Wireless broadband

FCC on wireless: Defining competition is task one

The FCC voted unanimously to move both of its wireless investigations to the formal Notice of Inquiry phase, but it is clear that (as usual) the body is divided along party lines regarding just what might be done.

Democrats think the industry has competitive issues and Republicans do not. Their differences seem to us to come out of the definition of “competition.” Republicans want to define it as having multiple wireless provider choices available, while Democrats define it as having relative freedom and flexibility to exercise handset and service options without being locked into a single provider.

In short, the “mobility” of customers is a concern of Democrats, and that may be a harder point to cover in a regulatory sense.

FCC’s national broadband plan: Inquiry process begins

The FCC has issued a Notice of Inquirymon developing a national broadband plan as required by Congress.

The NOI seeks comment on how to achieve universal access, how to achieve affordable and efficient infrastructure, how to use broadband to enhance consumers’ lives, health and education, and what the current state of broadband is nationally.

This is the first required step in the process of developing an FCC order. The next step, which is not likely to come in 2009, is a Notice of Proposed Rulemaking (NPRM), which is followed by an FCC Order. We believe an Order might come late in 2010 at the earliest, but there will be considerable jockeying in the intervening period.

Government-sponsored broadband: Hard track record to overcome

You’d think that municipal and state governments in the U.S. were drinking too much Fosters. Many of them are looking actively at applying for some of the broadband stimulus dollars to create government networks for their citizens, following the same model as Australia but on a smaller scale.

There is obviously a lot of opportunism and manipulation going on here. Big OTT players like Google have long supported any municipal or governmental network alternatives to the big cable and telco providers because they fear that for-profit access will eventually stop investing in capacity unless access ROI is improved.

The question (here or in Australia) is whether it’s prudent to spend tax dollars of any sort to create a government program for broadband. Most of these plans, based on WiFi for example, have failed completely. We’re skeptical, but programs that would use tax dollars (including stimulus dollars) to fund FTTH, which would then be “lit” by companies, might be a way of advancing broadband without creating a catastrophic collision with commercial providers.

Clearwire to deploy “developer sandbox”

Clearwire is going to deploy a WiMAX “sandbox” network in Silicon Valley, supported in part by Google, Intel, and Cisco. Each of the backers has its own motives here, of course, but we think there is a common desire to see as many broadband conduits to the user as possible and as many new applications for wireless as possible.

All of the players would also likely want a solid “migratory user” market to develop, and the final issue is that WiMAX might force faster LTE rollouts by AT&T and Verizon. It’s the classical “arms-race” mindset. The good news is that it suggests that everyone believes in a consumer recovery by the end of the year. The new network will be primarily for developers and will be offered at no cost.

Wireless operations costs explode with 4G complexity

Even in the wireless space, network operators are becoming concerned about the growth (nay, explosion) of operations cost arising out of the complexity of their networks. In a recent interview, AT&T wireless head de la Vega said that the company didn’t want hyper-complexity to accompany hyper-connectivity.

We are seeing increased operations concerns on the wireless side, where in the past this focus was largely from wireline operators. One reason is the concern that the transition to 4G will create a major problem with interworking of the new and old plants, and another that attempts to promote premium services and premium handling for mobile calls (via IMS) will be difficult to operationalize. IMS does not contain management standards, and management standards bodies have made relatively little progress moving standards that would be suitable for consumer-level mobile services management.

Nielson mobile survey: Caveats on the results

A mobile Internet survey conducted by Nielson for Tellabs shows that consumers consider it a necessity, and that almost three of four users expect to use the Internet from a mobile device daily. Obviously there are a lot of problems with this survey: 1) People routinely lie in them, and 2) Three out of four people don’t use mobile Internet, ever. Still, we believe that there is some sense in the dross here.

The Internet is an information tool that people rely on regularly, and that means they won’t give it up easily. We know seniors on fixed incomes of less than $15k per year who still have broadband service and profess to need it. There is little risk that there would be a major behavioral change and that broadband would be devalued in this downturn, but similarly we know younger and wealthier people who don’t use it at all.

In the mobile space, there is no question that the use of a smartphone for navigation, information, and just fact-finding, will become the norm. You don’t need surveys to figure that out. But just as there is resistance to longer-standing wireline Internet practices, there will be to mobile, and it’s just starting out. It would serve the industry better not to over-promote.

China to invest $40 billion in 3G network

China will likely invest at least $40 billion in a faster 3G network based on China’s own TD-SCDMA, which differs from the international standards. The investment is expected to benefit primarily Chinese manufacturers. This may be an indicator that some major economies will spend to support their own industry rather than simply erect trade barriers or take other overt steps.

The U.S. decision to aid the auto industry would be regarded by some as a subsidy, again showing that countries will tread carefully to avoid poisoning the free trade atmosphere but at the same time support their own manufacturing sector as a necessary part of economic recovery.

Questions on whether Huawei has ties to the Chinese government and the military (particularly the PLA) have swirled for some time and have now been raised again in financial circles, which suggest that the Chinese giant may plan an IPO.

Telecom spending 2009 - major cuts not evident

Both publications and research companies are jumping on a story that telecom is headed for a major slump, but we believe they are all seeing too many shadows at least for the present.

In our research, we have not found any concrete spending cuts from telcos, nor any major concerns that a recession of even a year’s length would create one. Telcos, like other industries, are worried about the possibility of a major systemic collapse in banking, credit, etc., but as that risk recedes, we believe they will then move to execute on their previous plans for 2009, which involved wireline capex increases from 0 to 4 percent and wireless from 2 to 8 percent.

In the meantime, they are pushing spending out. That means that if clarity in the recovery can be achieved by late spring, two-thirds or more of the 2009 plan could still be captured. If recovery is still not convincing by late summer, we believe that spending will indeed be down by perhaps 3 percent in wireline and perhaps flat in wireless.

FCC to address free wireless

The FCC is expected to take up the issue of a free wireless Internet service, must-carry rules, and other pending issues in December, the last meeting in which Republicans will be in control. The wireless Internet issue has been the most visible of the group to be discussed. The industry clearly doesn’t like free Internet no matter how it’s obtained, and privacy advocates are objecting to the proposal that the sites filter traffic to eliminate adult material. It’s still not clear how all of this would be funded, so the wisdom of reserving spectrum for it eludes us.

Spectrum auction has free wireless Internet conditions

The FCC has cleared the way for auction of spectrum that would be conditional on providing free wireless Internet service. The move has been controversial because most in the FCC believe that there is no way to make such a service work.

Other attempts at free or low-cost wireless services, such as municipal WiFi, have largely collapsed because advertising sponsorship was not forthcoming and problems in performance tarnished the image of the service. It may be that the greatest impact of the measure will be on the mobile advertising space, where current wireless operators will be looking to secure new ideas that will keep their own services on top and reduce the viability of a purely ad-sponsored approach.