Verizon

NSN professional services a plus for carrier procurement zone strategy

The head of NSN’s North America operation said the company would be an LTE leader in North America, and said it rather emphatically, to be sure. The comments came at NSN’s analyst event this week, which was a parade of optimism on NSN’s prospects in the market, not only in North America but elsewhere.

NSN’s greatest strength is its professional services business, and second on the list comes its credibility with operators in multi-vendor integration. The company also has a strong service-layer story, though that story is built on tools used by its consulting and professional services staff to create one-off solutions for operators and not productized (at least for now).

The value of professionals services in the U.S. today is based on the procurement zone trend, already formally in place at AT&T, and in process (we’re told) at both Verizon and Qwest, and being considered even by Sprint. This program creates what’s effectively a mandatory systems integration position in each zone, which in turn means that those with strong capabilities in that area can expect to get a prime vendor position.

Verizon quarterly financials tell classic telco story

Verizon delivered a classic US-telco story in the third quareter: Wireless was doing very well, telco TV was doing better, enterprise services were under price pressure, and wireline losses continued.

For Verizon, the net was better than Street expectations. Most encouraging were revenue gains of more than 10%, though about half of that was from the Alltel acquisition. Customer churn was up slightly in wireless, and DSL broadband subscribers continued to decline, but the latter was more than offset by broadband FiOS growth, suggesting that Verizon FiOS is attracting broadband users beyond its own DSL base.

The company promised investors that LTE would not generate a big capex surge, a relief given that the large up-front FiOS load is finally tapering down. In all, the story was good but not great. You can see that Verizon, like AT&T, is spending a ton of money on wireless and making a big bet it will be able to capitalize on that investment. We think that in the near term, that is almost certain. But the long-term viability of wireless depends on the ability of the operators to create value beyond voice and Internet.

Verizon’s smartphone direction still chasing AT&T?

Verizon is apparently planning a total smartphone blitzfor the holidays, including the already-discussed Droid from Motorola, but also according to rumor, a new HTC Android smartphone and perhaps a third model as well.

The Verizon moves are, we think, are calculated to make things complicated for AT&T and Apple with the iPhone for the holidays. A multiplicity of models at various sizes and price points makes sense at this stage in the market, but there is no question Apple still has the cachet that other smartphones have so far been unable to match.

We think all of these smartphone wars are a signal that whatever the FCC might do with wireless net neutrality, operators are committed to the mobile web.

Verizon DirecTV acquisition could ease FiOS video load

Some financial industry speculation is buzzing about the possibility that Verizon might buy DirectTV. While Verizon is clearly committed to FiOS, it’s not clear just how far FiOS could extend toward thin geographic areas or areas where household income is low.

Given that, a satellite offering would give Verizon a way to offer broadcast TV without consuming broadband capacity, which could be critical given cable’s plans to push DOCSIS 3.0 to the 50-to-100 Mbps level. video on demand (VoD) could still be delivered over DSL.

A deal would also tweak AT&T’s nose since that provider relies on DirecTV and is also rumored to be looking at the company.

AT&T to jump to 4G, abandon HSPA+

AT&T has abandoned its HSPA+ (high speed packet access) plans in favor of a migration to 4G LTE, a move that isn’t at all surprising, given Verizon’s commitment to LTE and the extreme competition between the two companies. Sprint promoting 4G (via WiMAX) would have left AT&T at risk of being the only 3G provider of note in the U.S.

The big issue, we think, is likely the stress that the iPhone success places on AT&T’s cellular network. The move to 4G will have major repercussions in the infrastructure space because it will likely divert even more capex to the wireless side and to cell towers and RF modernization. It will also make evolved packet core a very hot metro issue, hot enough to change procurement plans for some operators.

Another impact of the decision will be to make the whole procurement zone purchase strategy of operators more important because wireless is likely to be its own zone and drive other product decisions, including FMC and VoIP.

Smartphones drive wireless, Android updates in pipeline

Whether smartphones clog cellular networks or not, they’re in demand as flagship elements of engagement with the consumer. They also help reduce a provider’s churn and let the provider churn opponents instead.

No wonder, therefore, that Sprint will be launching the HTC Hero smartphone in October. Sprint already has an exclusive on the Palm Pre, but the HTC Hero is the first Android device Sprint has deployed and only the third deployed in the U.S. (the other two are offered by T-Mobile).

Google is also rushing upgrades to Android. There are three in the pipe, and we hear the first is imminent. We’re told by two providers that discussions are underway to do away with voice-only pricing and standard handsets for new customers and instead move to an integrated plan.

Both Verizon and AT&T already require data plans for smartphones, and smartphone pricing is likely to sink to the point where making them the only customer option becomes practical. When? It won’t happen till 2011 in our view.

Market pressure could cost AT&T Apple iPhone exclusivity

There’s growing speculation that AT&T’s honeymoon with iPhone may be coming to an end. Pressure from the government on the wireless industry is mounting, and Apple is no longer doing exclusive deals with iPhone. In fact, it can’t afford to.

With iPhone in the U.S. locked to AT&T, there’s too much of a risk that the U.S. market (the number-one smartphone market) will end up validating a host of iPhone competitors that might have little chance under normal circumstances. AT&T has relied on iPhone to gain some market share, however, and has won some Verizon customers. Since Verizon would be likely to get the iPhone next, the loss could send a bunch running back.

We’re hearing some speculation that Apple and Verizon will do a 4G deal, though, so the opening of the iPhone won’t be imminent.

Verizon completes LTE test, discusses plans

Verizon completed a two-city test of its LTE service to the hype and hyperbole of the press, but there are still no indications of what LTE will really mean to users because its price and performance levels are not yet announced.

While LTE is theoretically capable of much higher speeds, few in the industry expect Verizon to unleash full LTE performance, and in any event, at higher speeds, users just use up their monthly cap in fewer seconds.

In our view, the primary driver behind LTE is the need to create a wireless network that’s designed primary for smartphones and netbooks, which will be more data-heavy than today’s devices, even if stringent rate limiting and pricing levels constrain user behavior. Remember, both 100 Mbps of LTE and 3 Mbps of 3G are shared among all the users in the cell, but LTE supports more users per cell than 3G. That’s what’s critical as the number of wireless devices and data-ready devices increases.

Verizon expects to have LTE rolled out nationally some time in 2013 and its first commercial services will be available in 2010.

Verizon’s Q2 earnings indicate difficult voice migration

Verizon reported earnings and the results were in some ways alarming. The company’s net income fell 21%. Neglecting the Alltel acquisition, revenues grew less than 2%, about a third of prior-year levels. While wireless and FiOS were strong, Verizon (like AT&T) saw business and wireline revenues decline.

The announcement that the company will cut another 8,000 jobs will hearten Wall Street, and many attribute this to prudent response to revenue decline, but we think it’s really something different. Like all wireline/wireless providers, Verizon is finding it attractive to transition its wireline voice customers to either a wireline package like FiOS that creates ARPU, or to wireless. In the case of wireless, the result is a reduction in operations costs, since wireless has no “installation” or outside plant maintenance on a per-customer basis.

In short, Verizon and other operators are now looking at getting out of the wireline voice business, at least in the sense that they’re actively hoping to migrate any voice user to something more profitable.

Networks are essential, but higher-layer services are the focus

The head of Verizon Business says that the company is battling the perception that it’s a network player, a statement that shows just how much service providers like Verizon are focusing on above-the-network revenue for growth.

Its “strategic services” are growing, according to Verizon, and that’s also what we found in our spring review of service provider spending plans. There was an enormous focus on higher-layer opportunity for enterprise services simply because there was a universal reduction in profit for connection/transport services to enterprises.

Companies like Verizon are realizing that while networks are going to be essential to them forever, they’re not going to be profitable enough. In wireline, in fact, there is no hope of profit anywhere, which is why capex will be shifting more to mobile/wireless over the next three plus years.