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Showing posts from April, 2007

This Might be Good for Vonage

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In a decision issued April 30, the U.S. Supreme Court reinvigorated the "obviousness test" used to determine whether a patent should be issued. Ruling in the case of KSR v. Teleflex, the Court found that the US Court of Appeals for the Federal Circuit, which handles patent appeals, had not been using a stringent-enough standard to determine whether a patent was infringing.

At issue in KSR v. Teleflex is a gas pedal manufactured by KSR. The pedal has an electronic sensor that automatically adjusts its height to the height of the driver. Teleflex claimed that KSR's products infringed on a patent it held. KSR said that Teleflex's patent combining a sensor and a gas pedal was one that failed the obviousness test, and as such, should not have been granted.

Since 1952, legislation has mandated that an invention can not be patented if a "person having ordinary skill in the art" would consider it obvious. Many observers think Verizon's patents are overly broad…

EarthLink Not So Sure About Muni Wi-Fi

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EarthLink says it is studying the financial performance of its municipal wireless Internet networks in four cities--Philadelphia, New Orleans and California's Anaheim and Milpitas--before deciding how to move forward with similar Wi-Fi networks elsewhere.

While more cities are expressing interest in striking deals with the company, EarthLink is "not yet able to establish that comfort level" that the investments are really profitable, says Kevin Dotts, EarthLink's chief financial officer.

That's sort of the whole problem with Wi-Fi. It is a fabulously useful local access tool. It just never is quite so clear that it is a business, or a good business. Indoors is one story. Outdoors is quite another. As useful as Wi-Fi is indoors, muni Wi-Fi suffers in that respect. Sure, handhelds capable of doing something useful with outdoor Wi-Fi are getting to be more common. But they aren't yet real common. And I don't know about you, but I never use my notebook outd…

It's Hard to Do Any Better Than This

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Verizon added more than a million new wireless customers in the first quarter, outpacing at&t. And its churn remains astonishingly low. Millions of households move every year, and the propensity to move is much much higher for younger mobile users, who might arguably represent the highest churn demographic. A household churn rate of just one percent a month (people moving) would still generate 900,000 switchers in a quarter. Of course, mobile providers have one advantage wireline providers do not. When somebody moves out of state, the mobile account doesn't necessarily have to change. The landline voice, broadband access and video account might well have to. So wireline services always face an uphill battle to get churn down to just one percent a month.

It's All About ARPU and Churn

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How bundling is good, or whether bundling is good for customers might be debated. There isn't much question about whether it is good for service providers. "When you look at consumer customers from a bundled standpoint, customers that are stand-alone voice customers have ARPUs in the low $40 range," says at&t CFO Rick Lindner. "As they begin to bundle and as we move them upwards to a full-quad bundle where they have got voice, data, video and wireless from us, all of a sudden that customer moves to a $250, $260 kind of monthly customer"

"At the same time, the churn rates are cut by two thirds when you move from that stand-alone voice customer to a full-quad bundled customer," he says.

At the end of the day, this is about supplier push more than end user demand. It isn't the "bundle" users want, it's the monetary savings. Innovations will occur, neverthless. So in the end, bundles will lead to something besides higher ARPU for pr…

Specter Haunting Cable Companies?

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“It’s all clicking, our business is on fire,” says Comcast CEO Brian Roberts. Maybe so. But we sometimes forget that the cable industry is in the same position as the telephone industry. Namely: its core business is under fire and will not drive growth in the future. So each industry is racing to create new business models where legacy revenue is half or less of total revenue in a few years.

About half of Comcast's subscribers will also use its phone and broadband services by 2010, Roberts says. Roberts believes that within two to three years, half of the company’s customer units will not be cable TV, but instead will come from Internet access, telephony and other services. At that point, he says, “half of Comcast is no longer just a TV company.”

With the caveat that a stock price isn't a complete proxy for the anticipated fortunes of a company or industry sector, U.S. cable operator prices have sagged of late. In Comcast's case, it is a bit hard to know why. Comcast adde…

Viral Adoption for Enterprise

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The integration of the Iotum Talk-Now presence app with Jajah for calling on BlackBerrys illustrates a new approach software distributors can take to penetrate enterprise accounts. You know the old way: direct sales teams target "C" title executives. Key decision makers then are identified and the account is "worked."

There's another model. Harken back to the days when computing was centralized, lived in a "glass house" and terminals were dumb. If you wanted to sell a personal computer or a local area network to connect them, what would you do? You weren't going to get the glass house shut down, so the top down, rip out the mainframe, forklift route wasn't promising.

Instead, you targeted individuals. Lead users. Power users. You flew under the radar. You kept the upfront cost low. You didn't require a change of enterprise computing architecture. And then you let interest spread virally.

Lead users, work groups and then departments. That …

Commoditizing SMS?

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Given that short message service is a high margin product delivering between a third and half of most mobile operators’ profits, STL Partners wonders what threat third party providers might represent. Alternative services allow users to connect to a third party gateway over the Internet (using GPRS, 3G, or Wi-Fi) and send text messages affordably.

Service provider execs who remain optimistic about keeping the business say users are too lazy or indifferent to the cost of SMS to switch. A general shift towards IM features will moderate costs and provide a richer alternative. There will be spam and privacy issues. And service providers will just drop prices if they have to.

Executives seeing a larger threat suggested that messaging will be embedded in third party applications, notably social networking services, and that operators will lose control of the context from which messages are initiated — as well as the revenue.

The STL graphic shows the percentage of business lost to third pa…

Iotum and Jajah Partner

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The Iotum Talk Now application, a presence manager running on Research in Motion's BlackBerry, now has been integrated with Jajah, the Web-enabled calling application. ah is integrated into the iotum application. Very nice. Of course, now I am having an even harder time weighing two crucial device decisions. Do I ditch Windows and go Mac? And do I ditch BlackBerry and go iPhone?

As a former Mac fanatic, I finally had to switch to Windows because all my trading partners were on that platform, and at that time the Web really wasn't available to mediate most communications and applications. It is safe to say I've never enjoyed or really liked Windows. The big issue now is how many of the applications I get asked to test, or actually use, will be available on the Apple OS. Don't know yet, but this probably is the decision hinge.

Push email was a huge innovation when I first got it. But I'd have to say push email isn't a compelling reason to keep my BlackBerry any…

Vonage Wins Permanent Stay

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The U.S. Court of Appeals for the Federal Circuit in Washington D.C. has issued Vonage a permanent stay of a previous court's injunction that would have barred it from signing up new customers.

Vonage sought the stay following an April 6th decision by the U.S. District Court in Alexandria, Va. enjoining the company from using certain VoIP technology to add new customers. The permanent stay enables Vonage to continue adding new customers as it pursues an appeal of the patent infringement ruling.

Vonage will however continue to pay into escrow a quarterly royalty of 5.5 percent throughout the appeals process and also will post a $66 million bond as required by the court.

"We believe the original verdict was based on an erroneous claim construction -- meaning the patents in this case were defined in an overly broad and legally unprecedented way," says Sharon O'Leary,Vonage EVP and chief legal officer. "We believe the district court's decisions repeatedly neg…

Wireless Rules

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At the end of last year there were 233 million wireless accounts in service in the U.S. market. Access lines in service at the largest eight U.S. wireline carriers amounted to 139.2 million (at&T, Verizon, Qwest, Embarq, Windstream, Century Telephone, Citizens and Cincinnati Bell). Not to mention the directional change: wireless is still climbing, wireline still dropping. Of course, one has to add back in three million cable industry voice customers. But you get the point. Wireless increasingly is the way the mass market does voice.

Communications as Consumer Electronics

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As more and more mass market communications gear becomes an extension of the consumer electronics business, more of the rules of that business start to apply. Among the key rules are: keep the price low, make it simple to use, address a real need, design attractively, build retailer relationships and adhere to standards because one requires volume. Every January, hundreds of new products are shown at the Consumer Electronics Show, and most of them fail.

So consider MobiGater, a USB device that transfers Skype calls to a mobile phone without using SkypeOut credits. The €270 ($370) box works like any other plug-and-play USB device. Once connected to your desktop computer, all Skype calls are redirected to a mobile. Heavy mobile users in markets with high costs might find the gizmo worth buying and using. But there will be issues. It always is tough to sell a peripheral that costs as much as the processor the peripheral is supposed to be used with.

The user requires an additional SIM ca…

Time Warner Cable to Work with Fon

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Sometimes a service provider simply has to cooperate with what might be seen as a direct competitor. So it is that Time Warner Cable is going to allow its users to create publicly accessible hotspots in cooperation with Fon, the company building a network of private Wi-Fi connections. Time Warner will allow its home broadband customers to turn their connections into public wireless hotspots, a practice U.S. ISPs generally have said is outside "fair use" policies. Verizon Communications Inc., for example, can terminate contracts if it finds an ad-hoc hotspot.

Fon and Time Warner will split the proceeds from use of Fon hotspots by non-members. That is expected to be $2 to $3 a day. Fon network users can offer free access to all other Foneros in exchange for reciprocal privileges, or can offer for-fee access.

The Fon wireless router splits a Wi-Fi connection in two: an encrypted channel for the Fonero and a public one for neighbors or other casual users. Foneros can decide ho…

So Maybe It's the Lead Offer...

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...not the only offer. Most Western European consumers still buy Internet access separately from other services like fixed voice, VoIP, TV, or mobile, says Lars Godell, Forrester Research analyst. "Very few Europeans get either triple or quadruple play delivered in one integrated package," he says. U.S. bundle buyers might be more commonly found, but even in the U.S. market it is far more common to find dual play buyers than triple play.

Researchersa at The Yankee Group recently found that 41 percent of buyers chose a dual play package, compared with 23 percent for a triple play bundle.

Of course, it always takes some time before mass market buyers warm up to some new services and packaging techniques. Digital cable and satellite didn't reach their current penetration levels in a year or two. Also, promotions for triple play packages seem to alternate with "add voice" or "add video" or "add high speed Internet access" offers from either cabl…

Business Broadband is a Big Deal

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If we read these forecasts correctly, wired broadband access sold to business customers, not including voice, represents almost the same amount of revenue as all wireless services do in 2011. This forecast doesn't include voice revenues. Of course, we'd also note that the relative importance of wireless is growing.

Words to Live By

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Asked about Google's revenue per employee, Google CEO Eric Schmidt says the company doesn't focus on it. "It is more important to focus on end user happiness," says Schmidt. If that sounds ethereal, it isn't. The media business always is based on some equivalent of "aggregating eyeballs." So Google's business depends on attracting engaged users. "If we could bring out a product that will cause people to use Google and its various applications that much more and they spend more and more of their day using Google services, that allows us to eventually monetize that," Schmidt says.

Will Users Pay for Features?

Alec Saunders and David Beckemeyer are consistently worth listening to. This from David, who asks really good questions:

Fring is technically impressive, but I'm still wondering about its utility

I have mentioned Fring a few times before. The most recent post left it that I had not been able to complete the setup because I never received the SMS from Fring on my phone.

I sat down with Boaz Zilberman of Fring at VON and he was able to solve whatever glitch was happening at Fring that was preventing the SMS and I was able to get Fring 2.0 installed on my phone.

Luca Filigheddu calls Fring "the most complete multi-protocol IM VOIP client for mobile phones" and I would have to agree. That said, I still find myself asking, is it useful?

Like many other cell phone users in the US, I have GPRS data service rather than a true 3G data service with my carrier. My first experiences with Fring over GPRS were not very good. More recently, I have had much more acceptable call quality…

BT to Expose Itself

Project Web21C BETA software developer kit will expose network capabilities to developers working in the .NET Visual Studio, Java, PHP and Python environments. Initially the thinking seems to be to provide developers a way to add communications and global positioning satellite features to applications. The Web21C SDK abstracts the services interface and serialization classes by providing the developer with a simple object model to interact with.

The Web21C SDK provides the ability to embed Short Message Service into an application, for example. It also allows applications to make phone calls, conference calls, presence information, authentication, a way to store and retrieve data about an individual and location information.

A somewhat parallel effort, the BT Applications Marketplace, aims to give developers a way to market apps to the BT customer base.

BlackBerry Outage Disrupts Enterprise Ops

In a webinar poll conducted April 18 by ProfitIine, 81 percent of responding large enterprise IT and telecom professionals reported disruption to operations from the BlackBerry outage. Some 44.5 percent reported "moderate or substantial" impact to enterprise productivity. Only 18.2 percent reported no impact from the outage.

Engagement Might be The Issue

A recent Forrester Research survey suggests that mobile data apps are moving into the mainstream. More than one-third of mobile subscribers use text messaging, and 18 percent send or receive picture messages, but adoption of the mobile Internet lags, with only 11 percent using it.

As you might expect, data users are not only younger, but their attitudes also expose a deeper engagement with their mobile phone and service, and they are more satisfied with all aspects of their mobile experience than are those who only use voice.

Which raises an issue: even as wireline providers are able to leverage IP to provide richer directory and call log features, as well as click to call, will those new attributes put a brake on user engagement with their mobiles?

Certainly Embarq believes that offering wireline call logs, directory services and click to call are going to enhance the value of wireline voice, says Bill Blessing, Embarq SVP. He's undoubtedly right about that.

The issue is that en…

Don't Have It, Don't Want It

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Some 29 percent of U.S. homes do not buy any form of Internet access, and 44 percent of the "resisters" says they don't buy service because they are not interested in anything on the Internet. About 22 percent say they don't buy because they do not own a PC. The 31 million U.S. Internet "resister" homes also say they don't plan to buy access for the next year either, says a Parks Associates study. Parks researchers also find that most new broadband access subscriptions are coming from dial-up customers who are upgrading, not "newbies."

MetroPCS: More Evidence Voice is Not a Commodity

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MetroPCS provides more evidence that even mass market mobile phone service is not a commodity, in the strict sense. MetroPCS offers flat rate local and domestic U.S. calling in Miami, Tampa, Sarasota, Atlanta, San Francisco, Dallas, Detroit and the Sacramento metropolitan areas to more than three million customers at the moment.

It might be said to specialize in a several market segments: people who want flat rate wireline pricing plus mobility; people who have problems qualifying for prepaid plans; immigrant communities; people who don't like contracts; people who don't like credit checks or deposits; younger users and first time users.

MetroPCS offers a $30 per month service plan offering unlimited calling. For an additional $5 to $20 per month, ssubscribers can add nationwide long distance calling, unlimited text messaging (domestic and international), voicemail, caller ID, call waiting, picture and multimedia messaging, mobile Internet browsing, push e-mail, data and ot…

Satellite Gains at Cable's Expense?

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According to a survey taken early to mid March, there's evidence some households are about to make a move to satellite TV, especially DirecTV. While Comcast remains the current leader among U.S. and Canadian TV service providers, DirecTV shows the most market share momentum, says the Changewave Alliance, after a survey of nearly 3700 members.

And though customer satisfaction does not reliably translate into loyalty, it appears that satellite video services rank well on that score. Satellite customers say they are much more satisfied than cable customers. "Moreover, Satellite satisfaction ratings have improved four points since our previous survey, while cable satisfaction rates have declined two points, Changewave says.

DirecTV now is the industry leader in terms of customer satisfaction and has also experienced the biggest improvement since November. Comcast has experienced the biggest decline.

Most significantly, satellite s about to gain at cable's expense, Changewav…

Amazon: Compute in the Cloud

Amazon's Simple Storage Service (S3) and Elastic Compute Cloud (EC2) appear to be getting traction. The whole idea is to provide easy to use computing and storage "in the cloud." S3 recently had a peak day with 921 million requests, says Jeff Bezos, CEO of Amazon. At the peak second for the service, there were 16,600 requests. A year ago Amazon had 800,000 "objects" on the service. Now there are over five billion. S3 and EC2 are just a couple of reasons why the pace of Web application development has gotten so blistering.

Time Warner Cable Heading for the Doors?

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When a major player in the content business starts thinking that maybe it doesn't need to control distribution to the extent it once did, watch out. It is an indication that the strategic value of distribution networks could be changing. That might be just what is happening at Time Warner, which has generated significant profits from its cable system ownership. The latest thinking is but the latest iteration of a constant theme in the video entertainment business: the relative strategic value of distribution and content assets. Though the mantra of late has been that "content is king," distribution always plays an important role. Sometimes it is the key role. Satellite radio wouldn't be much without the creation of new distribution networks. But movie studios are barred by law from owning theater chains.

Once upon a time a company had to build an operate its own network to deliver voice services. And cable TV wouldn't exist without the cable network. And the sa…

What Else Would Vonage Say?

Vonage says it has no "workaround" in hand to sidestep Verizon's patented Internet phone technology. That would simply stand to reason. It obviously would take time to circumvent a broad patent covering interconnection of public and IP networks.

This is precisely what one would argue if angling for a permanent stay of an order that would shut one's company down, while an appeal winds its way through the courts.

More to the point, though, Vonage says isn't sure that such a plan is even "feasible," given the expansiveness of Verizon's patents, which set out methods for passing calls between the Web and conventional phone networks. Friday the 13th, indeed.

A federal court recently ruled that Vonage had infringed on Verizon's patented technology. As punishment, Vonage was barred from using the disputed technology to support new customers. Vonage has gotten a temporary stay, but has petitioned for a permanent stay until the appeals process is finish…

IPTV: Tough Going in Western Europe

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It's a good thing U.S. consumers like television quite a lot. Because IPTV results so far from Western Europe are sobering. While 11 Western European incumbent telcos have launched IPTV services, Forrester Research’s says consumer interest remains low, and revenue potential remains modest. Forrester predicts 25 percent of European xDSL/fiber broadband subscribers will have IPTV within 10 years. In the U.K. market Forrester expects 13 percent penetration in a decade. In France, Forrester expects 33 percent penetration in year 10.

Lars Godell, Forrester Research principal analyst says “Europeans are generally unwilling to pay much for TV content, and a discount scheme is needed to entice them to buy triple play."

In a mature TV market, this means incumbents will need to price IPTV below competing cable and satellite TV services. Assuming the typical provider gets a third of the market, annual IPTV revenue will work out to about €11.24 in net annual IPTV revenues. Remember tha…

4G Has to be Taken Into Consideration....

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One thing about the access business. It isn't as though the cable and telco contestants can rivet their attention on each other, and ignore everybody else. 4G wireless, for example, sometimes is defined as an access featuring 1 Gbps for stationary users and 100 Mbps to mobile users. The cable industry's DOCSIS 3.0 specification, for example, will bond channels to provide downstream speeds up to 120 Mbps and upstream bandwidth in the neighborhood of 80 Mpbs, at least in the lab. In the real world, physical impairments of various types and the need to share that bandwidth across a base of users will, in practice, reduce the actual bandwidth any single user might be able to pay for. We would note that at least one U.S. telco, SureWest Communications, offers a 50 Mbps symmetrical bandwidth service today for any customer that will purchase SureWest's most-expensive bundle, including every video service, wireless, fixed line voice and Internet access.

"Why Vonage?" Jon Arnold Wants to Know...

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Bloggers Jon Arnold and Daniel Berninger want to know why Verizon went after Vonage on the patent front. Why not some other company? The answer is that the dominant telcos want some competition, but not effective competition. The reason is simple enough. It is quite beneficial to show regulators that there is effective competition in their markets. But what happens is that there's a threshold. Below a certain level of success, we leave you alone. Cross the line, and we have to deal with you.

That's why some competitive local exchange carriers actually were encouraged to take share away from certain large tier one incumbent telcos. Helped, actually. All to demonstrate that there is effective competition in the market. Not every CLEC got that sort of material help. And not every CLEC found itself so favored once the legislative and regulatory battles requiring proof of effective competition drew to an end.

Vonage gets attacked because it frankly doesn't help to attack SunR…

Vonage Starts Cutting

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Vonage says its quarterly results for the period ended March 31, 2007 will show $195 million revenue, 332,000 gross customer adds and 166,000 net adds. That would bring Vonage in flat with net adds for the fourth quarter of 2006, when it added 166,000 net customers.

Marketing cost for each gross customer addition, though, backed down to $275, towards the more historic range of $239 in the second quarter of 2006, $306 in the fourth quarter 2006, $254 in the third quarter and $239 in the second quarter last year.

Quarterly revenue of $195 million was stronger than the $180 million Vonage reported for the fourth quarter 2006. Monthly ARPU was $28.17.

But Vonage also expects to boost operating results by cutting $110 million in marketing expense, possibly a quarter of what it originally though it would spend this year. Vonage now expects to spend $310 million for 2007 marketing, instead of $400 million to $425 million.

A 10 percent force reduction also will slash SG&A costs of about…

Carriers Innovate Because They Have To

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I wasn't the only one at the Voice Peering Forum recently who was struck by the sudden lead some European telcos have taken in their transformation efforts. BT actually is growing customer counts and revenue in its tough mass markets segment, for example. To be sure, some of the progress is born of necessity. As Carlos Dasilva, France Telecom Americas region marketing director notes, "we had to move aggressively because the regulators are killing our business." And though she didn't specifically make the same point, BT has had to strike out on some very innovative paths precisely because it was forced to do so. But a significant turn in the direction of flexibility (an internal requirement, perhaps) and openness (more important for third party application providers) is going to pay dividends for end users, who "aren’t waiting" for regulators to set rules and service providers to start giving them what they want, Anna Boukovskaia, BT head of market developm…

The Tyranny of Choice

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If you have used an iPod shuffle or a Bose audio system recently, you might notice something: these are mimalist devices. The shuffle has no screen. You can turn it on or off, play songs in order or randomly shuffle, raise or lower the volume, go forward or back one song. Out of the box, the shuffle doesn't even have a transformer. You recharge by using a PC's USB port.

The Bose docking station, which provides amplification for iPods, allows you just a couple functions. You can turn the unit on or off. You can raise or lower the volume. If you use the remote, you can move forwards or backwards in your song menu. You can mute the audio. Though it initially is jarring, the Bose doesn not even have bass and treble controls, because it senses the acoustical properties of the room and adjusts all that for you.

So in a world where we assume the customer wants choice, how does that make sense? The flip side to choice is that too much choice is a problem. Too many options actually d…

What's the Incremental Cost of Terminating a Minute?

Well over a decade ago, as part of an exercise to determine the actual incremental cost of terminating a minute of voice usage, I calculated that incremental cost could not be less than three cents a minute. The reason? Any service provider terminating a minute of long distance traffic, for example, would have to pay an access fee, and then there's the cost of the billing infrastructure to send a bill or comply with government regulations, which would add some fraction of a cent per minute.

It doesn't appear those costs have changed much, at least for most rural telephone companies. The cost to originate, by the way, seems to remain at about one cent a minute, with the actual usage of a switch costing about 4/10 of a cent, one analyst who continues to run cost studies reports.

Embarq SVP Bill Blessing, additionly, says that the cost of operating a soft switch is in fact not less than operating a legacy Class 5 device. Transport, access and plain old overhead continue to be whe…

Mobile Data ARPU Inches Up

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IDC research, there were 236 million U.S. wireless subscribers by the end of 2006. U.S. wireless data revenue totaled $4.8 billion for the fourth quarter of 2006, representing roughly 13.5 percent of mobile provider average revenue per unit, or $6.74 per subscriber per month.

Of the total data revenue, 48.8 percent came from messaging, 13 percent from content and simple application downloads and 38.2 percent from other business- and consumer-oriented services and content.

"Our research shows that in terms of blended data ARPU, Sprint Nextel, at $8.32, regained its lead over Verizon, now at $7.91, although Verizon remains the leader in terms of total wireless data revenue and data percentage of ARPU among the U.S. national carriers," says Julien Blin, IDC research analyst.

One way to look at the data is that basic communications remain the driver, though content sales are growing.

FMC Not a Slam Dunk

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Bad news for fixed mobile supporters: In March 2007, Deutsche Telekom cancelled T-One, its dual-mode WiFi-GSM service in Germany, which it had launched in August 2006. Whatever else the shutdown might mean, it certainly indicates that service providers cannot simply put the service out there, make pricing and handset mistakes, and expect customers to go wild over it.

That’s especially true if there is competent competition. T-One was up against the cheaper T-Mobile home zone services, for one thing. Home zone services are based on tarriffs that encourage use of fixed network connections rather than mobility network when a user is within range of their identified home zone transmitter.

So why did DT’s T-One fail? It failed because it never managed to get enough customers. At the point the service was closed, DT had garnered far fewer than 10,000 customers. In fact, just 2,000 was the final figure, says TeleGeography.

The more important questions are why it failed to stir much custom…