The challenges that small telcos face regarding the convergence of services onto a single platform was the subject of a panel featuring industry experts at the 2008 TelcoTV Conference. The overarching theme of the panel was the challenges surrounding convergence deal more with the business issues, as opposed to questions of technology.

Steve Pastorkovich of OPASTCO suggested that in order for independent telcos to have a powerful three-screen strategy, they need better and more affordable access to video content.

Warren Lee of NeoNova said, “Convergence should be the single greatest focus driving all of your businesses planning and decisions.” He went on to say that it is important for a telco to know what they are; are they a pipe provider or a full-service provider or some sort of hybrid between the two. He talked about the importance of telcos being able to easily add and generate revenue from multiple broadband services, such as Rhapsody, home security services, etc.

Lee stressed the importance of Business Management software to track things such as service profitability, customer support and return on investment. He recommended that telcos need new revenue modeling tools. He pointed out that planning has to transcend functions within a telco, so that there is cross-pollination between budgets.

Yue Chen, Director of Systems Engineering for Juniper Networks, echoed Lee by suggesting that it is important for telcos to align their network with their business.

Donovan Prostrollo of Calix said that it is necessary for telcos to think like the consumer in order to adapt to the changes in consumer behavior, competition, technology and regulatory. Prostrollo suggested that convergence is about a connected life.
 

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Update from US Telecom’s Executive Briefing in San Jose

At the US Telecom Association’s 2nd Annual Executive Business Forum this week in San Jose, CA, Link Hoewing, Verizon’s VP of Internet and Technology Policy, stated that Verizon Wireless plans to roll out LTE in early 2010 (that’s about 18 months from now!) with, "possibily 75M bit/sec downstream rate." 

At the same conference, Robert Brown, Wayport’s Director of Business Development for Strategic Roaming and Managed Services stated that WiFi hot spots are growing very rapidly and that more and more people on the move are using WiFi devices (e.g.cameras, MP3 players, mobile phones) for Internet connectivity. Wayport is largest operator of WiFi hotspots in the U.S. and the largest managed WiFi hot spot service provider (they manage AT &Ts WiFi network).

Note: The agenda and some of the presentations for this excellent conference are at:

http://ustelecom.org/Events/EventSubPages/Second-Annual-USTelecom-Executive-Business-Forum-Agenda.html

Please let me know if you have questions or request for my take on any of the presentations I heard.

So with LTE moving faster than expected at the high end and WiFi hot spots increasing dramatically at the low end, where does that leave mobile WiMAX? We review important take aways from WiMAX World in Chicago and results from SPRINTs XOHM WiMAX launch in Baltimore this week.  Then we offer an opinion and conclusions.   Good reading!

WiMAX World and More….

The 2008 WiMAX World show wrapped up this week in Chicago and offered a nice perspective on the industry and the possibilities of full-mobility, wireless broadband connectivity. This article lists 10 key points from the show.

http://www.wimax.com/commentary/blog/blog-2008/october/Top-10-Key-Take-Aways-from-WiMAX-World-2008

Reaching into WiMAX’s Pocket  By Rhonda Wickham WirelessWeek - October 03, 2008

This week’s WiMAX World wasn’t exactly the all-out enthusiastic trade event you might expect from a technology that launched its first commercial U.S. mobile network the day before the show doors opened. The mood was decidedly tempered as most folks were pondering the economic situation that was playing out on the world stage around them.
What should have been an exuberant time for this new sector was instead tarnished as many conversations were punctuated with financial feasibility questions.

http://www.wirelessweek.com/Reaching-into-WiMAX-Pocket.aspx

Sprint’s 4G Xohm WiMax: How fast is it?

The following link provides an excellent summary of the real world speeds and the real world devices (the Nokia tablet device is especially interesting) available in Sprint’s WiMax deployment in Baltimore. 

http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9116844&intsrc=hm_ts_head 

XOHM WiMAX Broadband Service Debuts in Baltimore

Earlier this week, Sprint officially launched XOHM TM (its mobile WiMAX commercial offering) in Baltimore, MD. “This is truly an historic day with the birth of a completely new Internet-based business model that alters the dynamics of the traditional telecom industry,” explained Barry West, president of Sprint’s XOHM business unit. “Wireless consumers will experience WiMAX device and XOHM service innovation on multiple levels as the computer, Internet, telecom and consumer electronics industries converge to redefine wireless mobility.”

http://www.wimax.com/commentary/blog/blog-2008/september/XOHM-WiMAX-Broadband-Service-Debuts-in-Baltimore-0929

Xohm Could Restrict Usage By Brad Smith, WirelessWeek - October 03, 2008

When Sprint’s Xohm launched in Baltimore earlier in the week, the launch raised some questions about the future. Are there usage restrictions? Are there more devices coming? What about long-term pricing? Where and when will other markets launch?
Atish Gude, senior vice president for mobile broadband operations for Xohm, answered some of those questions Thursday in his keynote to WiMAX World 2008. Others didn’t get answers.

http://www.wirelessweek.com/Xohm-Restrict-Usage.aspx

Alvarion Notches WiMAX Win in the US Heartland with Wisper

Midwest based Wisper chooses Alvarion to supply a dual spectrum WiMAX deployment in both 2.5 GHz and 3.65 GHz. In what is the first dual-frequency deployment of WiMAX radios in the US, Minnesota-based Wisper chooses Alvarion to supply both a 2.5 GHz licensed spectrum solution and a 3.65 GHz lightly regulated spectrum solution.

http://www.wimax.com/commentary/blog/blog-2008/october/alvarion-notches-wimax-win-in-the-us-heartland-with-wisper

DCT/Weissberger Opinion:

For a long time, mobile WiMAX was said to be the first 4G like mobile broadband service with a 3 or 4 year lead time over LTE. However, that window of opportunity for WiMAX is shrinking fast, as the WiMAX commercial rollouts have been delayed while carrier LTE plans and progress have accelerated. There seems to be much more telco focus and endorsement of that technology then WiMAX is enjoying, especially among Tier 1 mobile carriers.

Conclusion:

So it appears mobile WiMAX is being squeezed into a small niche market in developed countries like the U.S. and Europe. In the U.S. we observe expanding WiFi hotspots and WiFi based fixed broadband access putting severe cost pressure on WiMAX. With the financial crisis, how will WiMAX providers justify the high build out and deployment costs when they will have to charge very low rates to compete with free (or almost free) WiFi? What about the cost of mobile WiMAX CPE, especially on PDAs, smart phones, gadgets, etc when WiFi is already built into those for almost no cost?

At the same time, the lead time mobile WiMAX has over LTE deployments is shrinking fast. So where does that leave the market for mobile WiMAX? We have long stated mobile WiMAX would be predominantly used for fixed wireless broadband access in developing countries (without wireline infrastructure) and for DSL substitution in rural areas that can not be cost effectively serviced by DSL. Our opinion has not changed based on this week’s breaking news and conference reports. We also do not see any progress on the "Internet in your pocket" type of Mobile Internet Devices (MIDs) that Intel talked about at our ComSoc SCV January 2008 meeting.

Do you agree with this analysis or do you have a different opinion?

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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.
 

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Background

The United States is third among the world’s economies in the total number of FTTH households at 3.3 million, and is in 10th position in the global ranking with 2.9 percent market penetration. What’s most encouraging is that the US continues to experience the highest rate of growth of any economy in terms of FTTH subscribers – doubling the number of connections year over year.

This is due largely to FiOS deployments by market leader Verizon (VZ) and to ongoing buildouts by more than 600 smaller independent network providers across the country. "Aggressive FTTH deployment in the US has created a lot of buzz about this exciting technology, and the word of mouth from early FTTH subscribers is driving growth and fueling further deployments."  For more information, please see:

www.ftthcouncil.org

As we predicted several years ago, GPON has become the preferred last mile delivery technology for FTTP, with BPON, EPON and point to point optical Ethernet losing market share with declining sales. The nascent GPON market posted healthy growth worldwide in 1Q08, driven by service provider investments in broadband access networks, according to market research firm Infonetics Research (www.infonetics.com).  Even VZ is moving FiOS new installs to GPON with trials offering 100M bits/sec downstream. (see Ken Pyle’s comment below).

During the same period, BPON equipment sales declined significantly and EPON sales dipped, together bringing the overall PON market down three percent to $417 million worldwide in 1Q08. "Service providers increasingly turn to PON as the next generation of residential broadband access, primarily in areas where DSL service penetration has reached maturity and operators are looking to increase average revenue per user (ARPU)," says Mark Showalter, directing analyst for broadband networks at Infonetics Research.

FTTN vs FTTP: Which is the right last mile topology?

While AT&T ( U-Verse) has gone with fiber to the node (FTTN) and VDSL to the premises, Verizon has been very aggressive in its FTTH/ FTTP (FiOS) deployment. Many independent telcos have also rolled out FTTP, as per the announcements noted in this article.   Despite the higher build out costs and potential regulatory obstacles, we think FTTP will be the clear winner over FTTN.

Our opinion is that new video services, like multiscreen IPTV with simultaneous recording, will cause a "bandwidth explosion." Despite regulatory obstacles, we think that network operators will be forced to deploy fiber as close to the home as possible to provide the necessary increased bandwidth needed for new services. It looks like its starting to happen now with several independent telcos announcing their FTTP roll outs. For additional information, please see:

http://www.bbpmag.com/2008issues/aug08/AugSep08_FirstMile.pdf

http://www.bbpmag.com/2008issues/aug08/AugSep08_WhyFiber.pdf 

FTTH growth stays on track as connections rise to 3.76 million North American households

The upgrading of North America’s last mile networks with end-to-end fiber is continuing at a robust pace, with fiber to the home (FTTH) arriving at more than 1.6 million households over the past year, bringing the total number of FTTH subscribers to 3.76 million, according to a study released today by the Fiber-to-the-Home Council.

The study, by RVA Market Research (www.rvallc.com), pegged the annual growth rate for fiber to the home in North America at 76 percent, the highest of any country or region in the world.

http://fibresystems.org/cws/article/yournews/35944

Here’s a snapshot of recent FTTP/FTTH activity from independent telcos in the U.S.:

Dumont Telephone is rolling out fiber to the premises (FTTP) in Dumont Iowa (pop. 676), replacing the aging copper in its network. As a result, its maintenance costs are going down, and trouble tickets have dropped dramatically. One of the company’s four technicians is planning to retire some time in the next five years, said Roger Kregel, Dumont’s general manager, and Kregel may not replace him. "On a four-person team, that’s quite a bit," he said.  

To read the rest of the article, click here.

Embarq looks to make FTTP a bigger part of its future

A top executive with Embarq says the company cut the cost of fiber-to-the-premises deployment 19% per home this year and can shave an additional 5% next year, bringing the cost of FTTP in line with copper-wiring solutions. James Hansen, senior vice president of network services for the company, which currently deploys FTTP in greenfields, says he now sees a day when Embarq will "do a video play on network-based facilities."

http://telephonyonline.com/fttp/news/embarq-cut-fttp-deployment-costs-0923/

Comporium Communications Surpasses 6,300 Subscribers with FTTP gear from Enablence

Comporium Communications, has now connected more than 6,300 residential and business customers with Enablence’s FTTP equipment, and will now begin to deploy the TRIDENT7(TM) Universal Access Platform GPON solution. Comporium, based in Rock Hill, South Carolina, is one of the largest American ILECs (Independent Local Exchange Carriers) and cable television operators with almost 100,000 customers throughout its service area.

http://www.marketwatch.com/news/story/comporium-communications-surpasses-6300-subscribers/story.aspx?guid=%7BD245EE44-2492-480D-91D3-C8F91B426012%7D&dist=hppr

Wave7 Network Architect says DOCSIS 3.0 Not a Competitive Threat to FTTP

FTTP providers need not fear DOCSIS 3.0, says according to Jim Farmer, chief network architect for Enablence’s Wave7 FTTx networks division.Fiber-to-the-premises providers don’t have much to fear from DOCSIS 3.0 technology, which boosts the bandwidth of cable broadband networks, according to Jim Farmer, chief network architect for Enablence’s Wave7 FTTx networks division.  Click here to read the rest of the article.

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Please contact the author (alan@viodi.com) if you’re interested in FTTP/FTTH consulting or other research projects.

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