. Lobbyists spend, Congress introduces bills and nothing gets voted on. Don’t hold your breath on this one, either.