Video

Mobile broadband growth has upside and problems

Mobile broadband traffic, primarily to smartphones, is growing primarily due to increased use of video content. Research shows a 30% increase worldwide, and this is both a driver for LTE and a source of concern for mobile operators.

At present, mobile data plans aren’t uniformly all-you-can-eat, so most operators have some revenue upside to traffic growth in mobile services, but it’s clear that mobile content will threaten the older 3G network paradigms and force 4G migration at the current pace of growth. Operators may thus have to accelerate LTE, a trend that is already becoming visible, and the current plans may be inadequate if smartphone wars among providers stimulate further content viewing and traffic growth. The trend may also keep mobile tied to usage pricing as a defensive move.

Verizon links FiOS TV and Internet video

Verizon has announced that FiOS customers with a set-top box (STB) will be able to watch Internet video on their TVs using a menu selection, with no change of equipment or additional hardware.

The move could have an enormous impact on the credibility of Internet video, and the fact that Verizon is prepared to take the step is an indication that it believes that linking the TV and the Internet is inevitable and that refusing to take advantage of its own capabilities to do just that without extra equipment will only throw away a competitive advantage.

AT&T earnings to show spending preferences

AT&T is expected to show weakness in its earnings report this week, with accelerated line loss in the wireline space and with reduced mobile profits.

The WSJ article blames this on the economy, but there is little evidence from past economic slumps, even recessions, that consumers cut back on telecommunications services. Most have contracts that set their spending in any event.

We believe this is a more general problem with AT&T. The company is more vulnerable to mobile revenue caps than Verizon because U-verse is a less valuable and profitable property. It is also more vulnerable to cable competition in voice and broadband, and we believe that the cable companies are targeting AT&T specifically because they need some success against the RBOCs.

The key will be what AT&T says about spending; it will show where the company believes  future must lie.

AT&T U-verse to Trial 2 High-Def Streams

AT&T is about to begin a trial roll-out of a U-verse service that could deliver two HD streams at once, something that hasn’t worked up to now. There are several ways in which AT&T is looking at this, one through increasingly aggressive compression and the other through upspeeding the loop. It is possible both will be tried. There is no indication of when the capability will be fully rolled out, but AT&T appears committed to it. They have to be; this would be a crippling problem for U-verse if it continued much into 2009. We believe AT&T has major problems with its TV strategy, this change notwithstanding, and that they will eventually be forced to move to another approach.

RF over Glass: Cable’s answer to telco FTTH

The cable companies are taking the threat of FiOS seriously and promoting technologies that are more suitable for deep fiber and FTTH in their own plants. The activity is concentrated in what is called “RFoG” or RF over Glass, meaning mechanisms to perform the opto-electrical transformation from optical delivery of multicast RF to the CATV plant that already wires the homes. We are hearing that the idea is not to go with fiber to the home despite reports to the contrary, but rather to take more of a fiber-to-the-curb approach, wiring perhaps a dozen homes at the maximum into a CATV span off an RFoG fiber plant. Verizon has been looking at a similar notion of using a remote and MoCA to run cable into the home to reduce fiber provisioning costs in areas where the ARPU won’t justify true FTTH. We believe that there will be more and more outside plant “wiring” using a combination of fiber and coax, even among the carriers.

Cablevision reduces capex, ups FiOS competition

Cablevision reported better numbers, best of the major cable TV providers, and a sharp reduction in capex. Capex as a percent of revenues has dropped from over 16% (about what the US RBOCs spend) through 13% to slightly more than 11%. All of this suggests that the firm is taking a price-war model stance in competition with FiOS versus a feature stance, which is what competitor Comcast is taking. Cablevision had little to say about advances like DOCSIS 3.0, which would let cable spans increase their broadband speed to FiOS levels. Note that cable broadband is more “shared” than DSL or FiOS and thus raw speed numbers are not necessarily indicative of relative observed performance. We think the capex ratio shift here is the important element; a “successful” cable competitor is one that lowers capex-to-sales below RBOC levels, which means that the RBOCs can outspend the cable companies in capital improvements. Thus, ironically, innovation in access networking must come from the “conservative” carriers.

Google video ad trials - the clueless approach

Google has launched a trial of its controversial banner-add-on-video strategy, and we believe the step shows the extent to which the online content ad process is detuned from market reality. The approach has continually been shown to be offensive to viewers of video, far more so than the ever-offensive banner ads on web pages. In addition, it shows that Google has no real notion of how to address online content sponsorship other than to try to replicate the banner-and-click approach, and that is not attuned to the current broadcast TV advertising paradigm. Google also plans to put video ads on search result pages, a step that is likely to further clutter the search results and create more user angst.