TIA Forecasts 3.1 Percent Loss for ICT Industry in 2009- Broadband still THE growth driver for telecom

The Telecommunications Industry Association (TIA), whose primary membership is network equipment vendors, has just released its annual report and outlook for the global telecommunications industry. For the first time in its 23 years of forecasting, TIA predicts a 3.1 % loss for the global ICT Industry in 2009. Further, they anticipate a 5.5 % decline for 2009 US ICT revenue. Much of this loss may be attributed to a 27 % fall in the U.S. broadband equipment market.

TIA’s negative outlook is significant, because its report has always been a flag waving signal of hope for the telecom industry- even in years like 2002 and 2003, when there wasn’t much to cheer about. TIA’s annual global forecast report usually manages to find a silver lining somewhere in the world that shows an upward growth trajectory. TIA is optimistic about mobile data services (especially when compared to equipment sales). They think that some growth lies ahead, but not really until 2011.  Global telecom revenue is predicted to grow 1.2 percent in 2010, 6.4 percent in 2011 and 7.9 percent in 2012.

"Broadband will be a driver for recovery in all areas, from healthcare IT to smart grid technology, public safety networks to education, as well as for businesses and consumers," said Grant Seiffert, TIA President. "While TIA was instrumental in obtaining the $7.2 billion for broadband, other funding for energy, health IT and R&D will also spur recovery, especially in reviving some of the hundreds of thousands of jobs lost recently. The sum of increased productivity and revenue amongst all other industry segments whose growth broadband deployment contributes to is often underrated and perhaps immeasurable."

Growing demand for high-volume data applications is driving all segments, say the independent, unbiased analysts at Wilkofsky Gruen Associates who help to develop the Market Review & Forecast. Despite the recession, TIA predicts that wireless and business data revenue will grow by 73 percent during the next four years to $110 billion in 2012 from $64 billion in 2008.

Further analysis shows that economic recovery during 2011-12 will be driven by pent-up demand for equipment upgrades. Growth in data traffic will strain network capacity and stimulate investment; availability of financing will fuel investment; and broadband growth will expand the platform for VoIP and IPTV.

Recognizing that comprehensive market intelligence is more critical than ever for ICT companies positioning themselves to survive — and thrive – when the economy begins to rebound, TIA is offering an interactive version of the Market Review & Forecast as part of the new TIA Market Intelligence Service. TelecomTV is collaborating with TIA in offering the new online service, augmented by value-adds such as news updates, webinars, industry analyses and more.

The report is optimistic on WiMAX for broadband fixed wireless access, especially in rural areas of the U.S. where DSL and cable modems are not available. In answer to a question I had during the press briefing, the speaker identified WiMAX as the largest beneficiary of the growth in fixed broadband access (vs mesh WiFi or proprietary technologies). TIA believes that WiMAX will make initial inroads in rural areas — areas where subscribers are beyond 18,000 wire feet of a central office or public network access node. TIA also thinks that there is no competition for Mobile WiMAX in the U.S., because of the time to market lead it has over LTE.

Quoting from a Press Copy of the report, TIA states:

"WiMAX still faces strong competition from entrenched fixed-broadband technologies such as DSL and cable modems and from emerging 3G technologies in the mobile segment. With respect to fixed broadband, WiMAX will likely make initial inroads in rural areas where DSL and cable modems are not available — areas where subscribers are beyond 18,000 wire feet of a central office or node. If WiMAX becomes established in rural areas, it may then seek to expand to areas already served by DSL or cable, using the experience of direct broadcast satellite (DBS) as a guide. DBS initially penetrated rural areas not served by cable television and only later began marketing its services head-to-head against cable in urban and suburban areas.

There is currently no competition for mobile WiMAX, as the widespread deployment of alternative 4G technologies is still years away. Verizon has announced it will be using LTE as its 4G technology, has accelerated its testing and expects to have initial deployment of the technology by the end of 2009."

TIA’s 2009 ICT Market Review & Forecast includes:

-Detailed activities and metrics from prior years
-Projections, trends and anticipated performance for short-term (upcoming year) and mid-term (3-5 years out)
-The target audience includes equipment manufacturers, service providers, software vendors, content providers and the media.

-Sectors covered in the publication include:

 

  • Landline
  • Wireless
  • Enterprise
  • Network equipment
  • Broadband
  • VoIP
  • Data transport
  • Internet access 

For further information and to purchase the report, please contact:

Mike Snyder, PR Manager

Telecommunications Industry Association (TIA)

2500 Wilson Blvd., Ste. 300

Arlington, VA 22201

W: 703.907.7723; M: 703.869.3968; F: 703.907.7727

msnyder@tiaonline.org

 

Positive Signs and Positive Cashflow from One Telco

Jeff Gardner, President and CEO of Windstream Communications, opened his keynote speech at U.S. Telecom’s Executive Business Forum with a note of appreciation to US Telecom for getting behind what he termed, “credit stabilization legislation.” These opening comments set the theme for his talk, which was primarily about the financial condition of his company. In doing so, he provided insight into Windstream’s thoughts on the basic business, but also on topics such as wireless and IPTV.

Gardner spoke of the transformation of Windstream Communications from a telephony-based to a broadband-centric company. As proof points, he cited metrics that showed growth in broadband customers from 81k to 934k from 2002 to present. Revenues have increased from $3.1 to $3.21 billion in that same period, which is remarkable given the ongoing voice line loss of approximately 5% per year.

Windstream was born out of a merger of Alltel’s wireline properties together with those of VALOR Communications and instantly became a top-ten telco. It is primarily a rural and suburban carrier with about 20 access lines per mile. Still, they are facing strong competition, particularly in their suburban areas, as evidenced by the fact that 50 to 55% of their markets have voice competitors and 80% of their markets have broadband competitors.

Despite this, OIBDA (Operating Income Before Depreciation and Amortization) is at 53% and Gardner indicated that the dividend was safe and, at the time of his speech, was yielding 9%. He indicated that only 15% of Windstream’s revenue results from regulation (e.g. High Cost Fund, Switched Access, etc.).

Gardner said that there are multiple secrets to Windstream’s success, including aggressive marketing at the local level. Windstream staffs at the local level and targets its marketing efforts to particular markets, as opposed to one-size-fits-all, national programs.

They are expanding distribution channels as well and are finding success in marketing to MDUs – some of Windstream’s college towns have 30 to 40% of their residences located in MDUs. Approximately 10% of their sales are coming from retail channels. Gardner suggested that they are making big investments in their save desk; they have saved some 50% of customers who were about to defect to a competitor.

He spoke of the importance of offering products that customers want. As an example, they created an offering called Greenstreak; which is targeted at those people who are wireless-only customers. Greenstreak is a broadband product which provides a metered voice line (primarily for emergencies). They have not seen cannibalization of revenue from higher priced tiers as they have carefully targeted this offering.

One of the offerings Windstream won’t be providing anytime soon is wireless, especially as an MVNO. Gardner, who has 20+ years of wireless experience, said that Windstream could not see a path to profitability for a wireless offering. He said it was very difficult, if not impossible, for a rural telco to be competitive in the wireless space.

He had similar thoughts about building out a traditional IPTV infrastructure and IPTV does not appear to be in their video plans in the near-term. With that in mind, he is very pleased with the performance of their digital video offering via their partnership with Echostar/DishTV and called it a long-term strategy. He said that they are paid in the millions of dollars per quarter in upfront commissions, plus ongoing fee for billing and collections for their 231k video subscribers.

When asked who owns the customer, he admitted that, at this point, the customer is pretty much DishTV’s. He hinted that this could change as the rollout of a hybrid satellite/on-demand via broadband offering (expected in Q1 2009) will allow much more customization of the product for Windstream.

This is consistent with their focus on enhancing the broadband experience of their customers. Approximately 85% of their customers can receive their 3 Mbs tier, 40% can receive 6 Mbs and 22 to 25% can receive 12 Mbs. To increase the value of this bandwidth, Windstream has is either offering or planning to offer services such as tech help, home network VOD and security services.

He suggested that one way to monetize its broadband infrastructure is through, “Consumer preference advertising.” This is the type of targeted advertising that has been at the center of controversy in Washington. Gardner pointed out that the industry has to figure out how to add this revenue stream to their portfolio. He believes that targeted advertising ultimately provides a better experience for the consumer, as they will receive advertisements they want to see and implied that the new advertising revenue streams will effectively subsidize consumers’ broadband subscriptions.

Finally, Gardner suggested that Windstream is well positioned for further merger and acquisitions with other telcos. He warned that the ability to enter into such transactions will be slowed somewhat by the credit markets and to not expect anything for 12 to 24 months.
 

IEEE ComSoc-SCV Workshop: Location Based Technologies and Services

Summary of Location Based Technologies and Services Workshop

[June 19, 2008, Crown Plaza Hotel, San Francisco International Airport] 

Alan J. Weissberger
IEEE ComSoc- SCV Secretary and Program Chair
Backgrounder:  
Yankee Group tele-briefing report on Location Based Services and Technologies:

Speaker Remarks
1. Dave Reid, Director of Business Development, SiRF Technology Inc. http://sirf.com/
 
The world is on the go (which implies that mobile telecom services and devices will grow rapidly). SiRF believes that location awareness brings convenience to our lives. SiRF is predominantly a (fabless) semiconductor company- with the largest market share of discrete GPS chips and related intellectual property. SiRF powered mobile devices include personal navigation devices (PNDs), handheld GPS receivers, smart phones, feature phones, personal media players (PMPs), and in-dash car navigation systems. 
 
There are many types of Location Based Services (LBS’s) being deployed and being considered by network operators: navigation, social networking, location based advertising, mobile commerce, transportation, child locator, pet tracker, etc. New mobile broadband networks, like WiMAX, will be location enabled; so will new devices, including Mobile Internet Devices (MIDs) and even location aware watches. Applications and content are intersecting and this will lead to innovative new mobile services with location awareness. Enterprise customers have led applications in location for a long time, but the consumer market for LBS could now be poised for faster growth.
 
Verizon Navigator (offered by VZ Wireless) is the most popular LBS and most successful navigation service in the world (5M subs). VZ Navigator offers audible turn-by-turn directions for $10 per month.
 
 
LBS’s (mostly navigation) will continue to command a pricing premium over other wireless add-on services, e.g. music, ring tone, games.   In the future, LBS will be a key revenue generator for network operators. Nokia announced they would have location awareness in all their devices (Nokia uses TI processors). 
 
Location Based Technologies: While GPS is only one of several location-based technologies (others include cell site location, broadcast TV signals, WiFi AP locations, RF signatures- see graphic below), its accuracy is better than the others. Assisted GPS may be used to enhance performance when signal propagation conditions are poor (e.g. when surrounded by tall buildings or when the satellite signals are weakened by being indoors or under trees). In pure GPS location tracking, it typically takes 30 or 40 seconds for a GPS device to compute a location if it does not have recent ephemeris data for the GPS satellite network. Otherwise, locations are computed once a second or faster. 
 
Sky Hook Wireless (http://www.skyhookwireless.com/) creates a database of WiFi Access Points (APs) as the basis of its WiFi Positioning System. It uses the native IEEE 802.11 radio (already on mobile devices) to deliver accurate positioning worldwide.
 
Dave Reid was kind enough to provide this chart of Location Tracking Technologies:
 Location Tracking Technologies
Notes:
RSSI = Received Signal Strength Indicator
 
TDOA = Time Difference of Arrival
 
Cell ID will assume location is in the midpoint of the cell (this could be inaccurate if person is at the cell edge or on the border of adjacent cell?)
 
SiRF has proposed a LBS Systems Architecture. They have an ecosystem in place to develop, test and market location based applications. SiRF provides end- to- end solutions and has engaged in partnerships with various companies.
 

 
2. Jon Metzler, Director of Strategic Initiatives, Rosum Corp. http://www.rosum.com/
 
Location determination capability is becoming a "table stakes" requirement for device makers and semiconductor companies. LBS’s should be considered as a utility – like electricity that can be turned on and off. 
Rosum is the first and only company to harness over the air, broadcast TV signals for position location. The key advantage of this approach is that TV frequencies were designed to penetrate walls, ceilings and trees, in order to deliver a good video signal indoors. The company was founded by original GPS architects to deliver always-on location awareness where GPS fails – indoors and in urban canyons. Rosum is a provider of location, timing and frequency calibration solutions for Mobile TV Device and Home Telecommunications markets. In particular:
 
  • Mobile TV Devices: cell phones, notebook PCs, and PND/PMPs equipped with TV tuners
  • Home Telecommunications: femto cells for the home, and E911 (E112) for Wireless and VoIP subscribers
  • Among recent milestones for the company:
    • Rosum Announces Successful DVB-H Positioning Trial with UK’s National Grid Wireless (6/25/08)
    • 2Wire Selects Rosum TV+GPS Location and Timing Solution for E911/ Home Telecom products using femtocells (3/31/08)
  • Rosum Signs Collaboration Agreement with Intel – Will Enable TV-Location on Mobile Devices (10/07)
But why use Broadcast TV signals for position location? 
 
The TV signals offer high power (1 MW ERP typical), low frequency (50-750 MHz), frequency diversity (wide 6 to 8 MHz channels, multiple channels per tower), and horizontal signals (less attenuation from roofs and walls). Moreover, the terrestrial TV infrastructure is highly correlated with population density and broadband penetration in the U.S.   In a one on one test of TV Positioning vs. GPS based location tracking, GPS failed at three of six indoor locations in the SF Bay Area.
Editors Note: GPS vendors, such as SiRF and others, would likely question those test results.  However, Rosum uses third party testing in order to address concerns of competing technology vendors.
 
The best of both worlds might be a hybrid approach – where GPS and TV based positioning are combined in one device. In that case, GPS would be used outdoors, while TV positioning would be used indoors and in canyons (where GPS often fails).
 
The location technology and device market is consolidating, with many mergers and acquisition of key players, e.g. Nokia acquiring mapmaker Navteq. Other market themes of note:
  • Online mapping arms race between Google, Microsoft, Yahoo
  • Combination Personal Navigation Device / Portable Media Players (PND / PMPs)
  • Convergence of PNDs and Communications devices (i.e., cell phones) 
Two popular hand held devices with LBS and positioning technology:
  • Blackberry with Google Maps and GPS positioning
  • Apple iPOD Touch with Google Maps and 802.11x (WiFi) based positioning
What Comes Next for LBS’s?
  • Connected (not silo’d) use of location information with two categories foreseen:
    • Groups: self-chosen affiliations, such as Social Networks
    • Swarms: (anonymous) use of location for ITS enhancements
  • Resolution of privacy issues (TBD)
  • Growth in new LBS’s such as: Social Networks, Intelligent Transportation Systems (ITS), Connected Navigation, and Local Search/ Advertising (Google and Yahoo)
 Panel Session
 
The author chaired a panel session with the two speakers. It consisted of a few pre-planned questions for discussion, audience Q and A, and a wrap up question about the nature of future devices for LBS’s (cell phones, iPODs, other gadgets, or Mobile Internet Devices=MIDs). The panelists agreed that the big software companies (including Microsoft, Yahoo, Google, Oracle) all had LBS initiatives underway. They also believed that the smart phone (cell phone + Internet + LB technology) would dominate the LBS market, especially over non-voice capable MIDs.
 
Jon later amended his panel session remarks regarding MIDs: "If you define MIDs as including devices with integrated WiFi, such as the mylo or iPod Touch, then yes, I believe that market will develop. With that said the overall cell phone market will still remain much larger."
 
The author thanked the panelists and the audience (35 attendees) for their participation in this very enlightening and informative workshop. We also thanked IEEE SECON for sponsoring the workshop in conjunction with their annual conference.

Addendum: Critical issues for mobile network operators
 
At a VoiceCon- Spring 2008 panel on LBS’s, the critical issues for mobile network operators were identified:
  • Security and privacy-authentication, authorization, encryption, etc.
  • Application integrity – to prevent apps from harming network or users
  • Power dissipation and utilization
  • Flexibility and customizability
  • Integration of new value added services (e.g. location)
  • Billing: What to charge for a new service? Flat rate vs. Usage based (metered)
Postscript: Location Based Social Networking from Verizon Wireless
 
On June 26, 2008, Verizon Wireless announced that its location based social networking service- known as loopt – is now available to its subscribers. The original announcement this past March anticipated an April launch for the service, but according to Verizon Wireless spokesman Jeffrey Nelson, “technical issues, pricing issues and running the application through some traps before launch,” caused the delay. Regarding security and privacy, Nelson said: "We’ve strengthened the privacy capabilities even further. We will be pinging customers on a regular basis to let them know their loopt account is active and that they can be tracked."
 
Loopt’s CEO Sam Altman had previously stated that privacy had been one of the biggest issues facing the uptake of location-based mobile social networking and that solving them is a key step toward achieving inter-carrier LBS services.   Evidently privacy is no longer a problem- at least not for Verizon Wireless.

The DTV Transition – At What Cost?

[Author’s Note:  Thank you very much to David Irwin, Director of the Communications Law Institute at The Catholic University of America, for his review and suggestions for this article]

Click here to learn the detail of the DTV Transition from the official government web siteMuch has been made about the recent 700 MHz spectrum auction and the potentially billions of dollars raised for the U.S. Treasury, but this is just one part of a complex equation related to spectrum management and economics that may be implicitly costing U.S. citizens much more than they are receiving.

For example, there is the opportunity cost of the new, digital broadcast spectrum, given away to existing broadcasters by the government that is worth untold billions of dollars. Unfortunately, this article is probably about 10 years too late to affect a change, but maybe it will serve as a warning for future generations.

Prior to auctions, back in the early days of the FCC, spectrum was regarded almost like land during the homestead days of the eighteen hundreds.  That is, entities were given spectrum in exchange for building out the infrastructure, providing certain public goods and accepting regulations and restrictions.  Where more than one entity sought spectrum in a given locale, each spectrum application being mutually exclusive to the other, evidentiary-type hearings were held to determine which applicant would best serve the “public interest;” but, at the end of the hearing process a spectrum license was simply awarded by the government to the winner.

Much like homesteading, this policy lessened the risk for entrepreneurs and was a catalyst that expedited the build-out of the radio, television and original cellular infrastructures. These build-outs evidenced the inherent value of the spectrum and, as result, Congress turned to spectrum auctions as the prevalent way to ensure that the public received a return on its spectrum assets; that is, except for the give-away of digital television broadcast spectrum.

Giving away spectrum may have made sense in the 1990s when Congress and the FCC began laying the foundation for what what has become known as the 2009 digital television transition. In February 2009, all legacy television stations (with the exception of low-power stations) will turn off their analog transmitters and thereafter only broadcast digital signals; this may include high-definition TV.

The intent of Congress, heavily lobbied by the broadcast industry, was to free up the analog spectrum for other uses, as well as ensure that the U.S. remained competitive with other nations by having a digital broadcast infrastructure that supported HDTV. Like in the 1940s, the Federal Government essentially gave away spectrum to broadcasters in return for a digital build-out and exchange of bandwidth that had been used for analog signals. There have been significant and unanticipated changes since the DTV legislation was passed in the 90s, including:

  • The continued growth of cable, telco video distribution via fiber optics and copper DSL and DBS operators, such that the number of households receiving off-air broadcasts is estimated by Jeff Zucker, CEO of NBC-Universal at 10%.  He suggested at NATPE 2008 that the number of households receiving off-air only will drop to approximately 5% after the transition.
  • The transition of the Internet into a video distribution medium is a true unknown — a “sleeper” in this equation.  Broadcasters and television networks are “re-inventing” themselves, embracing the internet, proving by their own actions and plans that broadband is a viable distribution outlet for video.
  • The success of unlicensed WiFi spectrum also indicates that spectrum does not have to be licensed in order to have value.  On the horizon is WiMax, which may be thought of as WiFi on steriods; WiMax is a potential threat to cable, satellite and telcos.  In all events, it appears that the concept of device-regulated spectrum (the devices are network-aware and transmit data accordingly, minimizing interference), instead of the traditional agency-licensed and regulated spectrum.
  • Improvements in video compression, which frees up bandwidth for uses that were probably never anticipated by Congress.
  • The success of auctions in allocating spectrum.

The transition to digital television broadcast required a huge investment by the broadcast industry and probably never would have been justified by better picture quality alone (although, the broadcast industry did make feature upgrades to include color and stereo in earlier days, but these didn’t involve such an extensive infrastructure upgrade).

That is, there is probably no new revenue for the broadcaster who only replaces a standard definition digital signal, albeit better than analog, with HDTV programming.   It is thus understandable why broadcasters are looking for ways to monetize their investments in digital technology including the use of the bandwidth not utilized for their primary digital and/or HDTV signal by:

  • Creating mini-cable systems by developing new content to go along with their primary channel
  • Potentially creating “pay versions” of popular programming (several years ago, one industry pundit suggested networks could create two versions of the same show; a tamer version for general broadcast and a wilder version that people would be willing to pay for as a premium service).
  • Leasing out bandwidth to third-parties that would essentially act as aggregators
  • Offering a mobile video solution that would extend their service offerings onto personal video devices.

Policy makers and broadcasters believe that these new applications of the broadcast bandwidth will have value to some consumers.  But, there are, as noted above, real costs, as well as opportunity costs that need to be considered.  Some of the real costs to the DTV transition include:

  • The $1.8 B in coupons provided by the Federal Government to consumers to pay for digital set-top coversion boxes that will let analog televisions play digital broadcast signals.
  • The costs that my telco friends and others had to spend as a result of an FCC mandate to publicize the digital TV transition.
  • The costs associated with cable systems and telcos having to support standard definition, long after the broadcasters make the switch to digital.
  • The big cost is probably the opportunity cost, as the digital spectrum given away would have value that could be realized explicitly through an auction process or as an unlicensed public good.  Based on the recent $19.6 B expected from the auction of the 700 MHz spectrum, the remaining 200+ MHz of spectrum could be well worth many multiples of the 700 MHz spectrum bids.

As much as I would like to be able to present a silver bullet that would change the situation, I doubt there is anything that could be done politically or practically to improve the value of the DTV transition for the U.S. taxpayer (it is our spectrum).  After making such a huge investment and with rules in place for so long, it simply isn’t fair to the broadcast industry to change the rules of the game at this late date.  Economists will suggest that there is nothing like political uncertainty to impede business investment and it would be bad precedent to make significant changes to DTV.  The time to make changes was 10 years ago.

It will be interesting to see how economic historians view the digital TV transition. Hopefully, they will learn from it and be able to influence politicians and regulators the next time we have the opportunity to make such a historic shift in our communications’ infrastructure.

Yet Another Mobile Video Play

Monday, April 14, 2008, marked the launch of the largest commercial satellite.  ICO will be using this satellite to serve the growing mobile video market.  ICO will use frequencies in the 2 GHz range to provide video and emergency services to mobile handsets and car-based terminals.  They are building a hybrid satellite-terrestrial network.  The idea is that satellite will serve the wide-open spaces, while a terrestrial network will complement satellite in non-line-of-site areas.  They will be collaborating to build out the terrestrial network. 
 
The interesting thing is how little press coverage ICO is getting for their efforts.  In some sense, what they are trying to do is to be the Sirius and XM equivalent for mobile video.   Most of the small sample people that I talked to at IP Possibilities had never heard of ICO, which is surprising given the potential disruptive nature of what they are trying to do. 
 
What they are trying to do is a big project; however, as just getting a critical mass of device makers [Automobile communications powerhouse, Delphi is supporting] to support their approach will be a big challenge.  It will be interesting to see how ICO‘s approach competes against the pure terrestrial mobile video networks.