It is nice to hear a CEO admit to the fact that he might have over-hyped his offerings a bit too much, and without sweating the details. Charles Dunstone, the maverick CEO of UK-retailer Carphone Warehouse confessed to The Sunday Times of London that his company was struggling to meet the demand for free broadband, the company had launched in April 2006. Nearly 400,000 have signed up for the service.
“Free is such a powerful word,” said Dunstone. “It’s a £250-a-year saving for most people. In hindsight, maybe I should have anticipated that a bit more.
Well, that might be only partially right. James Enck, a man who marries the American forthrightness with British understatement writes, “Beneath the media hype about free broadband in the UK lies a sordid underbelly of broken promises and frustrated customers. In the latest example, one of my colleagues has suffered from a complete lack of connectivity on TalkTalk broadband for the past 36 hours (the line is working fine for voice.)”
Dunstone’s good intentions aside, there is a bit of a broadband brouhaha brewing in UK. Rupert Murdoch’s BSkyB has now offering aown free 2MB/s broadband connection to its existing television customers. Murdoch’s plan - make the profit on TV service. Dunstone wants to make money on voice and wireless services - two businesses that are well, under price pressure.
Verizon has announced that it will sell a 50 megabits down and 10 5 megabits up connection for $90 a month. (Thanks Tom, for pointing out that the business offer was 50/10.) The service is available where Verizon FiOS network is live in the states of New York, New Jersey and Connecticut.
This is an interesting move -does this mean Verizon is now just a pipe provider (and there is nothing wrong with that.) I have argued this is the best recourse for the phone companies is to sell more bandwidth at premium prices - turn the Moore’s law to their advantage.
Lidl, a German discount supermarket - think Walmart type operation - is going to start selling discount broadband packages soon. The company plans to offer high speed connections for about 20 Euros a month. They will also sell a VoIP-based phone service as well. They won’t be the first super market chain to get into the Internet access business - a British supermarket company used to give away free dial-up connections in the early days of commercial Internet.
More recently, UK-based mobile phone retail chain, Carphone Warehouse getting into the broadband access business. The markets in Europe are highly competitive mostly because of governments are pressuring the incumbents to open up. In comparison, we in the states have little or no competition.
Verizon and AT&T might be the ones who are hogging the limelight when it comes to IPTV, but don’t take Qwest to be a slouch. The Denver-based micro-Bell is planning to launch video services in many new markets, according to The Denver Post.
The company at present offers either fiber based or copper based TV services in some parts of Colorado, Omaha and Phoenix. It is also upgrading a big chunk of its network, and is also reselling DirecTV to its customers. The report is sketchy on details about which markets it is going to rollout its services. (Tips anyone?)
Qwest’s moves should not come as a surprise: four of Qwest’s six major markets are also services by Comcast, which has been aggressively launching VoIP services. It turned on its VoIP offering in Utah recently. Comcast’s triple play (which could also be triple pay) could become a major migraine for the micro-Bell, which doesn’t have the deep pockets to out-duel the cable behemoth.
In an attempt to better convince all those digruntled phone company customers to sign up with Earthlink, the company plans to open an old fashioned brick and mortar retail outlet later this week in downtown San Francisco. The store, which will likely open Thursday or Friday says spokesperson Chris Morse, will be at 1 Front Street, and is intended to help those fed up with Bells and CableCos learn about Earthlink’s products.
For now its only going to be a test-run open for a month, to see if the company can successfully convert walk-ins. It’s smart to move slowly, given its got to cost a chunk of change to rent a high profile store front in dowtown SF even for a month. But maybe it’ll help the company on its more-than ambitious (some would say foolhardy) quest to sell new types of communications services. Last week the company opened a store in Seattle, and plans to followup in other markets where it sells VoIP landline service.
If venture investors are any indicator then both Akimbo and video on demand over broadband is about to hit big time.
The San Mateo-based start-up has raised $15.5 million in series C financing from new investors, Cisco Systems, AT&T and venture capital firm, Blueprint Ventures. Existing investors - Draper Fisher Jurvetson, Kleiner Perkins Caufield & Byers, Sprout Group and Zone Ventures - also participated in this round of funding. Akimbo had raised $12 million its previous round of funding back in 2004. (More from Silicon Beat here.)
The tactical implications of this funding cannot be missed. Cisco, which led this round of financing owns Linksys, KISS and Scientific Atlanta, one of the major set-top box makers. This could mean Akimbo software could find its way into a myriad of devices. Joshua Goldman, CEO of Akimbo feels that along with AT&T, the Akimbo service can now find a mainstream audience. But the most interesting aspect of this investment is AT&T. Akimbo had previously had a deal with AT&T which allowed Ma Bell to distribute Akimbo programing on its AT&T’s Homezone service, scheduled to launch later this summer. The investment formalizes the relationship.
Still, I cannot help but read between the lines. AT&T has been pushing higher speed DSL connections. While not fast for instant on-demand video, they are plenty good enough for Akimbo-type services that trickle down the content to set-top boxes. It has also been aggressively hawking its DISH Network TV offering. AT&T’s Homezone offering will be focus of attention this summer. Add it all up: Project LightSpeed may not be moving at lightening speed!
Dave Burstein, who writes the very influential DSL Prime e-mail newsletter, and one of the earliest champions of DSL and Broadband has some interesting observations to make about the future of DSL.
His words, not mine: “ADSL is so last century. Today, it’s fiber home or fiber + VDSL at 50 meg or more. Japan is the first country to see a major drop in DSL as 5 million switch to fiber.” Now that is telling, because the man makes a living tracking this industry, so he knows the clock is ticking. He says that Comcast head honcho Brian Roberts is betting that the cable giant will go “50 meg down, 15 meg up pre-DOCSIS 3.0…in selected markets” by 2007. (Cablevision already is offering those kind of speeds.)
Meanwhile, Australia, Canada, and more than half of the U.S. are likely to spend the next decade with a second-rate Internet, 60% to 90% slower than leading countries.
“While the phone companies are only just starting to dig up your yard, cable is already in your house,” Dick Parsons, CEO of Time Warner laying down the smack on the phone companies. He has a point…
On the data side, phone companies added 1.513 million broadband connections, while cable companies added 909,000 connections so far, with Cox and Cablevision yet to weigh in .. my guess is that the quarter will be a tie for the two companies.But cable companies are hitting phone guys where it hurts the most…the voice business.
BellSouth - total access line declined 6.1% (238,000), residential lines declined 8.8% (120,000) to bring down the total access lines were 19.8 million.
AT&T saw 6% (600,000) drop in access lines to bring down the total to 48.8 million
Verizon lost 7% (830,000) access lines to bring the total down to 47.97 million
Qwest lost 5.2% of total access lines.
That works out to about nearly 1.75 million lines. I suspect some portion of it is going to wireless providers (which are mostly Bells without wires…) because people just want a cell phone. Still, in comparison to phone companies, cable guys added 550,000 voice customers. Cox/Cablevision are yet to report.
The big broadband providers ( TW, Cox, Qwest and Cablevision are yet to report) have added close to 1.9 million broadband subscribers in first quarter of 2006. That works out to approx. 19.5% of the 9.63 millionwho signed up for broadbandin entire 2005.
Verizon added 541,000 broadband subscribers bringing their total to 5.7 million. UBS says about 100,000 were FiOS customers.
BellSouth added a record 263,000 DSL net adds in the first quarter bringing the total to 3.1 million total customers
AT&T added 511,000 new DSL users and now has 7.432 million broadband subscribers.
Comcast added 437,000 broadband subscribers, to take their total to 9 million subscribers.
Charter added 126,000 subscribers to bring the total to 2.322 million
No, I have not gone on vacation. Instead, I am busy writing the next cover story for the magazine, along with a couple of other short pieces, and am horribly late. So posting is going to be light for a couple of days. And if I haven’t answered your email, don’t take it personally - there are 600 messages that have piled up in just day. Still, couple of things which have been sitting in my inbox and are worth sharing.
Future of The Bells Is DSL
Did anyone notice that AT&T introduced a three tier DSL pricing structure and are now offering a 6 megabits per second connection for $28 a month. (1.5 Mbps and 3 Mbps cost $13 and $18 a month respectively.) That’s twice as much as what BellSouth is charging for the same speeds. In other words, either AT&T will raise its prices after the deal with BellSouth closes or BellSouth will drop the prices.
John Hodulik of UBS thinks that while voice might be making them the most money, it is DSL which is strategically more important and is now the “anchor product of the consumer bundle.” In other words, it is going to be the proxy for their future (residential) market share.
The New Vongo Boys
Talking about the new Ma Bell, AT&T will soon start offering “Vongo” Internet movie-delivery service to its DSL customers. The companies will feature a co-branded AT&T and Vongo Web site and special promotions. Vongo works only on Windows-PC and costs about $10 for unlimited access. PPV is $4 a month. First Akimbo, and now Vongo, I tell you that either someone is having a change of heart over in San Antonio, Texas or that IPTV this isn’t going too well.
For Comcast, Broadband, VoIP are hot
So just to ensure a little balance, a quick take on Comcast’s earnings report for the most recent quarter - they added 437,000 new broadband subscribers, better than most analyst estimates of 345,000. Average revenue per unit (ARPU) - $43.14. Doesn’t look like the competition is having any impact, because it is higher than fourth quarter ARPU of $42.38. Broadband revenues: $1.1 billion. Forget all that - the biggest news is that Comcast added 211,000 VoIP subscribers, though 141,000 are “net new customers.” And this when VoIP is not even available in the entire footprint of Comcast. Someone should be extremely worried... don’t you think?
[Clarification from Comcast PR: we added 211K net new Comcast Digital Voice (VoIP) voice subscribers, and lost 70K customers for our circuit switched phone business (this was expected – we’re not trying to grow or expand). Netting those two out, we gained 141 K total voice customers (digital voice and circuit switch combined)we added 211K net new Comcast Digital Voice (VoIP) voice subscribers, and lost 70K customers for our circuit switched phone business (this was expected – we’re not trying to grow or expand). Netting those two out, we gained 141 K total voice customers (digital voice and circuit switch combined) ]
For second consecutive quarter BellSouth defied the industry trend of bargain DSL connections, adding more premium DSL subscribers than ever before. The company added 263,000 new DSL lines, of which a whopping 80% opted for the two highest speed (3 Mbps and 6 Mbps) offerings. As a result the DSL margins improved, theorize the analysts from UBS. At the end of the first quarter 2006, they had about 3.1 million broadband subscribers. Cynthia has the full lowdown on the earnings.
It is increasingly obvious that the Bells should stop fooling around with television and instead focus on selling bandwidth… a lot of it, for a premium price and make their numbers accordingly. It is a trend that is spreading across the world, and it should be the best defense against the cable companies. The problem is that instead of getting faster pipes rolled out, the phone companies are mucking around with television stuff, which is harder and more expensive, giving cable companies a chance to pick-up voice customers.
While I may not be a cheap graduate student anymore, I still try to pinch my pennies as much as possible. As such, as far as Internet service goes, I’m more sensitive to lower prices (for lower service), than I am to getting double or triple the bandwidth for $10 or $15 more.
My AT&T (formerly SBC) DSL costs me $40 a month for DSL service and a landline phone that I never use. My contract is up in early June, so I decided to explore my options for DSL in the area. I’m not interested in cable Internet, as I don’t have a TV. I asked around to some of my journalist buddies and called a few companies for quotes. Om suggested that I see what Comcast would charge for just Internet. They quoted me $60/month. As Om said, “Not bad for six megabits.” (Om adds: I am getting a 6 mb/s downlink though the service officially says 3 mb/s.) True dat, but still the most expensive quote that I heard. For me, I’d rather save $20 and cut that service by one third.
I tried Speakeasy, which seems to have become the cool kids’ ISP. Heck, even Paul Boutin endorses it. They quoted me 1.5 MB down/384k at $56 for naked DSL. A good deal to be sure, but if Om’s six megabits/second is right, then four dollars is a pittance for greater than three times the speed. One benefit of using Speakeasy is that they will let you share your connection without violating their terms of service. So that way I can be a Fonero in good conscience.
I also checked in with Covad. They quoted me the same service as Speakeasy, but for $10 more. No thanks. So what’s the secret, then, to super cheap DSL? Stick with AT&T. When I called them on the phone they said that they could renew my current service (at 384k down if you must know) at their current promo rate of $26/month (for a one year contract), plus what I currently pay for the phone line at $20/month.
But a quick visit over to their website illustrates that their online deals are better than that: $12.99/month for a year contract, or $5 more for 1.5 down/384k up — which is exactly what Speakeasy is offering. If I want the cheapest deal, I think it’s clear which one I’ll pick.
Forrester Research just released a new report, The State Of Internet Access, based on a survey of more than 4,500 US households and here are some of the key findings.
More than 50% of online US households are using broadband.
DSL is gaining ground on cable.
Consumers are still more interested in price than speed.
Broadband users show little desire to switch providers.
ISPs will have to re-orient their marketing programs to simpler pricing, product offerings, and distribution in order to attract less tech-savvy mainstream consumers.
The report indicates that when it comes to broadband, we are moving towards the base of the pyramid and making money is going to be tougher, and both the phone and cable companies will have to come-up with a simpler way of selling broadband. In addition, the burden of sale is going to fall on cable guys who frankly have not done a good job of selling a cut-rate service.
Take for instance, Cox which is selling a lame 256 Kbps synchronous link for $24.95 per month in middle Georgia. Why would you buy that when DSL is cheaper! If cable cos don’t start pushing the budget offerings don’t, then perhaps they will lose the chance of stealing customers from the Bells. For the Bells, well, another sign, that despite all the talk about cool technology, the IPTV thing is not going to be that easy.
Readers here shouldn’t be surprised about the broadband miracle in France, for we have written about it again and again and again. But it is good to see the Wall Street Journal write about how France went from a laggard to a broadband leader, mostly because of a quasi-socialist government that pushed sharing of networks as a concept. You know the same concept that was supposed to take root after 1996 Telecom Act.
WSJ writes about Iliad, that has 1.1 million customers, and charges $36 a month for 81 TV channels, unlimited phone calls within France and to 14 countries, and a high-speed connection. And they are not alone. It is one aggressive market, and despite all the challenges, even France Telecom is doing well, mostly because it has adopted the “broadband mantra.” There are others, and you can get the complete lowdown on the France Page on the Broadband Wiki. [It also reminds me, if anyone can help me translate this, I can bring the numbers up to date.]
Point Topic just released the final numbers for 2005, and what a bumper year it was for DSL. You will see the usual suspects there, as the graphic shows, but the big stories are not reported anywhere.
Turkey was one of the stars of 2005, adding more than 1 million lines to a total of 1.54 million
Mexico was another adding 900,000 to pass 1.6 million.
There are growing signs of saturation among the countries with higher penetration, even in Europe. Belgium, the Nethrlands and Switzerland.
Well, that might be only partially right. James Enck, a man who marries the American forthrightness with British understatement writes, “Beneath the media hype about free broadband in the UK lies a sordid underbelly of broken promises and frustrated customers. In the latest example, one of my colleagues has suffered from a complete lack of connectivity on TalkTalk broadband for the past 36 hours (the line is working fine for voice.)”
The company at present offers either fiber based or copper based TV services in some parts of Colorado, Omaha and Phoenix. It is also upgrading a big chunk of its network, and is also reselling DirecTV to its customers. The report is sketchy on details about which markets it is going to rollout its services. (Tips anyone?)