Telecom Monthly - June Newsletter: Sex, WiFi and Bankruptcy

June 3, 2009

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There is only so much doom and gloom a guy can take. Thank the telecom gods it’s Summer and there are enough diversions to keep our minds off the economy. Actually, signs are finally pointing to a bottoming out of the depression and that signals better times ahead . . . we hope! The question is: how long can some of the Telecom Industry’s most vulnerable companies hold out? The vultures are waiting to pick the carcass clean; that you can be sure of.

While April was filled with drama, May was all about price cuts, innovation, and sexspionage. Carriers are lowering prices and improving offerings, the FCC is tightening rules, and customers are just trying to find a way to pay the bills.

One way that carriers show how well they are doing is through the announcement of how many new customers they are able to bring aboard. But that can be a tricky number. Take Verizon for example: they are reportedly spending $200 in advertising for each new FiOS customer they sign up. Ouch! AT&T is in a similar situation with its U-verse service. But Vonage is in the unenviable position of spending up to $300 for each new VoIP customer it is able to buy. If you can’t get your customers on the cheap, buy them! But that strategy doesn’t work forever. Eventually, some bills have to be paid.

AT&T is a company which is not inclined to sit still and wait out the recession. They have been dabbling in all sorts of ventures lately. Perhaps most interesting is the big T’s interest in cloud computing services. AT&T is slowly rolling out new cloud services such as Internet file storage which allows customers to access their data from anywhere they have Internet connectivity. Of course, they aren’t alone in this space, everyone from Microsoft to Amazon have been blowing clouds for quite some time and there is always the threat of Google making its enormous cloud computing network available to the public at little or no cost.

Sprint may have opened a Pandora’s box when it began offering unlimited prepaid mobile service for just $50 a month on it’s Boost network. Virgin has matched that offer and others are following suit. But that marks a serious decline in carrier revenues and a price war is the last thing that Sprint needs right now. Due to the economy, lowered rates look like they are bound to stick, and that will likely place intense pressure on the post-paid market as well. Perhaps Sprint is hoping that they’ll be able to switch some users on to more lucrative plans for the about-to-be-launched Palm Pre. But with a $200 asking price (after a $100 mail in rebate) the Pre may not be Sprint’s salvation in the bottom feeder market they have so eagerly been developing at just $50 per month.

And what are old school carriers like AT&T to do about their rapidly aging wired networks? Ruckus Technologies hopes to solve many home wiring problems through their wireless “Ruckus” box. AT&T thinks it can speed up local installations and lower install costs with the Ruckus technology. That solves the problem in the home, but what is AT&T going to do about its ancient switching equipment and millions of miles of aging copper? Perhaps there is a wireless solution in the future for some of that mess as well.

Some interesting news on the regulatory side last month in the US: the FCC began tightening the screws on local number portability (LNP for short), in a ruling designed to make carriers more responsive to customer requests to move a phone number from one carrier to another. Carriers will now have just one business day to complete the request. And a Federal Appeals Court has determined that cable companies cannot be granted exclusive rights to apartment buildings and condos. Perhaps there will be a rebirth of telecom competition after all.

Abroad, Deutsche Telekom is getting blasted for commissioning reports on the sex lives of its employees! They have also admitted to scouring the bank records of more than 100,000 workers. If they lose too much money on law suits, perhaps they can drum up a bit of cash with a “Telecom Workers Gone Wild” video. Anyhoo…

Embattled Nortel is experiencing a slowing of its sales cycle due to the economy and concerns regarding the company’s bankruptcy and who might eventually control the company’s assets. A cartel of former Nortel executives are exploring the possibility of buying the company and are seeking one billion dollars to seal the deal. Regardless of who takes control of the company, current CEO Mike Zafirovski should probably start airing out his Golden Parachute.

Someone alert Captain Nemo! The sub-marine telecommunication cable business is hopping again. As many as 16 new cables are scheduled to be turned up this year. The cost of laying under sea cable has dropped dramatically and as the volume of transatlantic data and voice have increased, the pressure for increased availability and lowered costs has also increased. This should be very good news for the industry and for customers looking for more options and lower rates.

And finally, Skype is feeling the pressures of the increase in consumer mobile as land line replacement. Consumer VoIP no longer looks like the sure thing that it did a few years ago. But Business VoIP has never been hotter. Recently, Skype began to dabble with Business VoIP solutions and now it is looking to enlist industry Value Added Resellers (VARs) and Telecom Agencies to resell its products. They will soon find that the small to mid size business market is nearly entirely driven by price. Can another price war be far behind?

And that marks our farewell to May and embrace of Summer. May the sun shine brightly and help us recover our collective sanity after the darkest Spring in recent memory. A boat load interesting news floats on the horizon and we look forward to towing it in to you on TelecomMonthly.com.

Happy June everyone!

Written by Todd · Filed Under Others