Last week, Google introduced its Latitude feature for Google Maps and as an iGoogle gadget on the computer. The service allows the user to see the approximate location of friends and family on their smart phone or computer. The service is opt-in, so people can only see you if you let them and you can selectively let different people know where you are. You can set your location for anywhere as well. The service is offered on Blackberry, Symbian 60, and Windows Mobile phones and will be coming to Android phones and to the iphone (via its Google Maps Application) soon. On the computer version, the user can manually set the location of friends or family too. The service also allows communication directly via SMS, Google Talk, or Gmail.

Location is always a service that is an enhancement to an application. Google has smartly added it to its Maps features to tie into its Google service - Google Talk and Gmail - giving it another differentiator. The service uses cell tower locations and satellite GPS to get locations. The service also offers communication via SMS for ubiquity. The real goal is to greater personalize your Google applications to provide stickiness, eye balls and advertising dollars. The plan effectively does this via free service, usefulness, peer driven behavior, concern over loved ones' locations, and alleviating privacy concerns. It also gives the average wireless user one more reason to buy a smart phone and a data plan. Another one of Google's indirect goals.

"User Survey Analysis: The Next-Generation Communications Consumer, United States, 2020" (11 country reports)

"Forecast: GPS-Enabled Devices, Worldwide, 2004-2012"

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Last week Verizon Wireless introduced its Verizon Hub to the consumer market. The service connects over broadband and offers a number of different services, including unlimited voice, calendaring, unlimited texting, local traffic and weather, directions, local business connections, and movie trailers. The system also works with Verizon wireless applications VZ navigator, Chaperone and V-CAST. The company has added additional content from National Geographic and E! Entertainment news. The Hub device costs $249 with a two-year contract ($199 if ordered online) and additional handsets cost $79.99. In order to subscribe to Hub services for $34.99 a month, you must be a Verizon Wireless subscriber. The service is offered nationwide.

The service being offered is a premium version of the $10 a month landline service that T-Mobile offers. The problem is that many of these services are already offered on a cellphone, or can be obtained from other means such as the internet or TV - so why pay the extra $35 to obtain these services? The service is a good idea and offers convenience to the end user, but it has to provide some tangible benefit, such as free texting to any Verizon phone, low cost voice - such as what T-Mobile has done - or a wide variety of unique applications, as in the case of the iphone.

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We finally outgrew the old blog. What with the factory incentives and the easy financing, we couldn't put off an upgrade any longer. So we traded up to the Gartner Blog Network, a shiny new vehicle with an extra row of seats and room for the whole family of Gartner bloggers. They're over there with their heads leaning out the window at 80 miles an hour, tongues a-wagging.

For more on the future of Communications, check out these analyst blogs:
o Nick Jones (Mobile Computing and Innovation)
o Lydia Leong (Cloud Computing, Internet Infrastructure, and Data Center Management)
o Eric Goodness (Managed and Professional Network Services)
And also these folks:
o John Pescatore (Network Security)
o Tom Austin (Collaboration, Social Software and Innovative Thinking)
o Mike McGuire (Media)
o Jeffrey Mann (Collaboration, Social Software)

See you over there!

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AES Eletropaulo Telecom is the telecommunications division of AES Eletropaulo - the largest power utility company in Latin America, serving 24 municipalities in the metropolitan region of Sao Paulo state, including Sao Paulo city. The region has a population of approximately 16.5 million inhabitants, an area of 4,526 square km and concentrates Brazil's most important socioeconomic region, with 5.6 million consumers.

In the last few years, AES Eletropaulo, like other power utilities in the world, has been largely investing in their fiber optic infrastructure to provide broadband access through their power lines using BPL technology - Broadband Power Line - that permits bandwidth of up to 80 MB and internet access. Their 2,000-kilometer fiber optic network covers key neighborhoods in the city, such as Moema, Pinheiros and Cerqueira Cesar, reaching 300 buildings, or 15,000 sites today. AES Eletropaulo Telecom have no plans to be a consumer service provider. Its business model is still providing backhaul or infrastructure to carriers in the region interested in using their capillarity in terms of penetration. No specific deal with any carrier is yet announced, but Eletropaulo is already running trials with 150 end users. BPL broadband is still not regulated in Brazil, but it is expected to be regulated soon, so the company is just in time with their plans to start commercial offerings to consumers in 2009.

Broadband in Brazil and especially in the main metropolitan bulks is facing inflated expectations (see "Dataquest Insight: Consumer Broadband in Brazil 2007, Where Next?"). Other carriers such as Telefonica have also implemented their own fiber optic infrastructure in other rich pocket neighborhoods of Sao Paulo city , such as Jardins. And during 2008, the mobile operators have focused their 3G technology launch offer on mobile broadband, with most of the new connections of such technology going to broadband access.

This diversity of offers will certainly drive an increase in the bandwidth-speed usage rather than reduce prices. (see "Dataquest Insight – The Future of Residential Broadband Internet Access Speeds"). The city today has Fiber Broadband connections going up to 30 Mbps; cable packages that include voice over IP and video, reaching 12 Mbps speeds; DSL packages going up to 8Mbps; and 3G Mobile broadband offering speeds between 1 and 7 Mbps - although the 80Mbps promised by BPL as a shared speed is hard to maintain consistently.

For a large country such as Brazil, this is a positive initiative, especially once several other cities and other electric energy companies can follow the example and start these types of offers. The country has 15% penetration of consumer broadband and a lot of space to growth, mainly in the rural and non metropolitan areas. BPL broadband cases throughout the world have not succeeded in other markets. If Eletropaulo succeeds on their initiative and business models with the carriers, it will make the BPL industry extremely happy.

As a reminder that broadband needs to grow hand in hand with PC availability, see "Forecast - PC Installed Base Worldwide 2004-20012". And on the topic of suitable local content and services for broadband users that are already daily connected an average of more than 4 hours and have habits of usage similar to mature markets, see "User Survey Analysis: Consumer Usage of Broadband, Internet and VoIP, Brazil, 2008".

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The largest U.S. cable operator showed surprising resilience in a number of key business areas during the 3rd quarter 2008 as consolidated revenues increased 10% to US$8.5 billion in the period, and 11% YTD to $25.5 billion. Comcast gained more subscribers for its cable broadband service - 382K customers - than both AT&T and Verizon Communications combined, which together only saw an increase of 277K new high-speed data customers. Gartner expects Comcast to keep its momentum going for net new high speed data customer gains with the addition of ultra-high-speed services at 50 Mbps, due to launch in 10 markets this year and footprint wide in 2009.

With cable speed tiers besting DSL in most markets, Comcast confirmed that approximately 66% of new cable modem customers are the result of customer defections from DSL services. But bundled pricing and promotional offers to stay competitive are eating into revenues: Average revenue per subscriber (ARPU) for cable modem customers was $41.74, down due to the effects of multi-service bundling, new lower speed tiers of service and new promotional offers. Comcast continues to gain traction with its broadband service, with 14.7 million customers and a penetration level of 30% of homes passed within its footprint.

In its telephony business, Comcast continued to gain very healthy 483K net new customers in the quarter, for a total of more than 6.1 million Comcast Digital Voice subs; revenues for its phone business grew 44%, to more than $690 million. Net adds for the quarter were down 29% year over year however, from 681K in 3Q07. As with high speed data, ARPU per voice subscriber was down 5%, due to the effects of bundling and promotional offers. Phone service has been an engine of growth for the cable operator and penetration stood at 13% of its homes passed footprint.

But the cable company continued to show weakness in its most mature business - video. Its main cable video services revenues increased 4% in the quarter and YTD, however it lost 147K basic cable subs in 3Q2008 and 342K year-to-date. Comcast executives indicated that they are seeing more competition from AT&T than from Verizon FiOS TV so far in their footprint, which is interesting. The bright spot in the video business for Comcast is the increase in net digital subscriber additions, up by 417K in the quarter, which puts digital penetration levels at almost 70% for the cable service provider. But as recent data indicate, two top U.S. telcos alone gained 465K total new video customers: AT&T with 232K and Verizon with 233K net new video additions. Comcast said that most of the churn was coming from single service video customers - those not bundled up with other services. Speaking of bundled offerings, approximately 22% of Comcast customers now subscribe to a three-service bundle, up from 15% year over year.

Capital Expenditures tell an interesting story: for the quarter, CapEx was $1.268 billion, down $160 million year-over-year; YTD CapEx was $3.877 billion, down almost $750 million year/year. Comcast said this was attributable to a number of factors, including better procurement, which has helped lower the cost per unit for the technology they are buying, as well as lower overall unit purchases. As the company has fewer net new connections due to slower overall growth in their various businesses, this translates directly to lower capital expenditures for technicians and truck rolls to homes for new service activation, the need for CSR support to handle incoming support calls, fewer set-top box and voice eMTA devices, etc., as well as less construction spending to extend their network into new housing developments. On the 3Q financial earnings conference call on Wednesday, Steve Burke, Comcast COO, said CapEx was down 16% quarter over quarter, but that Comcast would still continue to invest in their network transition to all-digital and to roll out ultra high-speed broadband (DOCSIS 3.0) technology to 20% of their footprint by year-end.

But the declining economic conditions in the U.S. are causing both service provider and vendor players in this space to issue warnings on their expectations for slower growth both in this quarter and into the first quarter of 2009. No one seems to have much clarity of vision past these two quarters and few are willing to comment further than to say they see slower growth into 2009 and that service growth (or decline) will depend on the duration and severity of the economic downturn.

Comcast's lower uptake of video services comes not only from growing competition from telcos, but also from the deteriorating economic environment and weakness in consumer spending. The company expects declining marginal increases in new customer adds in all service areas, and this will also directly affect demand for CPE devices, especially eMTAs that enable VoIP phone service, cable modems for high speed data services and digital set-top boxes with advanced features for DVR and HD. Said COO Steve Burke: "It's not that people who have our services are leaving, it's that there is less propensity to upgrade, less propensity to move and take our services when someone moves into town."

Gartner will issue updates to its reports on broadband access and other service provider infrastructure spending forecasts on a regional basis next month, which will reflect our assessment of these changing dynamics in the marketplace.

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Last week, newcomer O3b Networks announced it was launching a new global network of 16 low earth orbit (LEO) satellites, carrying 2,133 transponders and designed to offer IP and cellular backhaul for telcos and ISPs across the developing world. As was the case with a recent trans-Pacific submarine cable, most media coverage has swept past any other impact to focus on the fact that one of the new venture's backers was high-tech celebrity player Google. We don't necessarily disagree that "if Google did it, it's news," but let's look at the news on its own merit first.

Certainly, this is a significant announcement, comprising a substantial new satellite network backed by some known and unknown players - namely, Liberty Global, one of the world's largest cable operators, and HSBC, the financial giant with a history of self-provision for its IT needs. The release speaks of access to speeds up to 10 Gbps, with a total aggregate capacity of 160 Gbps. Most importantly, Gartner has learned that these will be Ka band satellites, which puts O3b's network infrastructure decision on the leading edge of the latest technology for these underserved regions. The use of Ka band has the potential to impact price, available capacity and network architecture for most of the regions announced for coverage.

Although it purports to serve "Asia, Africa, Latin America and the Middle East" and the founders speak of "the next 3 billion," it is unlikely that this will be a global network to start with. O3b quotes five satellites as needed to provide "global" coverage, but that's more likely a bare minimum to blanket the southern hemisphere. At any rate, the 16 satellites announced in this launch pale in comparison to Globalstar's 48 LEOs and Iridium's 66. We tentatively believe this "Asia, Africa, Latin America and the Middle East" network will focus its first phase on Africa. Such a focus would make sense, as this is easily the least penetrated telecom region in the world (and the fastest growing). The impact on pricing would be significant, assuming that O3b and its partners can bring the vision of a data/backhaul network to fruition on LEO-based satellites. The use of such a network for data is the key differentiator - the other incumbents may also be planning upgrades to capacity with this in mind, but only time (and perhaps the pressure brought by a successful new entrant in O3b) will tell.

With several new submarine cable projects under way for the region, which in total could dectuple the available bandwidth, satellite needed a competitive response. The immediate result for end users should be very beneficial in terms of lower prices, increased choice and access to new applications. Africa has historically been capacity-starved, and the easing of bandwidth constraints will bring not just more of the same old service to a larger base, but it will also enable the appearance of new services and applications that previously could not have been considered. Mobile VoIP is only one prominent example. Importantly, all the new cable construction has fostered growth of the open-access principle. This may finally displace the proprietary ownership and distribution of capacity by incumbent providers, with higher hopes for transparent pricing and market-based rules.

Now, back to Google. The search giant, which was rumored in recent weeks to be talking with carriers and other partners about a submarine cable, has now backed a satellite play for the world's underserved regions and populations. We believe Google's aim is largely to commoditize carrier strengths in the network, and reach users via its search portal to provide them with applications that keep them on Google's servers. Its vision is one in which folks with Internet can answer all their important needs through Google - Google has worked with carriers in the past, but overall, it seems to prefer a future in which operators don't differentiate against off-network traffic and are content to take their access fees like a good utility and stay out of the application arena. The open-access discussion we just referenced plays directly into this tactic. If Google can make even one dollar in increased ad revenues per user, using its search and location technologies to provide attractive targeting, then the population of Africa alone will make a large dent in the $100 billion target the company has set for its growth.

For more information, consult the Next Generation Satellite technology profile in "Network Service Provider Infrastructure Hype Cycle 2008".

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Glowpoint, an IP-based managed video communications service provider, recently announced that it has been awarded a multiyear contract to provide its Video Network Operations Center (VNOC) managed services for a world-leading electrical energy service provider. The energy company will also be interconnected to Glowpoint's Telepresence interExchange Network (TEN) to facilitate business-to-business telepresence and nontelepresence video calls and calling to other public video communities, such as systems connected via ISDN, the Internet and public rooms.

As part of the service agreement, Glowpoint will provide management of the client's telepresence rooms in seven countries and will provide access to Glowpoint's video and telepresence infrastructure, including bridges, gateways, and unified communication capabilities through Glowpoint's TEN video services fabric. Glowpoint is supporting this next generation of video use as a way to help businesses communicate with other business communities through managed services and exchange capabilities. Glowpoint's TEN is a suite of services and applications designed to overcome the challenges of using video outside of a company's private network, such as interconnectivity and interoperability.

Many organizations struggle with suboptimal, internally managed videoconferencing environments, where the user experience is poor and costs are not well controlled. As a result, many organizations are now evaluating the available options for delivering video as an externally managed service and the potential benefits such an approach can bring (see Gartner research note "Managed Videoconferencing Services").

High-end immersive video telepresence solutions are almost never sold without an accompanying managed-service wrap. In this case, the managed services are as important to maintaining the user experience as the quality of the image and sound. In addition, using telepresence to conduct intercompany meetings with business partners, clients and customers is an interesting proposition for many organizations today (see Gartner research note "MarketScope for Video Telepresence Solutions, 2008"). Identifying partners and providers, such as Glowpoint, that can deliver the infrastructure and managed services in support of intercompany video communications is an important next step for those organizations.

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The switch-off of U.S. analog broadcast TV signals for all high-power television stations took place this week in the town of Wilmington, North Carolina, at noon on Monday, 8 September, and many stakeholders will be watching and waiting to see how this test case might highlight any future potential problems for the rest of the country come midnight on 17 February 2009 - the official date of the digital TV transition for the U.S. Currently, each U.S. TV station has assigned capacity for two channels - one for analog TV signals and one for digital TV signals. As of the switch-over date, all analog TV spectrum (in the 700MHz spectrum) will be returned to the Federal Communications Commission (FCC) and repurposed for other uses. The FCC has already auctioned off a good portion of this spectrum - mostly for wireless broadband communications and for public safety/first responders - netting so far approximately US$19 billion in spectrum licensing fees.

Statistics from the FCC, Nielsen and others estimate that as many as 13 million to 17 million households could be analog-only over the air (OTA). The immediate net effect of the digital TV (DTV) transition is that television viewers with analog TV sets not connected to cable, satellite or telco-based pay-TV service will need to take action before 17 February 2009 to ensure their TV sets continue to work.

This means getting a digital TV that has a digital tuner, getting connected to a pay-TV service, or connecting the analog TV to an OTA converter. The U.S. Congress-sponsored "TV Converter Box Coupon Program" allows U.S. households to obtain up to two coupons, each worth $40. These coupons can be applied toward the cost of eligible converter boxes. As of August 2008, about 150 converter boxes had been approved for the program, which is administered by the U.S. Department of Commerce's National Telecommunications and Information Administration (NTIA - see http://www.ntia.doc.gov).

Wilmington is the 135th largest television market in the U.S., with about 180,000 television households, according to Nielsen. It is located on the seacoast in the southern part of the state, and it is estimated that less than 10% of its viewers rely on OTA broadcasts to get their television programs. FCC officials reported receiving several hundred calls from local residents, many of whom did not know that the switch had taken place, while others reported trouble hooking up converters. Local news reported brisk sales of converter boxes and digital antennas at consumer electronics and big-box retailers. A bevy of officials from local, state and national organizations and media from all over the world were also on hand to witness and support the event, including:

• The FCC, the chief telecom regulator, which set up a call center
• The NTIA, an agency of the U.S. Department of Commerce that oversees the government program responsible for issuing coupons to buy digital-to-analog converters for OTA TVs
• The National Association of Broadcasters (NAB), a broadcast industry trade association that has been funding and conducting consumer workshops throughout the area to heighten the awareness of the early transition
• The Consumer Electronics Association (CEA), which represents the CE manufacturers and which sent hundreds of converter boxes to nursing homes throughout Wilmington

The switch to digital broadcasting is a phenomenon occurring worldwide; however, each country is approaching it differently. Japan is switching to all-digital in 2011, while many European countries are either already there or in the midst of planning their transition. In the U.K., for example, the transition is taking place over three years and on a regional basis, whereas in the U.S., the DTV transition happens en masse nationwide on 17 February 2009 - in part due to the way the initiative is being funded.
The NTIA is administering the government-sponsored program for digital-to-analog (DTA) converter boxes. It has allocated almost US$2 billion of the auction fees to fund the public awareness and converter program for households that get their programming OTA. Those consumers with digital TV, those with TVs connected to cable and those with digital satellite pay-TV service won't need the OTA converters.

It is expected that there will be at least some technical or operational issues associated with the DTV transition, however. Not the least of these is consumer confusion, despite massive public service campaigns by broadcasters, cable and satellite TV providers on TV, radio and other media. There is the potential for problems related to changes in digital signal strength and contour vs. analog, as well as the ability of older indoor and outdoor antennas that won't handle digital signal, even with a digital converter - among other issues. In addition, due to the way the program for converters has been set up by the NTIA, nursing home residents will not be able to apply for government-sponsored coupons for DTA converters. While the policy is under review, it could mean that nursing home residents, depending on how they obtain their TV service, could have trouble receiving the digital broadcast signals on their TV sets.

While Wilmington is the first market to go digital, some markets have FCC permission to make the transition earlier than the February deadline (as early as November), especially those in northern climates where icy roads, snow and freezing temperatures might make the technical transition too difficult in the winter, especially the repositioning of TV transmitter equipment for digital transmissions.

Wilmington, however, is the only market that volunteered for the early test transition, so it will be interesting to see what the potential technical issues and challenges will be. It was selected in part due to its location, with terrain that is relatively flat and free of aerial obstructions that could compromise signals. Some are criticizing the timing, however -right in the middle of hurricane season - as this could compromise some residents' ability to get emergency alerts, evacuation orders and news bulletins. The statewide public broadcasting station that will continue to broadcast the analog signals which should get local residents through until after hurricane season ends, which is usually the first week of November. As there are very often power outages due to hurricanes, the converter boxes approved for this market have battery backup built in.

Digital TV transition is expected to be a boon for consumer electronics manufacturers of flat-panel LCD or plasma TV sets, in addition to spurring increased uptake of pay-TV subscriptions for the cable, satellite and telco TV offerings. There were about 112 million TV households in the U.S. in 2007, with about three TVs per household on average. While shipments of DTVs are strong according to the CEA (more than 32 million are expected to sell this year alone) there are still many legacy analog TV sets relegated to spare rooms, not connected to a digital set-top box and only using either indoor or outdoor aerial antenna. So the opportunity is quite substantial for a number of stakeholders.

There are a host of issues related to the DTV transition. Look for an upcoming report that outlines in more detail the implications of this technical milestone for cable operators in particular.

Recommended reading: Digital TV technology profile in "Network Service Provider Infrastructure Hype Cycle 2008."

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As many of you might know, Qwest Communications has won the contract to provide network services to both political conventions. The Democratic National Convention finished up last night with Barack Obama's acceptance speech at Invesco Field at Mile High Stadium. By all accounts, the 6,000 voice and data lines and video equipment (see http://press.qwestapps.com/index.cfm?fa=press.view&pressReleaseId=56825) that Qwest provisioned at Mile High Stadium/Invesco Field, as well as the Pepsi Center, did not experience much, if any, issues or downtime. This should score in the win column for Qwest. But most outsiders would say that, being in Denver, which is where Qwest headquarters are located, this was expected. So Qwest was basically in a situation where it could not pull off a big-time win - just a big-time loss, which did not happen.

As we turn toward the Republican National Convention in St. Paul, Minnesota, next week, Qwest, again, will be providing voice, data and video capabilities to the Xcel Energy Center in St. Paul (see http://press.qwestapps.com/index.cfm?fa=press.view&pressReleaseId=56820). Again, since Qwest is the predominant local provider in that region, it will be expected to deliver flawless service, and it will find it tough to gain positive credibility for a job well done.

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This week, the networking industry learned about the tragic loss of Cisco's Ben Goldman. Ben was murdered while in Detroit for what was supposed to be a quick, one-day business trip - the kind of trip that many of us take for granted - it's the modern equivalent of hopping on a bus. Those of us that knew Ben are shocked and saddened by a turn of events that is difficult to make sense of.

I've had the pleasure of interacting with Ben for a number of years, and while I can't claim to be a personal friend, I had developed a great deal of respect for him. When I knew Ben was going to be involved in a call or face-to-face meeting, I knew it would be a productive one. I came to look forward to these interactions, and we both learned from them. Ben had a great passion for Cisco (he was a 16-year veteran). But he never let that passion get in the way of the issues at hand. He never took Cisco's position for granted and was always willing to listen to and learn from different points of view and debate the issues. In times when the discussion became a little more confrontational (as they can between analyst and vendor), Ben was always a voice of reason. His thoughtful, open style had a strong steadying influence on everyone.

The link provides a more complete and fitting tribute to Ben's memory: http://www.mercurynews.com/ci_10309586?IADID=Search-www.mercurynews.com-www.mercurynews.com.

While this is a loss for our industry and for his colleagues at Cisco, our thoughts must focus on the young family he leaves behind.

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This week, Virgin Mobile USA completed its takeover of Helio in a merger of mobile virtual network operators (MVNOs) from very different corners of the mature U.S. mobile market. Virgin, the second-largest MVNO specializing in young, tech-savvy but still lower-spending prepaid customers, had felt some pain in recent quarters; Helio, arguably the largest high-end service providing the latest data connectivity to the upper end of the postpaid spectrum, had been struggling toward a break-even number that was still years in its future. Both were well-known brands. Was this a simple case of bigger is better?

Helio was clearly a relative "heavyweight" in terms of its support infrastructure. In an MVNO market where many competitors provided little besides a brand name and an idea, Helio leveraged the strength of its investors SKT and EarthLink to provide its own backbone, support systems, handset distribution, retail kiosks and much more. This seemed appropriate for a company that wanted to provide bandwidth-hungry, high-cost applications and services to its customers, but the number of subscribers needed was just too high. SKT, which has consistently maintained it wants to seek growth outside its home market, is essentially trading in equity control of 85,000 Helio subscribers for a 17% share in Virgin's customer base (4.9 million as of the half-year report); that would translate to 833,000 equity subscribers, nearly a 10 times increase. Virgin, in return, gets first crack at about the same number of subscribers in Helio at one go, which is more than it earned with a year's worth of effort since the end of June 2007.

Virgin also acquires a company with the tools and infrastructure to support the immediate rollout of postpaid service. It's interesting that Helio had already dispensed with its retail stores, which certainly dragged on costs and might have pulled in a tough new direction. Because Virgin emphasizes that nearly half its customers are older, it's pretty clear that it has needed to move up the chain, and this could be a very appropriate offering. Helio, like Virgin, was "hip" and put attention on bringing connections that early adopters and high-usage customers wanted. It remains to be seen whether the new company can maintain that kind of leading-edge influence in a cost-effective fashion (and remember, Helio never proved it could turn a profit).

Overall, the U.S. mobile market remains brutally competitive, with far more failures than successes on the landscape. Virtual operators seem to have carved out a niche in several areas, showing that success is possible, at least up to a certain size (where we assume the network-based Big Four would become interested in a purchase). These success areas include:

• The low-end, prepaid customer of simple voice and messaging, with no frills and an emphasis on price (such as Tracfone)
• The interesting niche player with a special value proposition, still too small to attract MNO attention (such as kajeet)
• A well-articulated sub-brand that uses MNO capabilities while putting a different face to the market (such as Sprint's Boost)

And then there's Virgin Mobile USA. The immediate future for this company should be quite interesting - and possibly instructive about the future of the virtual operator as a stand-alone model.

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A recent report from Reuters indicates that Turkey's telecommunications regulator is considering regulations to allow mobile virtual network operators (MVNOs) to gain licenses to operate within the country by this winter. This feature of the more developed markets is now appearing in certain larger emerging markets as well, and it's interesting to note the differences. Turkey, which is perhaps a half-step behind South Africa in general terms of liberalization and advancement, is also behind in this regard, because there have been MVNOs functioning in South Africa for almost two years.

The difference is that the South African regulators have never said anything to clarify this fact, and actually forbade virtual operators as recently as four years ago. What's happened since then? I would say this is one of a number of issues where the regulator (or actually regulators, as there are several bodies with a say in telecom) has gradually fallen silent, enervated by infighting and uncertainty over the future direction of the regime. The Electronic Communications Act of recent times, in truth, does allow for licenses that can be interpreted to mean facilities-free competition. But there is quite a bit of confusion over this, as in several other areas, including self-provisioning, access to international bandwidth (regulation of submarine cable landing sites) and the ever-popular fixed-wireless technologies.

Ideally, one should handle things the way the Turkish authorities appear to be. The regulator makes a clear statement, and then the licenses come in. South Africa's "muddy waters" around regulation have competitors trying things and hoping for the best. With the World Cup 2010 on the way, I presume authorities will have the wisdom not to stand in the way of a company that is getting things done. But South Africa's heritage is facilities-based, and so I'm guessing the goodwill won't extend beyond the players that are putting in fiber, or launching new satellites, or bringing in the submarine cables. Virtual operators occupy an interesting niche, but right now, they compete in South Africa under uncertain conditions.

I call upon the South African regulators to meet behind closed doors, hammer out a consensus and then issue it for all to see. It could be that on many issues - self-provisioning of competitive players, fixed-wireless licenses, essential facilities and open access - they'd simply be repeating themselves, and possibly on others they won't be able to agree yet (in which case they should say that, and state the governing principles for review and arbitration). But the market is at a crucial point, and now's the time to establish as much clarity as possible for all concerned. I wish them well, and we'll continue to keep an eye on this emerging model telecom market.

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Nortel this week announced the acquisition of Pingtel's software-based unified communications (UC) system from Bluesocket - an enterprise mobility solution provider. The financial terms were not disclosed.

Pingtel is known as an open-source UC vendor with solutions based on interoperable software that can run on a range of hardware platforms. Pingtel will provide new software capabilities to Nortel's enterprise UC portfolio, as well as additional research and development capabilities. This transaction brings Pingtel's existing original equipment manufacturer (OEM) relationship with Nortel in-house, gives Nortel ownership of the Pingtel technology and furthers the company's ambitions to become more software-centric.

Nortel will use the Pingtel software capabilities to continue to deliver UC solutions to enterprise customers of all segments, but initially for the more cost-sensitive SMB market, as well as for some custom vertical markets. Initial plans will bring additional Pingtel open-source software elements to Nortel's SCS500 (Software Communication System 500) solution, which targets up to 500 users and has been available since April 2008.

This is a good example of Nortel evolving to a software and services-focused business, as evidenced by the 10+ IT platforms the SCS500 is currently supported on through Dell, IBM and most recently HP.

We expect that over time SIPfoundry - the open-source community in which both vendors are active participants - will be leveraged into the core Nortel architecture, including the Nortel MCS 5100. This will also provide a good SIP-proxy-type approach.

If you are an enterprise communications planner, this offers a significantly more open alternative that will interoperate with the rest of your broader communications and collaboration investments, with less lock-in (see "Developing an Enterprise Unified Communications Road Map" and "Key Issues for Voice Applications, 2008".)

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Traditional wireline carriers have long played on a relatively even playing field, offering such services as voice, private line, frame relay, IP and Ethernet. These larger carriers - AT&T, Verizon, BT, Orange and T-Systems - have been achieving marginal (not dominant) differentiation through the offering of more complex ICT services. Newer megacarrier services now include WAN acceleration, security, contact center, LAN management and desktop support. In comparison, the midtier players - Global Crossing, XO, Paetec and Level 3 - focus on the core network services and a limited base of ICT services.

However, the ability of the select megacarriers to offer combined wireline/wireless offerings will accelerate this differentiation. In the U.S., both AT&T and Verizon are enabling their larger customers to pool their revenue commitments across wireline/wireless services. Both Orange and T-Systems have similar potential in Europe, as does Bell Canada in Canada. Sprint also has the opportunity to exploit this trend, should it be able to inspire market confidence by shoring up its financial and management issues.

Trends toward integrated wireline/wireless contracts will put pressure on the single-play providers. Companies like Qwest, Paetec, Level 3, Global Crossing and XO may not make it to the shortlist on some RFPs. In other instances, sage buyers will focus on price and thereby reduce the margins on single-play providers.

See "Forecast: Enterprise Network Services, North America, 2006-2012" for more.

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I've been following the challenge faced by host countries as they broadcast live global sporting events such as the World Cup and Olympics, and naturally, all eyes are on China during these Olympics. China has declared its intention to present a "high-tech Olympics," and the manifestations of that have been myriad. If you were one of the gazillions who tuned into the opening ceremonies, you saw high-tech LEDs, fabrics and much more (who'd have figured the Chinese would do fireworks!). But my focus has been on the communications and broadcasting sectors, and there's been much to think about there as well.

One major theme is access to video, live and on tape, and to various end-user devices. Mobile TV continues to grow, and we have seen partnerships between host broadcaster NBC and numerous companies, from SinglePoint up to AT&T and Microsoft, bringing it to us, in any flavor you could dream up. But with all the emphasis on live video delivered to where you are, I think we're losing sight of the amazing growth in flexible, easy access to video content on the PC screen. Here in the U.S., I can access the NBC Olympics Web site and scroll through dozens of choices for video from the various arenas: Sure, it's not live, but all I have to do is delay reading the morning paper and I can still thrill to the exploits of fencers, skeet shooters, divers and beach volleyball players at any time, in high quality on my PC screen. I'm too old (and nearsighted) to want to watch sports on a two-inch mobile screen, but for the millions who do (including Chinese subscribers who are using the freshly homegrown SC-TDMA standard), you can choose from live clips to alerts and daily digests of the highlights. Does anyone out there still think an unlimited data plan is a frill?

There's been a lot of talk about the use of IPv6 at these games. China, which by some accounts will be the first country threatened by the shortage of IPv4 addresses, has certainly invested heavily in the technology, but indications are that its deployment has been exclusively in the security camera systems set up around the venues. Attendees and media in Beijing, while they can access video as well as the Internet from "e-booths" set up by China Netcom around the area, will likely not be directly experiencing any superior quality that the new standard can supply. In the end, it looks like the jury is still out on the need for the world to convert to IPv6, and we may not get conclusive results of its performance qualities out of Beijing. Meanwhile, broadcasters calling the play-by-play as well as their listeners at home will have touch-screen access to player stats and data to assist their efforts, split-screen view options, and numerous other incremental advances in technology.

As you might imagine, the traffic flows around the media and broadcast center are potentially enormous. Throw in the call centers to field multilingual inquiries on everything from directions to lost tickets, as well as the internal communications needs of the staff running the games, and you might find it easier to believe Atos Origin's staggering claim to have conducted no less than 200,000 hours of testing on the command center systems needed for these purposes.

How well will these enormous efforts translate to later venues and events? I'm somewhat skeptical that, for example, South Africa (in preparing for the World Cup in 2010) will be able to draw too close a connection between the specific offerings and technologies in Beijing and its own situation. The demographics of course are at opposite ends of the spectrum, but it might surprise you to note that the World Cup in soccer is just about the equal of the Olympics in terms of the size of the broadcasting effort. Certainly for now, the Olympics can serve as an indicator to South African regulators and service providers of what is possible — and, by inference, of the barriers to greater takeup that lie in the way at home. Imagine South African consumers trying to figure out which videos to watch online, when their accounts are capped at 3GB per month. The country has just under two years to go, and we'll be watching with great interest. For more on the effort to host the first World Cup soccer tournament in a developing nation, see "Dataquest Insight: World Cup Will Advance South Africa's Telecom Network."

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Wireless licenses will be auctioned, and the process is expected to be completed three to four months from now, which means that the commercial launch of 3G services would happen by 1H09. To start with, the Department of Telecom would permit up to five operators in each circle to operate. However, the limit is three for metros like Delhi and Mumbai. Government-owned service providers Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) will each receive a license, gaining a head start of several months over competitors in rolling out 3G services. The license has been allocated to BSNL and MTNL with only one condition: The license fees must be equal to the highest bid made during the auction of licenses. This allocation has given them the advantage in terms of time to market versus the private operators. One could expect, for instance, that MTNL will launch service within four to five months. The government's surprise announcement heartened CDMA operators that worried that the guidelines would only cover GSM services in the 3G market. The GSM version of 2G services here were launched about three years before CDMA. At least two CDMA operators will be allowed to offer 3G services in each license area. The licenses will last 20 years. Spectrum for EV-DO data services will be auctioned in the 450MHz and 800MHz bands, and eventually in the 1,900MHz band, the statement said. Auctions will be overseen by an agency to be appointed by the Indian government.

3G services are all set to give a boost to the value-added service industry in India, which Gartner estimated was standing at about US$1.5 billion in 2007. Going ahead with Gartner estimates, by 2012, every fifth wireless connection would be on 3G and the operators can expect to generate nonvoice revenue to about US$5.5 billion.

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Recent news that the convenience store food chain 7-Eleven is expanding its MVNO service beyond the U.S. and Canada - first to Taiwan and now to Singapore - caught our eye this week. It's just the latest entry in a long line of food stores offering phone service (see the list below), and it got us thinking about what the MVNO model needs to succeed. Even as content-oriented MVNOs have fallen by the wayside, and high-spending MVNOs have either failed or been merged away from their pure approach, simple prepaid phones, SIMs and cards seem to be working just fine for grocery stores across the developed world:

• Tesco based in the U.K., with branches in Europe
• Aldi based in Germany, with branches around the world
• Auchan in France
• Carrefour ranging across much of Europe
• Kroger in the U.S., Canada and elsewhere
• Plus several other smaller examples

In each case, the food store has emphasized cost savings, simplicity or both for its base brand offerings, and it has tailored the phone service to match. High-end handsets generally are not offered, and customers don't get to do much with pictures, video or live multimedia content: They just phone and text at prices close to the bottom of the market. Certainly, these are low-end customers who are unlikely to attract the MVNO players that are providing the access and other services needed by these branded operations. But the match has real synergy on a number of levels:

• People who like to save money usually like to save money on everything.
• Staffing costs for these simple prepaid phones are nonexistent for the food chains, which compares favorably to the costs of dedicated staff at major-carrier kiosks. Similarly, follow-up customer care is minimized by the fact that it is a simple, low-end service, and customers who come in to shop for food twice a week will have little trouble finding the customer service desk with any questions or problems they have. Alternately, they can make use of call centers in the manner of other MVNOs, run by the network operator or run independently.
• Low-end phones, SIMs and prepaid cards can be bought or topped off in an off-the-shelf fashion, such as for the store's other products.
• Unlike many other retail MVNOs, those associated with large grocery chains have the distribution network to really challenge the carriers in terms of convenience and reach.
• Again, as a result of their size and scale, grocery store MVNOs may not need to move up the value chain, because mobile service margins already compare favorably to margins of many kinds of food, and the incremental cost of stocking these items is fairly low.

While we have yet to see any MVNO really challenging for market leadership (and we don't think any ever will), it's very likely that this version of player could have a long "shelf life," to abuse the phrase. What will be truly interesting is to see whether any of these chains exploit the potential for synergy with customers who use their phones and buy their food. The opportunities to gather data and effectively cross-market are both obvious and substantial, and there is some evidence that folks would be less resentful of a marketing attempt through their grocers than they would be of the carriers behind them. Here is where most chains will likely need substantial assistance to execute properly, with either the MVNO or an MVNE. Either of those partners will also need to develop their listening and partnership skills in order to craft out a mutually beneficial exchange.

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RADVision - a provider of video network infrastructure and developer tools for unified visual communications over IP, 3G and emerging next-generation IMS networks - recently announced that it is providing integrated video communications for Cisco's Unified Customer Voice Portal (CVP). Cisco Unified CVP will leverage the Scopia Interactive Video Platform's (IVP's) video communications capabilities.

The Scopia IVP is a universal video media server platform that provides processing building blocks and ubiquitous device connectivity and supports the creation of a wide range of video-related applications and services. The video-integrated Cisco CVP solution utilizes RADVision's iCONTACT, a contact center video-enabling software component running in conjunction with the Scopia IVP. Together, Scopia IVP and iCONTACT offer a comprehensive solution that enables system integrators (SIs) and contact center equipment vendors to develop and deploy visual communications services to contact centers.

With RADVision's Scopia IVP, Cisco Unified CVP can support video interactions, including self-service, queuing and agents, and it can provide the following features and benefits to help change the nature of customer interactions:

• Video menus for a more intuitive caller experience
• Video self-service where prerecorded or live videos can be played, enabling richer interactions
• Video queuing where videos can be played while waiting for an agent
• Video agent support, providing a unique customer service experience that builds trust
• Video agents' ability to "push" additional prerecorded or live video content to callers, providing an efficient, standardized method for sharing information and instructions
• Support for 3G video-enabled mobile devices and video kiosks for broad user access and reach

The use of video in contact centers is still embryonic, and there are few applications deployed - but there are benefits for some contact center applications. For instance, it can be useful where live demonstrations or personalized interactions are helpful. Proprietary protocols and technical complexity have limited deployment to consumer environments; however, increased adoption of webcams may increase adoption of this form of interaction. Some examples of use include:

• Financial services - using video by financial services contact centers to assist in credit rating of prospects. Nonverbal cues can contribute to positive or negative decisions on the creditworthiness of the prospect.
• Healthcare - assisting in the assessment of the emotional and physical well-being of homebound patients.
• Retail - using kiosks with video to assist in purchasing decisions (the kiosks may be placed in locations where it would not be cost-effective to have live agents).

Video sometimes is included in interactive voice response (IVR) applications (an area this announcement addresses), enabling users with properly equipped mobile devices to access video. The applications resemble mobile Web/video, except that they are implemented as part of a phone service, rather than a Web service (see "Hype Cycle for Contact Center Infrastructure, 2008" and "Hype Cycle for Enterprise Communication Applications, 2008").

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A U.S. Federal Court of Appeals ruled this week that top U.S. cable operator Cablevision Systems, of Bethpage, New York, would not directly infringe the copyrights of program content owners if it allowed its subscribers to use network-based digital video recording (DVR) technology. The ruling reverses a lower court ruling in March 2007 that prevented the cable operator from implementing the network-based DVR technology - called remote storage digital video recorder (RS-DVR) - that would enable customers to record and store TV programs using the cable operator's own network servers across its 4.6-million-home footprint in the greater New York, northern New Jersey and Connecticut service areas.

The ruling lifts an injunction that prevented the MSO from implementing its RS-DVR without obtaining a separate license from content owners. Various network programmers and movie studios, including Time Warner, 20th Century Fox, Universal Studios, Paramount Pictures, Walt Disney, as well as broadcast networks ABC, CBS and NBC, sued Cablevision in May 2006, when the MSO announced its intention to roll out the technology to consumers. The content owners argued that, because the RS-DVR service involved recording and storing of programs at Cablevision's facilities, Cablevision, and not its subscribers, would be making the copies when a consumer recorded a program with RS-DVR, and a consumer's replaying of programs recorded with RS-DVR would be a "public performance." Both of which would require a separate license from the content owners.

This case made for some strange bedfellows. Last year, a number of industry associations and lobbying groups, including the Consumer Electronics Association (CEA), USTelecom (USTA - which represents telephone companies such as AT&T and Verizon, the latter being a key rival to Cablevision with its FiOS Internet and TV service offerings), as well as the Electronic Frontier Foundation, joined together to file a court brief in support of Cablevision's appeal.

The ruling now frees Cablevision to use the network-based hardware and software solutions that will enable cable customers with existing digital set-top boxes (STBs) to time-shift their favorite programs, instead of using more expensive locally based storage solutions. DVRs are highly popular with U.S. pay-TV households of all distribution modalities - satellite, telco/IPTV and cable -and are now increasingly being incorporated into cable advanced digital STBs.

Although this is positive for both consumers and cable operators, the long-term implications may be less positive for set-top box manufacturers such as Motorola, Cisco, Pace, Thomson and others that are shipping large quantities of advanced STBs that incorporate storage capacity for time-shifted TV, and that are also a source of higher margins than generic digital set-top devices. The news could be good for video server vendors, as well as suppliers such as BigBand Networks that provided some of the initial RS-DVR equipment the company used at the time of the proposed trial before it was shut down.

Cablevision's subscriber base of digital customers was almost 90% at the end of 1H08, so the ruling comes at a good time for the MSO because DVRs are an increasingly important competitive service element for pay-TV service providers. Although network DVR is a less costly solution, especially because it enables a whole-home DVR solution in every room, it does nothing to enable a comprehensive solution for "whole-house video" or "networked video," especially one that incorporates video originating from sources other than the operator's network, such as from PCs or other storage devices/home servers.

It is unclear when Cablevision might start rolling out the network-based DVR service, but the path is now cleared for all cable operators to move forward with this technology option for time-shifted television.

(Suggested reading: "Hype Cycle for Network Service Provider Infrastructure 2008")

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Before the Beijing 2008 Olympic Games open, Nortel has won the race to be a Tier 1 sponsor for the Olympic Games to be held in London in 2012 (see http://www2.nortel.com/go/news_detail.jsp?cat_id=-8055&oid=100243943&locale=en-US).
Nortel gained this status by donating a huge and diverse stack of communications equipment to the games through BT, London 2012's Communications Services Partner. Following a set of heats, the final matchup, we believe, was between Nortel and Cisco. Nortel most likely won for several reasons. Energy efficiency was important, because sustainability is a key theme for these games. Nortel has made low energy a theme in recent advertising, and it continues to invest to maintain this differentiator. Nortel's close partnership with Microsoft through the Innovative Communications Alliance (ICA) helped, and Nortel's Olympic track record was also important - its network is already up and running for the Vancouver 2010 Winter Olympics. But, most of all, we think Nortel won because it wanted it more.

"Greening the Enterprise Network" explains three steps to minimize the environmental footprint of enterprise networks. This research was part of a broader research analysis, "Green IT: The New Industry Shock Wave," which explains how IT organizations have an opportunity to improve the environmental footprints of their IT infrastructures.

"Microsoft-Nortel ICA UC Solutions Are Late But Finally Market Ready" is a recent update on this vendor alliance.

The technology and market forces that are enabling UC are causing significant shifts in legacy stand-alone communications markets, several of which are more than $10 billion. Vendors, including Nortel, must prepare themselves to face new competitors in their existing market strongholds and to compete in the emerging new markets. The London 2012 Olympics give Nortel a great platform from which to showcase its ability to deliver mission-critical communications solutions. But, more importantly, it is a great marketing platform for Nortel to rebrand and position itself in what may prove to be a changed role for communications solutions.

For customers, Nortel's selection for the Olympics is reassurance that - in the presence of good alternatives - their choice of Nortel is sound.

Nortel would not say how much this will cost, but I speculate that it will cost the company several tens of millions in pounds. This will take a big chunk of its marketing budget during the next few years - more reason for Nortel to talk to you about it at every chance it gets.

We have said in the past that Nortel must invest more in marketing, so it would be perverse to criticize it for going for gold at the London 2012 Olympics. All it has to do now is to execute flawlessly.

Gartner "Vendor Rating: Nortel Networks" and "Dataquest SWOT: Nortel, Enterprise Communications Applications, Worldwide, 2008" provide some recent analysis of Nortel.

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