Friday, February 08, 2008

Are We Done With Broadband Service Growth...Is That All There Is?

A rosy report released by the National Telecommunications and Information Administration (NTIA) confidently states that the U.S. is doing great in broadband penetration because the current administration has increased penetration more than 1100 percent and 91.5 percent of zip codes have three or more competing service providers. 

I must only be familiar with the 8.5 percent of zip codes, including my own, that have zero to two providers.  I guess we can now start proudly chanting, "Were number 15!" because that is where the Organization for Economic Cooperation and Development (OECD) places the U.S. in broadband penetration.  Although initiatives like FiOS and U-Verse are increasing penetration and access speeds, they are only touching a small fraction of homes and the lack of significant competition, like on the UTOPIA network, prevents new services and lower prices from being realized by this supposed 91.5 per cent of Americans. 

Lately I have seen evidence that the U.S. broadband market is stagnating:

  1. AT&T increases prices of its DSL service to lower tiered customers by $5 per month.
  2. Comcast begins using reasonable traffic management practices which some label as intentional service degradation.
  3. Time Warner Cable experiments with capping download quantities in Beaumont, Texas where it may be conceived that they are impeding competing video delivery services.

These are not trends in a vibrant competitive market.  The NTIA and Department of Commerce should not benchmark their success on absolute numbers.  Instead they should compare the U.S. to other countries that lead the world in broadband services.  Then again this is government; whereas, business benchmarks against other similar businesses.  The FTTH Council provides a thorough analysis of broadband service in the U.S. and contrasts it to other countries.  They include policy recommendations and initiatives that the government can take to stimulate broadband service deployment and competition.

Article:  TelecomTV - TelecomTV One - News

Wednesday, February 06, 2008

AT&T Needs More Money

image AT&T decided yesterday to increase the price of DSL service by $5 per month for subscribers that do not purchase U-verse (AT&T jacks up DSL price $5 per month | Tech news blog - CNET except in the old BellSouth territory where they promised the FCC and regulators that they would not raise prices for a certain period of time.  Apparently revenues are not increasing enough for them in their wireline and wireless businesses, and they are fearing a slowing economy.  Expect a similar price increase shortly from the cable companies in AT&T's territory.

Instead of offering some value like a speed increase, AT&T just raises the price.  There is almost no incremental cost of providing greater bandwidth because customers will not change their surfing behavior much.  Competition is suppose to create greater value for customers and lower the price; therefore, I conclude that AT&T does not have any significant competition other than MSOs.  Duopolies function similarly to monopolies in most cases.  AT&T should be finding new and innovative services to offer customers that increase their revenue.  This price increase may help AT&T's financials in the short-term only.

Lack of true competition for residential services is why the U.S. continues to lag in broadband penetration which will manifest itself in other ways throughout the economy.

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Tuesday, February 05, 2008

Cable Cuts a Coincidence?

Yesterday I wrote an analysis for a consulting service stating that three cable cuts in three days is most likely not an accident.  Today, news outlets (TelecomTV) announced a fourth undersea cable cut that occurred late Sunday, presumably to FLAG's FALCON cable.  One does not have to be an Oliver Stone devotee to realize that these incidents were most likely an act of sabotage.  Conspirorists were quick to come out of the closet and blame the military, CIA, NSA, and/or the Bush Administration.  I find it hard to believe that anyone with any credibility would even suggest that the United States had any involvement with these cuts.

The point is that someone or some organization is intent in disrupting global commerce and isolate the Middle East.  I included the article I wrote yesterday below because I believe that these incidents validate the need for us in the industry to continue to ensure reliability in the equipment and networks we build.


Now that a third undersea fiber cable has been cut, the probability is extremely low that it was an accident.  Someone or some organization is intent on disrupting international commerce and finance in the Middle East in the attempt to isolate the more secular countries like the UAE, Egypt, and India.  The robustness of the global telecommunications infrastructure minimizes the impact of multiple failures.  Although this action has political and ramifications, these incidents demonstrate the need to continually build redundancy and reliability into our telecommunications infrastructure.

Undersea cable map


The original CNN story stated that two of FLAG Telecom's undersea cables were cut Wednesday and then Friday another FLAG cable (FALCON) was cut in waters outsize Dubai.  The probability that these three cuts in the same region of the world all happening within three days is extremely low that it was an accident.  In the telecommunications world, we design networks and products to survive single and double failures, but we almost never design for a triple failure because the probability of three nearly simultaneous failures happening is infinitesimal.

I will not delve into who or why these cables were cut because they were clearly an attempt to isolate many countries in the Middle East from the rest of the world.  Cutting these undersea cables was a move to disrupt international commerce, travel, and financial transactions of some of the more secular Middle Eastern countries.  The truth is that these cuts had a minimal impact on business because of the reliability and redundancy that the industry has built into its telecommunications infrastructure.

Today we expect split second trades, continuous package tracking, near instantaneous document delivery, and global access to information any time, any where.  In order to meet the virtually continuous availability to communications, the industry builds its network to sustain multiple failures.  Traffic is rerouted another path to the same destination when the primary path fails.  Equipment has a backup in case it fails.  Telephone offices are built with excess capacity to take over the load if one of its neighbors fails.  As more and more of our communications travel over packets, it is easier to make the network more resilient to failures.  Packets wind their way through the network until they reach their destination.  They do not always take the same route to get there, but they get there.

This protection and resiliency is why cutting three cables had a minimal impact on the communications in the Middle East.  Redundant capacity, alternate routes, and multiple cables are why these accidents have minimal impact.  Carriers will continue to build more cables to add capacity and diversity to their networks.  The capital expenditures will be tremendous, but the ROI will justify the expense.  Redundancy has its price, but imagine the economic impact of 9 Middle Eastern countries not being able to conduct global business for 10 days.

Sunday, February 03, 2008

NFL Gone Wild

Funny that my second post of the year is more of a rant than something significant, but the situation is indicative of our desire to make money by copyrighting and patenting everything in sight.  Once again this year, the NFL is  stopping churches with TV larger than 56" from showing the Super Bowl (Techdirt: Super Bowl Intellectual Property Insanity: No Big Screen Super Bowl Parties, Trademarking 19-0).  Are they that greedy that they have to shake down churches for licensing and performance fees although some of the mega-churches can afford it?  What is even more amazing is that the New England Patriots have attempted to trademark "19-0."  Will math teachers have to stop giving out subtraction problems of 19-0 unless they properly reference the trademark?  Where will all of this insanity end?  We need to apply some common sense to our patent and trademark laws for the greater good of innovation and business.

This article was written without the express permission, either implicit or implied, of the NFL or any of is affiliates.

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Friday, February 01, 2008

AMD: Is a Dog Chasing Its Tail

image AMD (AMD)continues to disappoint investors in the forth quarter (AMD: Is The Worst Over? - Seeking Alpha) losing $1.77 billion in that single quarter.  AMD's problem stems from its management team in ability to differentiate the company in the microprocessor marketplace both mainstream and embedded microprocessors.  Their inability to forecast and manage product run rates will plaque the company with continued poor financial performance.  They cannot spend themselves to health with acquisitions without executing on the vision that the acquisition brings.  They have yet to utilize the value that ATI brings to AMD.


The problem with AMD is indicative of most technology companies: they develop great technology, but they do not understand what their customers want and how to communicate the value to their customers.  The process is called marketing, and AMD does not understand it in any division.  The CEO and COO talk like engineers and not businessmen.  That was fine in the early days of Silicon Valley.  Consumers want to know why they should buy a computer with and AMD microprocessor over Intel (NMS:INTC) not that their 45 nm process is finally up to snuff.

AMD has done well in the server market where savvy consumers realize the price/performance value of purchasing server blades with AMD processors.  Well informed IT managers know AMD processors perform better, use less power, and are less costly than their Intel counterparts.  This market is technical and understands the tech-speak that AMD spews.  The problem is that this market segment is becoming a commodity business with Intel and AMD continually one-upping each other.  Revenue is good but margins are eroding.

AMD has not differentiated itself well in the PC market.  The acquisition of ATI was suppose to release a slew of innovative designs that would propel AMD past Intel...or at least keep them equal.  ATI continues to innovate in the graphic processor and board market, but the integrated microprocessor and graphic processor designs are lacking.  Their announcements at CES are proof that they are not realizing the potential of integrating ATI into AMD.  Financially ATI is pulling down AMD.

AMD must look to other market segments than PC and servers.  They have an embedded processor division with multiple product lines that highly overlap.  For several years this division has been running at a loss because of poor vision and financial management.  The embedded processor market could be a bright spot in AMD's future if it had the right leadership to focus it on specific market segments and follow through in developing a complete ecosystem for it.  Not only are they competing against Intel in this market but Freescale (FSL), TI (TXN), Marvell (MRVL), Infineon (IFX), Qualcomm (NMS:QCOM), and a few others.  If it uses a little marketing prowess to find a segment of the market and utilize its technological expertise to disrupt it, then it could see some success.  A new class of open mobile devices is emerging where AMD/ATI could show some leadership.

The bottom line is that AMD cannot continue to compete head-to-head with Intel.  It has to differentiate itself as a company.  Intel has much more breadth than AMD so it can survive any price and technology war with AMD.  For AMD to improve its financial situation it should take the following steps:

  1. Enable a management team that understands how to deliver value in the server, PC, mobile device, consumer electronic, and embedded processor market segments.
  2. Learn how to market and serve each market segment.
  3. Leverage the technical expertise of AMD and ATI to develop disruptive products.
  4. Stop worrying about Intel and worry about AMD.

AMD has some great talent in the company that can achieve some great things if only it could get rid of the stagnation in the company.  I see it following in the footsteps of Motorola which is no surprise since many of the executives came from Motorola.

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