Per the FT at http://www.ft.com/cms/s/0/d72cea8a-9d1a-11dc-af03-0000779fd2ac.html
And the Wall Street Journal at http://online.wsj.com/article/SB119617188870905241.html?mod=telecommunications_primary_hs
It appears Verizon decision is probably in reaction to the Google Android plans. But then to come up with such a plan within such a short time without the possible thought of it before does not make sense – which makes me think that Verizon had something in process already and the Google decision just accelerated that process.
In a wireless world, the customer is owned by a service provider. Per this announcement from Verizon, devices one chooses to operate remains at the discretion of the end users. This will reduce the distribution costs of service providers at the same time reach out to users who were not their customers by providing them choice of handsets.(Not sure the revenue lost from giving away the distribution channel, as the operators will still distribute the most popular models.) This could result in increased competitive intensity and change in channel mix for mobile devices manufacturers.
By announcing the program it appears Verizon wants to control the user experience. Verizon could then use this to negotiate with Google and other application vendors to share the revenue from online advertising and usage of applications.
A better option would be for both Google and Verizon to work on a converging framework for the software that would be incorporated in the mobile devices – this would help reduce the investment needed by both Verizon and Google, reduce time to market for mobile devices, make available lot more innovative applications that could be accessible via the mobile device – all this is a possibility so long there is an agreement on the revenue split online advertising and use of other tools and applications. Depending on the perception of who owns the customer will shift the balance of power at the negotiating table. Android of Google and the ‘Open Access’ plan from Verizon is trying to do just that – prove that each has plans to own the mobile user. Time will tell who gets the better of the other.
Tuesday, November 27, 2007
Wednesday, November 21, 2007
AT&T and Echostar combo could be deadly for the cable operators in US
AT&T has been building capabilities for its video offering, U-verse that will offer IPTV. The acquisition of Echostar will add a lot of value to AT&T’s video offering. Specifically, Echostar will get the expertise of content negotiation and relationship that is so crucial for a successful video offering. The Echostar’s Direct to home (DTH) service will be a very good complement to the IPTV offering.
As a stand alone business Echostar may have limited options as they will need to partner to offer bundled services - broadband and phone (both wireline and wireless) services. And if the market direction is to offer bundled services, a pure play video services business will have its limitations.
Cable operators and Telecommunication service providers have been at war as each enters the forte of the other. Cable operators are already eating into the phone business. And the Telcos have been aggressively upgrading their networks to offer video services. With Echostar DTH, AT&T could potentially hurt revenue growth and profitability of cable operators. AT&T could also tier their video services – DTH and IPTV. DTH could be priced to mimic the cable operators business in region and IPTV could command a premium based on its interactivity and time shifted TV.
Also with the number of scribers of Echostar (approx. 13.7 Million as opposed to AT&T 126,000) will give AT&T additional room for bargaining with the content providers – could reduce cost.
Similar thinking must be going through the Verizon video services strategic team.
As a stand alone business Echostar may have limited options as they will need to partner to offer bundled services - broadband and phone (both wireline and wireless) services. And if the market direction is to offer bundled services, a pure play video services business will have its limitations.
Cable operators and Telecommunication service providers have been at war as each enters the forte of the other. Cable operators are already eating into the phone business. And the Telcos have been aggressively upgrading their networks to offer video services. With Echostar DTH, AT&T could potentially hurt revenue growth and profitability of cable operators. AT&T could also tier their video services – DTH and IPTV. DTH could be priced to mimic the cable operators business in region and IPTV could command a premium based on its interactivity and time shifted TV.
Also with the number of scribers of Echostar (approx. 13.7 Million as opposed to AT&T 126,000) will give AT&T additional room for bargaining with the content providers – could reduce cost.
Similar thinking must be going through the Verizon video services strategic team.
Monday, November 19, 2007
Radio spectrum freed could be a great win for the WiMAX proponents
The Financial Times and FT.com (http://www.ft.com/cms/s/0/2ece0dd2-962c-11dc-b7ec-0000779fd2ac.html) reported that radio spectrum 698-806 MHz will be available immediately for service providers to offer mobile broadband services immediately in America and much of Asia including China and India. In Europe, Africa and the Middle East it will be available after 2015. This was put together under a United Nations agreement on Friday, Nov 16, 2007 by governments of over 160 countries.
The article makes a great case for Ultra High Frequency (UHF),
1. Support for high speed mobile broadband connections – encouraging the development of new internet-based services
2. UHF signals can penetrate buildings and travel long distance, reducing the cost of rolling out wireless services
This is certainly great news for all the WiMAX proponents (Google, Clearwire, Intel, Motorola, Samsung etc.). The adoption and improved penetration of wireless services would also be of great benefit for end users as it is believed in a more connected world – individuals benefit through the dissemination of information and enable trade and commerce. This will directly add up to the GDP of a country. Improved GDP will further improve the lives of people and will surely be desired virtuous cycle for people in the emerging markets.
The article makes a great case for Ultra High Frequency (UHF),
1. Support for high speed mobile broadband connections – encouraging the development of new internet-based services
2. UHF signals can penetrate buildings and travel long distance, reducing the cost of rolling out wireless services
This is certainly great news for all the WiMAX proponents (Google, Clearwire, Intel, Motorola, Samsung etc.). The adoption and improved penetration of wireless services would also be of great benefit for end users as it is believed in a more connected world – individuals benefit through the dissemination of information and enable trade and commerce. This will directly add up to the GDP of a country. Improved GDP will further improve the lives of people and will surely be desired virtuous cycle for people in the emerging markets.
Friday, November 16, 2007
Tipping in WiMAX favor
It appears that there are two things that tip the balance in WiMAX’s favor,
1. Internet’s open-standards approach - This will allow them to address a sizeable internet ready market instantly.
2. Popularity with Infrastructure vendors - Intel – Montevina chips (also called Centrino Duo) to get to the next billion users, Motorola offering WiMAX modems, PC Cards, and multimode phones. And am sure there are other vendors with similar intentions. It is the investment by the vendors that drives the next round of infrastructure upgrade.
The game changer for WiMAX could be Google since Sprint has its own problems and Clearwire may not have the deep pockets to go on their own. Google is using negotiating tactics to get to the wireless operators who do not want to open up their network (and making it difficult for Google to make money). By bidding for the wireless spectrum Google’s motivation would be either to
1. Increase the price of spectrum for the wireless providers. This would surely be an aggravation for the mobile operators, OR
2. If they win spectrum, then use that to provide WiMAX to promote the mobile Internet and other service plans they may have based on the Android platform. In this case, Google will monetize the mobile internet the way they did it with the wire-line internet.
Clearwire will need a partner and for a really win-win situation, this partner could be any of the Internet companies with deep pockets - Google is what comes to my mind.
1. Internet’s open-standards approach - This will allow them to address a sizeable internet ready market instantly.
2. Popularity with Infrastructure vendors - Intel – Montevina chips (also called Centrino Duo) to get to the next billion users, Motorola offering WiMAX modems, PC Cards, and multimode phones. And am sure there are other vendors with similar intentions. It is the investment by the vendors that drives the next round of infrastructure upgrade.
The game changer for WiMAX could be Google since Sprint has its own problems and Clearwire may not have the deep pockets to go on their own. Google is using negotiating tactics to get to the wireless operators who do not want to open up their network (and making it difficult for Google to make money). By bidding for the wireless spectrum Google’s motivation would be either to
1. Increase the price of spectrum for the wireless providers. This would surely be an aggravation for the mobile operators, OR
2. If they win spectrum, then use that to provide WiMAX to promote the mobile Internet and other service plans they may have based on the Android platform. In this case, Google will monetize the mobile internet the way they did it with the wire-line internet.
Clearwire will need a partner and for a really win-win situation, this partner could be any of the Internet companies with deep pockets - Google is what comes to my mind.
Thursday, November 15, 2007
Business case for WiMAX?
The WSJ had a good article on WiMAX prospects but however did not convince me of the real benefits of WiMAX. http://online.wsj.com/article/SB119498643110891751.html?mod=todays_us_page_one
Per the article ‘Clearwire is trying to cobble together a network to give customers fast, affordable Internet access for laptops and mobile devices in their homes, cars, commuter trains -- almost anywhere’. The key word is “affordable” – not sure how can someone make it affordable without cost advantages compared to competing technology and its deployments.
My understanding of the cost advantages for WiMAX are as follows:
1. Lower CAPEX from Open standards and Clean Intellectual Property Rights (IPR) – leading to lesser expensive equipment
2. Lower OPEX from less expensive spectrum and more advanced technology
Let’s look at CAPEX - Open standards and clean IPR are only marketing terms. Open standards would surely reduce cost but then there has to be so much adoption that economies of scale becomes an advantage. However, if the technology is open standards, then vendors may not be able to differentiate (and earn profits) and hence their motivation to increase scale. Clean IPR or better negotiated royalties could help. But then most of the Orthogonal Frequency Division Multiplexing (OFDM) will come from Qualcomm and few other vendors like Motorola, Intel. Qualcomm has been buying up companies like Flarion, AirGo and TeleCIS that have great Intellectual Property assets. The motivation of Qualcomm remains to maximize their earning potential. And then Qualcomm already has plans for the EV-DO rev C that would be based on OFDM instead of CDMA. For WiMAX one still needs the base stations, the long haul networks, the softswitches, chipsets for both transmitters and receivers as is needed for other mobile technology – in other words am not convinced there would be CAPEX savings.
Now let’s focus on OPEX – if spectrum license is cheap now, it is because there are not enough bidders to drive the price up as was done with the auction of 3G licenses. So not sure the spectrum licenses will be any less once there is excitement in the market. And with respect to more advanced technology requiring less power, space, remote manageability etc, surely this is something that would reduce the cost of operations.
Then the case for WiMAX is that it provides more bandwidth – now if this is a function of the digital technology like OFDM, this advantage will also go away soon.
I liked what Mr. McCaw (Craig McCaw, Chairman of the Board for Clearwire) had to say "There's always been this sort of messiness that's created opportunities." I too remain optimistic but am having a hard time justifying the economics for WiMAX.
What am I missing?
Per the article ‘Clearwire is trying to cobble together a network to give customers fast, affordable Internet access for laptops and mobile devices in their homes, cars, commuter trains -- almost anywhere’. The key word is “affordable” – not sure how can someone make it affordable without cost advantages compared to competing technology and its deployments.
My understanding of the cost advantages for WiMAX are as follows:
1. Lower CAPEX from Open standards and Clean Intellectual Property Rights (IPR) – leading to lesser expensive equipment
2. Lower OPEX from less expensive spectrum and more advanced technology
Let’s look at CAPEX - Open standards and clean IPR are only marketing terms. Open standards would surely reduce cost but then there has to be so much adoption that economies of scale becomes an advantage. However, if the technology is open standards, then vendors may not be able to differentiate (and earn profits) and hence their motivation to increase scale. Clean IPR or better negotiated royalties could help. But then most of the Orthogonal Frequency Division Multiplexing (OFDM) will come from Qualcomm and few other vendors like Motorola, Intel. Qualcomm has been buying up companies like Flarion, AirGo and TeleCIS that have great Intellectual Property assets. The motivation of Qualcomm remains to maximize their earning potential. And then Qualcomm already has plans for the EV-DO rev C that would be based on OFDM instead of CDMA. For WiMAX one still needs the base stations, the long haul networks, the softswitches, chipsets for both transmitters and receivers as is needed for other mobile technology – in other words am not convinced there would be CAPEX savings.
Now let’s focus on OPEX – if spectrum license is cheap now, it is because there are not enough bidders to drive the price up as was done with the auction of 3G licenses. So not sure the spectrum licenses will be any less once there is excitement in the market. And with respect to more advanced technology requiring less power, space, remote manageability etc, surely this is something that would reduce the cost of operations.
Then the case for WiMAX is that it provides more bandwidth – now if this is a function of the digital technology like OFDM, this advantage will also go away soon.
I liked what Mr. McCaw (Craig McCaw, Chairman of the Board for Clearwire) had to say "There's always been this sort of messiness that's created opportunities." I too remain optimistic but am having a hard time justifying the economics for WiMAX.
What am I missing?
Monday, November 12, 2007
70 -70 FCC (yet to be published) Report may be good news for Telecom Operators
Based on the 1984 Cable act – the FCC could now regulate the Cable too. Per the Wall Street Dated Nov 12, 2007, the Cable companies have become too dominant in the ‘Pay-television industry’. The cable act also called - The 70-70 rule states if Cable penetration exceeds 70% of households in the U.S. and that 70% of those households take out a subscription, then the FCC would have additional rights to regulate them. This surely is some good news for the Telecom operators, who have been investing heavily to provide more video services called IPTV to the US users.
The National Cable & Telecommunication Association (NCTA) does not think additional regulations by the FCC would be in their best interests and believe the FCC is twisting statistics.
As for the consumers – this would be good news and result in
1) Potentially reduction of subscription rates,
2) Get access to channels that they really want to pay for (a la carte pricing), and
3) Have more choices, since the regulation will ensure more independent programmers have access to this market.
Of course the intensity of competition would increase for the service providers – but then this should be a good thing for all. As to thrive, they will need to constantly innovate. Didn’t somebody say “Innovate or Die”?
Need more info -
On the Financial Times http://www.ft.com/cms/s/0/43ff9cd8-90bf-11dc-a6f2-0000779fd2ac.html
On the Wall Street Journal http://online.wsj.com/article/SB119483049023089622.html?mod=todays_us_page_one
The National Cable & Telecommunication Association (NCTA) does not think additional regulations by the FCC would be in their best interests and believe the FCC is twisting statistics.
As for the consumers – this would be good news and result in
1) Potentially reduction of subscription rates,
2) Get access to channels that they really want to pay for (a la carte pricing), and
3) Have more choices, since the regulation will ensure more independent programmers have access to this market.
Of course the intensity of competition would increase for the service providers – but then this should be a good thing for all. As to thrive, they will need to constantly innovate. Didn’t somebody say “Innovate or Die”?
Need more info -
On the Financial Times http://www.ft.com/cms/s/0/43ff9cd8-90bf-11dc-a6f2-0000779fd2ac.html
On the Wall Street Journal http://online.wsj.com/article/SB119483049023089622.html?mod=todays_us_page_one
Thursday, November 8, 2007
Average Revenue Per User (ARPU) Comparisons
It is interesting to note that ARPU for cable, Satellite and Telco service providers have so much of variations. Comcast and Cablevision are the cable operators offer triple pay service bundles so does Verizon, a telco. DirectTV offers only video services via satellite. DirectTV seem to be doing well without having to offer bundled services but surely are at a disadvantage to improve ARPU (unless they look at acquisitions/partnerships or advancement in technology so that they too can offer triple play services). However, if you observe the APRU of Comcast, Cablevision and Verizon, Cablevision appears to be making most in terms of ARPU. This could be the reason why Verizon have been targeting the Cablevision territory as they offer IPTV and HSI services - 25% of the homes Cablevision serves are exposed to Verizon’s FiOS service compared with about 4% for Comcast and Time Warner Cable Inc., according to a Citigroup Research estimate.
Also it also appears that Comcast is pushing to increase their High Speed Internet (HSI) penetration - 27% of "available homes’ and Comcast thinks it can get that number up as eventually 80% of homes in the U.S. will have broadband, up from the roughly half of homes that do now. Of the 450,000 HSI additions, only 25% of Q3 net adds came from dialup, while 61% came from DSL (telco) and 14% came from other cable companies. I am sure the telco are making note of the 61% number and their motivation to provide higher bandwidth internet services.
Other upside revenue potential from Comcast is their phone services - only 9.4% of the 40.3 million homes offered phone service have subscribed, leaving considerable room for growth. They are further targeting the Small and Mid-sized businesses - Comcast has hired roughly 750 sales people and trained about 1,200 technicians for its nascent plan to offer services to small and midsize businesses. Both these targets are aimed at the strongholds of telcos. As the Pali Research report puts it ‘the cable industry is now looking at an all-out war’ (with the telcos).
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