December 30, 2006

• Big deal in D.C., Better Deals in Paris
• 75% Up in Saudi Arabia and GCC  From 290,000 to 530,000
• Q3 Growth Good, But Slightly Down Net adds, total broadband, some surprises in the household figures
• More on BellSouth's Demise, and a Possible Net Neutrality Turnaround
• Briefs: Bit Torrent not half of Internet, D.C. 10 April Chairman’s Dinner, Ofer Vilenski's Jungo to NDS, Anick Jesdanun at AP wants faster uploads, Ikanos lawsuits, China Mobile rose $10B, Adtran down dramatically as Bells cut capex, Hong Lu Wells notice, BigBand China accounting, Claire McCaskill new Democratic Senator  hires AT&T lobbyist Sean Kennedy

• “I am stunned by AT&T CFO Rick Lindner’s comment ‘Special Access rates have been declining as a result of competition.’ What was the evidence  Lindner cited?” The comment came from someone probably an advocate on the issue of how much to charge the competition (like T-Mobile and Sprint) for all important data lines. Actually, Lindner presented no evidence to back up his comment, but I included it to make clear that a freeze on these rates is an easy thing for AT&T to accept in the D.C. negotiations. After all, if the rates are going down anyway, it’s not much of a concession to agree not to raise them. That’s typical of almost everything in the proposal, very little that changes things. Getting BellSouth territory to 85% DSL sounds good - unless you know BellSouth is already at 85%.

• It’s become a cliché that “half of Internet traffic is Bit Torrent” based on unverifiable press releases from several sources. It almost certainly is untrue. The latest data from MIC Japan, for example, show that WinMX and Winny are far ahead in the third largest Internet market in the world, with over twice the volume of all other p2p protocols combined. In France, Daily Motion is a surprising share of the traffic. Japan’s official MIC also reports “It is p2p traffic that has a significant effect on networks rather than streaming and web surfing.“  This is almost certainly true in the U.S. as well, meaning anyone in D.C. who claims streaming video (YouTube, Google, etc.) is a major traffic burden is probably lying.
• D.C. 10 April is the new date for the Bar Association “Chairman’s Dinner.” Last December, over 1,000 lobbyists filled the Hilton where Reagan was shot, but the event is delayed until April this time. It’s remarkable to see $300-400M in billing together in a big room. Add Congressional lobbyists, the folks who could not come that night, Astroturf and other consultants, the meaningless policy “ads”, the “campaign contributions” and it’s easy to count over a $B in influence-peddling. Most of that is aimed at four men and one woman, the FCC commissioners who are bored and sick of most of it. Ask any of them privately, and you’ll discover they’d rather listen to an honest outsider who knows the relevant facts.
• Ofer Vilenski's Jungo provides the software to millions of residential gateways around the world. They seek to standardize the worldwide "operating system" of gateways in a way similar to how Microsoft provides most of the worldwide PC operating systems, and scored some significant customer wins along the way. They've now been purchased by NDS for $107.5M in cash. The Rupert Murdoch controlled company's software is in most of the world's satellite boxes and has shipped almost 5M DVRs as well. BSkyB owns DSL provider Easynet and is offering not-quite-free broadband, a natural market for an extraordinary gateway/set top from the new merger. Vilenski adds "When our gateway software 'speaks' to the set top, we can store video files on the gateway. You can then watch on any device in the home, or send the program to your cell phone or connected laptop." DSL Prime has often reported the lack of upgradeability in most set tops is a severe problem.
• For the record, I would be strongly opposed to Sarkozy if I were a French voter, but would not want him assassinated.

• Anick Jesdanun at AP picked up the “(A)DSL is so twentieth century” theme with a strong piece on how users want faster uploads.  He went beyond the “usual sources” to respected technologists John Chapman (playing a major role in DOCSIS), John Cioffi (DSL engineer and Marconi prize winner), and Gary Bachula of Internet2.  Mark Harrad of Time Warner Cable needs to read BroadbandReports.com, "Speed has not been an issue for most of our customers, or we'd hear about them." TWC customers are constantly demanding more upstream, and his engineers fighting congestion in the limited upstream they have.
• Not telecom, but good reporting I’d like to acknowledge. I’ll leave the value judgments to the reader, but like the blunt statements. Amidst a barrage of spin about the Ethiopia-Somalia War, the Washington Post is clear, “The State Department signaled U.S. support for the Ethiopian military intervention in Somalia.” The New York Times writes, “American officials have given Ethiopia, one of their closest allies in Africa, tacit approval to stamp out the Islamists.” 

• Ikanos faces 11 firms competing to be the lead plaintiff in the shareholder suit, with both Lerach Coughlin and Milberg Weiss fighting hard. In discovery and other research, they will almost certainly find the problems that surfaced late in the year foreshadowed.  Some were clearly revealed in financial filings, but any problems not publicly disclosed will have repercussions. If the case turns on mens rea, however, I’d like to offer my opinion that CEO Rajesh Vashist had no intention to defraud. His accomplishments at Ikanos have been remarkable, beating to market half a dozen companies with far greater resources.  I’m sure he many times confronted what looked like dismal situations, but overcame the problems and delivered successful products reasonably timely. I’d guess that gave him confidence that allowed him in good faith to believe he could overcome severe obstacles in 2006 as well. Every winning streak ends, of course, but that moment is hard to foresee after earlier successes.
• China Mobile rose $10B on December 26, reaching a market cap of $170B. Vodafone is not far behind, at about $160B market cap. Yes - the money is in mobile, and not in the United States.
• Adtran announced Q4 sales should be $108 million to $112 million , down dramatically from $140M last year and $149M the previous quarter. The shortfall was probably due to one or more bells slowing deployments of DSLAMs as part of a capital spending slowdown. 
• I want to repeat my warning that what I cover is different from what moves the market. That was brought home reviewing my 27 September comment “the inappropriate $20B gap between AT&T and Verizon market cap should narrow soon.” In fact, the gap expanded to over $30B and now is at $27B, far too much on the fundamentals, but Graham and Dodd don’t set stock prices. 
• Very sorry to discover “On December 18, 2006, Mr. Hong Lu, president and chief executive officer of UTStarcom, Inc., received a "Wells Notice" from the staff of the U.S. Securities and Exchange Commission (the "Commission") in connection with an ongoing investigation into trading activities by third parties. The Wells notice states that the staff intends to recommend to the Commission that it file a civil injunctive action alleging that Mr. Lu violated Section 10(b) of the Securities Exchange Act of 1934.” Hong has been helpful and generous to many of us in the industry, and many wish him well.
• BigBand has a problem as well, Om discovered. “The investigation, which was completed in December 2006, found numerous instances in which resellers of our product applications in China, with the understanding and approval of our China personnel, agreed to provide technical support, extended warranty terms and potentially other undefined terms without proper documentation and without communicating these arrangements to our legal and finance departments. As a result, we have deferred approximately $4.8 million in revenue from customers in China, which will be recognized in future periods if we satisfy all of the elements of our revenue recognition criteria.”
• There are perpetual problems with telecom sales figures in China, where China Telecom and Netcom pay for goods on their own schedule, often 6 months later than they take delivery. In some cases, the goods are carried by manufacturers as inventory, although they may already be in use at the carriers. Other times this produces very long receivables. I don’t believe this is the explanation of the BigBand issue, however.

• Claire McCaskill, new Democratic Senator, hired AT&T lobbyist Sean Kennedy as her chief of staff. The only ethical position for them to take is to bend over backwards on issues affecting that company. With luck, the press will be watching.

November 30-December 5

• As Lucent and Bell Labs Dies  Set the flags to half-mast
• Verizon $15 DSL Now $19.99  Think $35 as typical broadband price, remember devalued dollar
• Prime Minister Demands Soonest Possible DSL For Kazakhstan  Enough with the Borat jokes.
• Turkeys TV Smiles   Dogan Yayin starts DSL service with Skype included
• Editorial: Republicans Should Become the Party of Ethics
• Corruption did the GOP in. Dick Morris on the U.S. election
• The obvious compromise on Net Neutrality and Special Access
• Enforce AT&T Promises not to degrade
• Politicians Sweep Midterm Elections

“Competition is desperately needed in the video market.” Kevin Martin, 6 December 2006

Martin just affirmed the most important argument for strong net neutrality rules. People should be able to watch the TV they want, not what Comcast or AT&T picks for them. The obvious way to ensure that is the AT&T/BellSouth merger, but he intends to let it through anyway. BellSouth stock went up $3B in the last week - AT&T hasn’t offered one twentieth of that to make the deal. 

Simple logic makes clear it’s a bad deal for the American consumer

1- Concentration - typically two providers - is severely hurting the market
2- An $80B merger significantly reduces competition.

Ergo, the AT&T/BellSouth merger is not “a good thing.”

Headlines like “AT&T customers to see array of price hikes Jan. 1” as well as academic studies like Majumdar, filed in the merger proceeding, make it clear consumers simply won’t benefit. (policy, as usual at end).

    I’ll try to send another issue in a day, while we’re in Paris for LeWeb3. Please get say hello to the round fellow with a beard and Cameragirl Jennie Bourne.

As Lucent and Bell Labs Dies
Set the flags to half-mast
"They looked for dung but found gold, which is just opposite of the experience of most of us." Describing Wilson and Penzias’ Bell Labs discovery of the Big Bang radiation.

Claude Shannon would ride his unicycle through the halls of Bell Labs, but when he stopped he invented communications theory. Applying that theory suggested megabit speeds over copper were possible, and DSL is the practical application. Crucial early work came directly and indirectly from the Bell Labs and Telcordia. Today, 160 million homes have DSL connections.  Dozens of the engineers whose work has been reported by DSL Prime were deeply influenced by their time at the Labs.

    Another great moment came when Wilson and Penzias couldn’t get rid of some noise in their radio telescope, even after shoveling off the bat guano. No matter which way they pointed, that three degrees above absolute zero noise wouldn’t go away.  Eventually, they found an explanation; this was the cosmic background radiation from the big bang.

     Alcatel deserves no blame for picking up the final pieces and hopefully preserving some of the fragments. I’ve been covering the decline of Bell Labs literally since my first solo interview as a reporter.  Jeremy Bernstein came to the WBAI studios nearly twenty years ago and discussed his worries about the lab’s future. He had just written 3 Degrees Above Zero, which chronicled both the Wilson-Penzias experiment and glory days of the institution.

     I wish I had the skill to write an obituary worthy of the Labs.  From Chekhov’s The Cherry Orchard, the ending axe blow, one of the great moments in theater.

“I didn't see. ... Oh, these young people! [Mumbles something that cannot be understood] Life's gone on as if I'd never lived. [Lying down] I'll lie down. ... You've no strength left in you, nothing left at all. ... Oh, you ... bungler!

[He lies without moving. The distant sound is heard, as if from the sky, of a breaking string, dying away sadly. Silence follows it, and only the sound is heard, some way away in the orchard, of the axe falling on the trees.]” Project Gutenberg

Never again are we likely to read:

Nobel Lecture (8 December 1978 or other dates)
Robert W. Wilson (or ten others)
Bell Laboratories Holmdel New Jersey
Fractional Quantum Hall Effect (1998) Horst Stormer, Robert Laughlin, and Daniel Tsui
Optical Trapping (1997) Steven Chu
Laser 1981 Arthur L. Schawlow
Cosmic Background Radiation (Big Bang) (1978) Arno A. Penzias and Robert W. Wilson
Improved Understanding of Local Electronic States in Solids (1977) Philip W. Anderson
Maser 1964 Charles H. Townes
Transistor (1956) John Bardeen, Walter H. Brattain and William Shockley
Wave Nature of Matter (1937) Clinton J. Davisson

In lieu of flowers, perhaps a contribution to the Committee of Concerned Scientists, Arno Penzias Vice-Chairman. http://www.libertynet.org/ccs/join-us.htm Here’s part of

“Since Penzias' grandfather was born in Poland, the Nazis refused to recognize the family's German citizenship. But when the family arrived at the border, they found that the Poles' deadline for accepting immigrants had passed. Their train was turned back, and the Penzias family members may well have been spared their lives. Arno was then six years old. "I remember the train trip and the large cell we were all herded into before we left, but I don't think I was frightened at the time," Penzias says. "Many years later, I learned that the people who had arrived 'in time' had been put into an open enclosure where more than half froze to death."

      Similar horrors occur in too many places today as well.

Verizon $15 DSL Now $19.99
Think $35 as typical broadband price, remembered devalued dollar
Costs of offering broadband go down with Moore’s Law, but in the U.S. high cable rates allowed the telcos to recently raise their DSL prices. AT&T has gone up as well, judging by their website. AT&T now is at $39.95 and $49.95. If you can hondle them into the “new customer only rates” you do somewhat better. The web site implies you can’t, but their pr people tell me it’s possible to make a deal. Verizon 1 December raised its ultra-low speed tier (768/256) from $14.95 to $19.95 + some unspecified nasty fees. Their 3 meg/768K is $29.95 + nasty fees; both rates require a 12 month contract, require bundling in a phone service, and have gotchas. The best estimates are that the average U.S. customer pays about $35, while they advertise much less in their headlines. These speeds, of course are “up to” and sometimes deceptive. U.S. basic charges with a modest national calling plan typically range from $55 to $75. Verizon also raised their FIOS prices, looking to reduce demand to their capability to install. That’s a smart move for quality.

     Compare those rates to France, where twice the speed, 60 channels of TV, and free international included calls have settled at about 30 euro, or $40. The French package was closer to $30 when introduced - half the American price without TV, and less than a third of the U.S.“triple play” price. . With a similar drop in the dollar-pound rate, the 20-35 pound UK V+D offers are now not that much different than the U.S., although on many the speed is twice as high.  Japan, where the yen hasn’t moved as much, still is the best value among high wage countries, with voice + DSL at 5-20 meg available around $25-35, often including TV. Seven million Japanese have signed on for 50-100 megabit fiber at $35-45.

     The dollar has dropped 14% against the euro this year alone, which needs to be considered when making international comparisons. The headline is picked it up from Karl Bode, whose direct style is refreshing.
    

Prime Minister Demands “Soonest Possible” DSL For Kazakhstan
Enough with the Borat jokes.
Danial Akhmetov, PM invited new Telecom CEO Askar Zhumagaliyev  for an official meeting, and set his number one priority to delivering broadband to Kazakhstan. He was tasked to reduce Internet prices by half, as well as bringing down regular phone charges. A few days later, Askar Zhumagaliyev announced a contract with Alcatel, with whom he had worked developing e-government for the country. Lucent announced a deal last year, and Russian companies including Golden have limited service, but the Alcatel 7300’s headed to Astana will be the first major deployment.

     Kazakhstan is an enormous land with only 15M people. The nomadic country was a colony of the Russian Tsar for one hundred years and a subordinate part of the Soviet Union until 1991. Oil exports have produced GNP growth of 60% in the last five years to a nominal $9,000 per person, but poverty is widespread. They have 5M cellphones, 2.5M landlines, perhaps 500K dialup internet users, and nearly no broadband connections.
 
   “Bribery and corruption are common in Kazakhstan . Even President Nursultan Nazarbayev has been implicated in several corrupt schemes,” writes NY Times, with a picture of George Bush holding out his hand to Nazerbayev in the White House. He that is without sin among you, let him first cast a stone.Turkey ’s TV Smiles
Dogan Yayin starts DSL service with Skype included
’s largest media group has jumped into DSL, which Orhan Göksal expects “will serve as the main distribution channel of a wide range of media content, from television to the Web.” (Turkish Daily) Dogan publishes Hürriyet, Milliyet, Posta, and others, controlling 40% of the Turkish newspaper market measured by ad spending. StarTV and their other channels have 26% of the prime time viewers. The current price is $20 for a limited 3 gigabyte, one megabit down service.

FYC:
ITU Hong Kong 4-8 December will introduce the new leadership of Dr Hamadoun Touré and Haolin Zhou. Malcom Johnson of the United Kingdom will take over the Telecommunication Standardization Bureau. Nearly every equipment company is sending the CEO, as are most of the Asian carriers. Viviane Reding of the EU and Leonid Reiman of Russia are coming, but few leaders of Western carriers or national regulators except Sanjiv Ahuja of Orange and Paul Reynolds of BT. Akossi Akossia of the African Telecommunication Union should be able to announce the beginning of the very important EASSY underwater cable, designed to cut African transport costs 80-90%. Perhaps the highlight will be Nicholas Negroponte with working prototypes of the $125 One Laptop per Child. The crucial FSAN Working group meets just over the border, hosted by Huawei in Shenzen. Michael Brusca and others in this quiet group are finishing the network design for GPON that will dominate most of the Western growth in the next decade.
Atlanta 11-14 December. Bill Smith, BellSouth’s lively CTO, will keynote the DSL Forum meeting in The Forum doesn’t allow press except as members. One day I’ll have to find the money to join, as suggested by two Chairmen of the Forum. Perhaps before the May meeting in Beijing Washington, 12 Dec, an FCBA Brown Bag Lunch at the National Association of Broadcasters brings together Jeremy Pelofsky of Reuters; Amy Schatz of Wall Street Journal; Chris Stern of Bloomberg; Bill Triplett of Variety; Jeffrey Yorke of Radio & Records. Best of luck to Jeremy as he moves to general reporting at Reuters. I just read five articles on the same subject by frontline reporters, and Pelofsky had the most accurate account. 
Paris 11-12 December, a full house of over a thousand of the best in the European Internet will be at LeWeb3 in Paris, as will Jennie and I. Say hello. 

Briefs
Verizon should like this posting from DSLR “I'm also enjoying incredibly-reliable service and excellent USENET servers. I'm an ex-OOL customer, and I'm saving $180 per year by using Verizon DSL. I don't care how fast OOL is, unless they lower the price to $30 or less, plus provide usable USENET servers, I'll never switch back.” I can confirm both from my personal experience with Verizon DSL when it worked. The three meg/768K service gave me a solid 3 meg down, 750K up. Their newsgroup servers were excellent, while Earthlink’s similar are disappointing. If only Verizon’s installation and billing worked as well.

Press
Best of luck to Scoop Malik and Liz Gannes on NewTeeVee.com, the latest extension of the OMpire. They apparently decided beating the Journal and the like on telecom stories wasn’t enough, and now look to take on Variety and The Hollywood Reporter.
China Daily doesn’t make a habit of criticizing national champions, so their comment Huawei “is believed to be under increasing financial pressure as the telecom industry has become increasingly competitive and consolidated,” has to be taken very seriously. 
Telephia reported wireless substitution in the largest U.S. cities. Remarkably, San Francisco has the lowest mobile-only rate at 5.5%. Telephia suggests it would be caused by poor coverage due to the hills.
Derek Turner did an exceptional job with the new report, Broadband Reality Check, at http://www.freepress.net/docs/bbrc2-final.pdf. In particular, he uses OECD figures to devastate the old canard " U.S. problems are related to low population density." This nonsense was promoted by Mike Gallagher and Michael Powell to cover up their failures, which worked well with audiences who wanted to believe and didn't know what they were talking about. Time for politicians to stop making the claim, as well as the similarly untrue one that rates in the U.S. are widely going down. Basic phone rates are going up, typical long distance bills probably the same, and Wall Street is even declaring wireless prices have stopped declining.
Belson is getting compliments from his peers in the RSVP to the local “sparkling toast.” One writes “reporting on telecom has been excellent and well-balanced over the past few years and I wish you tremendous luck as you transition to the metro desk.”  “Cheers to Ken, he’s done a really great job on that beat,” comes from one of his hardest -digging competitors.

Wall Street
Rick Sherlund of Goldman Sachs is yet another top tech analyst leaving for the buy side. It could be that after 25 years covering Microsoft he got bored and as a pre-IPO Goldman partner he doesn’t need to work as hard as a top analyst must. Wall Street research continues to lose key people, with 30-40% gone in the last three years and not replaced. Even the best analysts are making less money, being provided less support, and pressured to deliver more direct contributions to profit.
ZTE is providing the equivalent of stock options to many of their Chinese employees, William Bao Bean of DB notes.  That’s part of a general trend in China towards better wages. He has a buy on the company despite a disappointing quarter, because he expects China ’s 3G TD-SCDMA to soon be approved and drive volume.  Capital spending at China Telecom and China Netcom is flat to down, one more reason Huawei and ZTE are offering such attractive deals around the world. They must export to thrive.

Editorial: Republicans Should Become the Party of Ethics
“Corruption did the GOP in.” Dick Morris on the U.S. election
Robert McDowell has a reputation for honesty, exactly what the Republicans need after the recent scandals. Earl Comstock, who until a few months ago signed Robert McDowell’s paycheck at COMPTEL recently claimed, “Approving the proposed AT&T/BellSouth merger and allowing the Bell companies to further enhance their already prodigious market power will undermine competition, thwart innovation and broadband deployment, and hurt our nation’s economy.” The L.A. Times notes “federal law calls for recusal whenever ‘a reasonable person’ might question impartiality. The law applies to all federal employees. Former Chairman Bill Kennard adds ““A recusal is a personal decision. It’s an ethical decision that someone has to make,” he said. “Once you’ve said you’re not comfortable voting on a particular issue, it’s very hard later to reverse yourself.”

     Despite that, FCC counsel Sam Feder is almost certainly going to find a loophole to force McDowell to vote. His decision is likely to read very closely to what AT&T lawyer Bruce Fein wrote last Friday


The obvious “compromise” on Net Neutrality and Special Access
Enforce AT&T Promises not to degrade
Whitacre testified to the U.S. Senate that they “would not block or degrade” anything coming from the Internet; Cicconi, his man in D.C., keeps repeating the same words, and folks like Ted Stevens take this at face value. Test the network by sending video from the edge and prove to Martin the content really does get with through with minimal packet loss and degradation. Add reasonable peering and decent customer speeds, and video will get through.

On Net Neutrality, that’s the minimum. Accepting anything less (like “principles”) is the mark of a fool or a hypocrite.
    
On special access, Rick Lindner told the UBS audience “Special Access rates have been declining as a result of competition.” Actually, even a monopoly would logically be dropping rates for these data services, because costs are declining rapidly ( Moore’s Law on switchers and other necessary gear.) They therefore have no reason to reject a freeze because the effect is nil if rates are declining. McDowell, think about that a moment: if they won’t minimum freeze rates

    The only way for Martin and McDowell to save their reputations is to make sure the deal if it goes through is fair. Time for Martin to call Ed Whitacre, and tell him what it will take. Otherwise, everyone informed except D.C. sycophants will lose their remaining respect. 

      Whitacre will give Martin what he asks, unless he really wants to kill the deal. “We’re absolutely committed to the BellSouth deal.” Rick Lindner, AT&T CFO just said at UBS. But they haven’t proven that in D.C. “AT&T has offered a number of concessions, which we do not view as materially valuation affecting” David Janazzo, Merrill Lynch. 

And here’s one reminding all the Democrats aren’t always honorable, either.

Politicians Sweep Midterm Elections (The Onion headline)
Larry Marshak of AP is perhaps too cynical. “On Day 1 of the next session of Congress, newly empowered Democrats are promising restrictive rules to ‘break the link between lobbyists and legislation.’ The city's veteran lobbyists know what to expect on Day 2: requests for political donations from the Capitol's new stewards.” In particular, Democrats Michael Copps and Jonathan Adelstein at the FCC have shown extraordinary courage and independence. However, the changeover to Democrats in Congress does not assure independence. John Dingell, taking over the House Commerce Committee, has already hired Verizon lobbyist Gregg Rothschild as his new chief counsel.  Drew Clark has some powerful reporting on Dingell’s ties “John Dingell was once one of the Bell's closest friends. He took their campaign contributions and, for more than two decades, promoted their legislative priorities on Capitol Hill….Dingell has supported the Bells through legislation and through oversight of the Federal Communications Commission. And the Bells, in turn, have supported him. Among telecommunications, media and technology companies, BellSouth is the single largest donor to Dingell campaigns since 1997. The company's employees and political action committee have contributed $108,875 of his $936,566 total telecom and related industry receipts from 1997 to June 2006. The figures come from an immense database of campaign contribution and lobbyist spending by all segments of the information industries that the Center for Public Integrity's Well Connected Project today makes available for free on the Internet..” Clark adds “It's a relationship that soured only within the past year.” quoting Dingell on the new telecom bill, "This was decided by a very unprincipled lobby."

November 24, 2006

• Whitacre Isn't Sure About AT&T/BellSouth Deal
• Now circulating at the FCC: "No efficiency gains" in Bell Mergers.
• Lightspeed Explodes in Houston 5,000 DSLAMs will soon be turned on
• Sistema Russia Want Deutsche Telekom, Bundestag modifies Lex Deutsche Telekom, 200M Siemens payoffs
• Conexant Promises ADSL2+ DSM 1 & 2, Loop Testing
• Alcatel-Lucent: Deal is Done   Bush had to approve, painful job cuts coming in U.S. and Europe
• For your consideration
• Everyone is coming to New York.
• For Your Consideration: iHollywood at New York’s Harvard Club 28 Nov, HD World, Columbia’s Ultrabroadband NY 1, UBS Media NY 4-7 Dec, Le Web 3 in Paris 11 and 12 December
• Briefs: China’s 3G licensing February (maybe), Ken Belson and Arshad Mohammed leaving telecom,  “fatigue” at the Web 2.0 conference, Jessica Rosenworcel, Michele Donegan, Walt McCormick's future, Jason Calacanis

“We have suffered a lot. We have helped to develop the Microsoft Internet-TV platform.” Ueli Dietiker, CEO Swisscom (informitv)

Ed Whitacre is willing to let the BellSouth deal die, a sensible move given the price has gone up $17B since March when the deal was announced and $29B since January.   Losing the war in Iraq cost the Republicans the election, and could (but probably won’t) kill the merger. The best informed D.C. folks believe the fix is in, and McDowell will suddenly discover that his conflict of interest has suddenly disappeared so he can pass the deal. Ethics be dashed.  Meanwhile, a university study that sees no benefits from the merger is making waves at the FCC. (continued in policy, at end)
----------------

Stephen Harper promises to dramatically reduce cancer deaths in Canada, and if he succeeds I hope Canada re-elects him Prime Minister by a wide margin. Getting results on what’s really important earns more respect from me than ideology. Broadband for all isn’t as important as curing cancer, but getting a 10 meg up, 50 meg down connection to nearly everyone is a reasonable goal that Germany, Japan, Paris and Verizon’s quarter of the U.S. can achieve. Regulators in every developed country should do as well. (Ubiquitous affordable wireless might be even more important, but not our story).

     Bringing those speeds to Britain requires a fire lit under Gordon Brown, incoming British Prime Minister, and Ed Richards, Tony Blair’s OFCOM CEO. Paul Reynolds at BT, after much internal debate, has decided to only offer 1 meg up, 10-25 meg down ADSL, leaving the UK behind for the next decade. Reynolds concludes, “It is not immediately apparent where the incremental revenue would come from [FTTH] investment.” (Ken Wieland, TM)  To Brown and Richards, it should be “immediately apparent” that country deserves more. It’s hard but not impossible to find policy that delivers advanced, affordable, and near-universal service, and Brown should step in before BT’s plans leave the UK behind. In BT's case, setting the line charge 12 pounds for a high-speed line with new investment but 8 pounds for a slower line would be about right to change Reynold's decision. Better ideas from readers (and BT) requested.  

      Paris. Le Web 3 on 11 and 12 December is attracting the very best of the European Internet. Say hello to the round fellow with a beard and stop by Cameragirl Jennie Bourne’s birthday party.
 
Lightspeed Explodes in Houston
5,000 DSLAMs will soon be turned on
Deutsche Telecom has reported heat problems at remotes, BellSouth has held off deploying VDSL there, and now an actual explosion at AT&T. The Sony lithium batteries in laptops could be a harbinger, although it is not yet determined a lithium battery was the cause of the Houston explosion. It could be a freak accident, but the pictures of charred equipment, damaged siding, and a fence knocked down at http://www.unstrung.com/insider/document.asp?doc_id=109923&site=lightreading are worth a look. Phil Harvey and Andrea Quezada hear from homeowner James Harrison that  “his wife, Mabel, who was home when the DSLAM cabinet was destroyed, said the blast was significant and debris went in at least two different directions. ‘It went about 50 feet to the other side of the yard and some pieces of the box went down the street,’ he says. ‘It shook the house pretty good.’ Wes Warnock of Fleischman-Hilliard, AT&T’s pr firm, adds “We're looking into all the possibilities for this fire, including a gas leak, electrical issue, or an act of vandalism.”

     There are hundreds of similar units deployed that are scheduled to be turned on in the next six weeks, with tens of thousands more due in 24 months. Jim Carlini, a former Bell labs engineer, is scathing “the scene has been compromised by AT&T taking away all the pieces to look at them ‘back at the lab‘. If it was considered a crime scene, it should have been left untouched and proper authorities should have been brought in to investigate.”
  
“No job is so important
No service is so urgent
That we cannot take the time
To perform our work safely” Bell System plaque, from Carlini

Wes Warnock comments: “AT&T puts the safety of its customers and employees first--and our track record reflects that.  We're doing everything we can to get to the bottom of this, including utilizing a forensic investigation team comprised of AT&T and non-AT&T professionals.  Our investigation is ongoing.  To suggest this is a technology issue is presumptuous and inappropriate.  … As for our testing, we continuously test all the pieces of our network in AT&T Labs, which is known around the world for its exhaustive research and stringent criteria.  We are conducting a thorough investigation of this incident.  Until our investigation is complete--and we can review the facts instead of mere speculation--I won't have any other details to share with you.”

Sistema Russia Want Deutsche Telekom
Bundestag modifies Lex Deutsche Telekom
René Obermann is firing the top team of Kai-Uwe Ricke after taking over as head of troubled Deutsche Telekom. Ricke’s last achievement was to blackmail the government into granting DT a “temporary” monopoly on their VDSL build, contrary to EU competition laws. EU Commissioner Redding will challenge the move, although last minute modifications are creating legal doubts. Much noise coming, with the real victor buried in the fine print of the rules, James Enck suggests. http://www.t-regs.com/content/view/369/86/ has the latest details. Blackstone, U.S. private equity giant, had been down $500M on their DT investment, but the government tilt toward the company has made their investment profitable. Telekom Italia may be the next target.   

       Angela Merkel’s government went along out of fear of being blamed for the 30,000+ job cuts due soon at DT. Granting a monopoly is usually the worst way to achieve telecom results, justified only if backed with smart and strong regs. Even more upsetting to most Germans would be the virtual assumption of control proposed by Moscow’s Sistema. They are offering a share exchange that would give the Russian oligarchs 20% of DT, enough for control if the German government divests as planned. The assassination of Alexander Litvinenko in London is a grim reminder that the KGB is still with us.

       Germany is also being challenged by what Heise Online calculates as a 200M payoff scandal at Siemens in the communications division. Klaus Kleinfield, Siemens CEO, saw his office searched and 6 subordinates arrested. The company has admitted guilt and is co-operating with the investigation. Siemens now joins Alcatel ($13M in Costa Rica, never fully investigated), Lucent (millions to Saudi Arabia), UTStarcom (multiple current investigations), Infineon (payoffs for sponsorships) and my neighborhood fire inspector (don’t ask) as demonstrably corrupt. 

Conexant Promises ADSL2+ DSM 1 & 2, Loop Testing
Potential for major improvement
Many of the techniques that yield performance improvements for VDSL are also being retrofitted into the ADSL standard. Conexant’s new 16 and 24 port CX95516 and CX95524 DSLAM chips offer:

• Enhanced Impulse Noise Protection (INP). The original ADSL standard assumed a generally “worst case” of impulse noise, adding error correction beyond what is necessary much of the time. Conexant is using additional memory to reduce errors that cause video dropouts. 
• Dual-latency with dual-interleaving, I.e. two separate streams on a single line, each having appropriate error protection. Being able to use both simultaneously allows separately optimizing for video and for data.
• Dynamic spectrum management (DSM) Levels 1 and 2. The original DSL specification was “static”, making assumptions about what a typical line can support. The new tendency is “dynamic,” testing the actual conditions of the line and binder and adjusting how the DSL signal is sent to optimize performance on each line.
• Mask-on-Demand (MoD). Conexant is introducing an “adaptive version of reach-extended ADSL (READSL)” which can be tuned for better performance on some longer lines.  
• RemedyDSL:  Loop diagnostics, which are increasingly demanded by carriers.

• IHollywood at New York’s Harvard Club 28 Nov will feature Matt Davis predictions, typically on target for the coming year; Dan Berninger, an analyst with passion and creativity; Shean Ng of NBC and a very full day. Then HD World brings Dan Rather and a dozen of broadcast TV’s top technical people on 29 and 30 Nov to the Javits Center
• Columbia’s Ultrabroadband NY 1 Dec is inspired by Eli Noam’s question, what will the change when people have 100 megabits and more? Joining Noam will be game pioneer Tim Langdell, wall street icon Simon Flannery, and Susan Crawford, a law professor who looks deeply at policy. 
• UBS Media NY 4-7 Dec features the Bell CFOs in succession on the 6th. Doreen Toben of Verizon starts off, likely to explain how building fiber will protect the company's future. On the numbers, Verizon is spending about the same on capex as their depreciation, which in ordinary times means they are standing still. Rick Lindner of AT&T comes next, explaining how not spending on fiber is more profitable. AT&T capex/depreciation is about 70%, typical of a company milking profits while praying the future comes slowly. Then Oren Schaffer of Qwest comes on, who will get kudos for keeping the company out of bankruptcy by not spending on anything for several years. Impeding insolvency gave him little choice given his priority to protect Phil Anschutz and other shareholders. His customers would have been better served by a chapter 11 debt reduction if the surviving company could afford to compete, but that raised unthinkable risks for policymakers and bondholders. Schaffer has lost nearly a third of his customers in the prime growing market of Phoenix (Richtel in NY TImes). Is it time for him to write down the value of equipment in that town? UBS did a good job of reaching beyond the usual suspects. Mark Cuban of HD Net, a prominent blogger about video over the net, opens Thursday morning. Jim Buckmaster, CEO of Craig's List, is shaking the newspaper business also represented by Don Graham of WashPo, the CEOs of Gannett, NY Times, McClatchy, and Belo.  Richard Zannino of Dow Jones is scheduled a few days prior to unveil the down-sized Wall Street Journal. Christie Heffner will as always inspire expectations beyond her role as Playboy's business-like CEO. She represents the most requested "video on demand,"  while World Wrestling Entertainment's Michael Sileck is part of the "extreme sports" sector possibly #2 in what people will pay to watch over the net.
• Le Web 3 in Paris 11 and 12 December is attracting the very best of the European Internet. Skype’s Niklas Zennström, Yossi Vardi (IM, the original), Rodrigo Sepulveda of Vpod.tv and dozens more. Marc Canter, danah boyd, Ross Mayfield, Michael Arrington, Dave Sifry, and Dave Weinberger are coming from the states. I‘m particularly looking forward to meeting Martin Varsavsky of FON, just possibly the world‘s next great wireless mogul. When Varsavsky comments, "The information society is essential for democracy. … If everybody has Internet access, authoritarian governments will have a more difficult time controlling the media,” he speaks as one who has donated $11M to spread the Internet into schools in his home country of Argentina. (Quote from Brett Brune, Houston Chronicle.) Jennie and I will be there and we’ll have Jennie’s birthday party on the evening of December 11. Please let me know you’re coming. We’re staying for a few days extra to catch up with a city leading the European Internet, and hope some readers will invite us to visit. Say hello to the round fellow with a beard and Cameragirl Jennie Bourne.

• AT&T will extend IP TV to Houston imminently, and will announce in the next month they have passed 2.4 million homes for Lightspeed. That’s welcome progress, of course; having some landline competition to cable is better than a monopoly.
• The Wall Street Journal will downsize the paper, but I hope it doesn’t reduce the best telecom reporting staff in the world.
• psiphon, a program to bypass totalitarian censorship, will be released Wednesday by the University of Toronto.
• Readers are invited to help me understand coming stories on Lightspeed (Houston, HD, and more cities about to announce), 90% coverage in Ireland and Western Canada, the end of Netopia, major service failures from UK to Chicago, Comcast customer complaints, James Enck’s “ten things,” AT&T/Alcatel conflicts, Southeast Asian vendor financing, Strowger and GoDigital DSL range extenders, U-verse emergency alerts and Huawei in Venezuela. For a story about VDSL2 problems with interoperability and performance at 5,000 to 12,000 feet, I’d appreciate any chip or equipment vendors with solid data getting in touch with me right away. I hope what I’m hearing can be contradicted by solid facts.

• China’s 3G licensing will begin in February with TD-SCDMA, Shanghai Daily reports quoting MII officials. Maybe this time it’s true.

• Ken Belson is leaving the telecom beat at the NY Times to join the metro desk. Email me for details if you want to join the modest party on December 5.
• Arshad Mohammed has left the telecom beat at the Washington Post to report from the Middle East for Reuters. Alan Sipress is temporarily filling in, covering telecom as part of a technology beat. Sipress was until recently an Asian correspondent for the Post. Many good reporters have been leaving the Post, presumably less secure after the cutbacks.
• Om Malik found “fatigue” at the Web 2.0 conference, and an excess of hype and jumping on the bandwagon. He criticizes Level 3 for “spin and a blatant attempt to get a little Web 2.0 pixie dust. …. Hate to break it to you guys, but you paint a pony with black stripes, it doesn’t become a zebra. You are a bandwidth provider, and might become a content delivery network, but you will still remain in the background, and a plumbing company.” While San Francisco may be post-boom on Web 2.0, few outsiders understand a major change occurred. Today’s web software (Ajax, Ruby, etc.) is so much more productive ideas become working products on the web in months; the valley is overflowing with startups. Miguel Helft in the NY Times notes the new companies are so inexpensive to create they don’t need venture capital millions. The predictable result of making innovation affordable will be breakout new apps.

• Best of luck to Jessica Rosenworcel, one of the best at the FCC, who’s off on maternity leave. Also welcome back from leave to Michele Donegan, one of the strong reporters at TotalTele.
• Walt McCormick, head of the USTA, held his job largely because of connections with Republicans in Congress. Given the slim chance of getting a bill before the newly elected Democrats take over in January, he won’t leave as quickly as Donald Rumsfeld. It’s hard to imagine any role he’ll play when Congress goes Democratic. The financial issues with his Telecom Next Show hurt him badly. He thought that show was going to give him cash without needing to beg the bells, but instead they had to bail him out when it flopped. It’s now been expensively cancelled, but the split cost SUPERCOMM its position as the most important show in the world.  
• Jason Calacanis left AOL right after CEO Jonathan Miller, and the colorful ex-publisher of Silicon Alley Reporter created more headlines. John Paczkowski claimed “You know it's a bubble when the resignation of the Web 2.0 booster who ran AOL’s Netscape division attracts just as much media attention as the ouster of the CEO who hired him.” Sure it’s a bubble, but Jason was a human face for AOL. Miller and everyone else at AOL/Time Warner have been ducking and boring the press for years. Listen to Jason and “father of pod casting” Josh Harris at this pod cast and you’ll hear how much more interesting he is. http://fredwilson.libsyn.com/?search_string=harris&Submit=Search&search=1 Or catch Jason’s own farewell cast at http://stadium.weblogsinc.com/calacanis/podcasts/calacaniscastbeta5.mp3 . He talks about how glad he was that other AOL people joined him in blogging, and especially when they felt enough confidence to criticize him publicly. One problem at telcos is a fear of saying “the CEO is wrong.” Maybe if some of the staffers telling me three years ago DT was betting on an unsustainable monopoly said the same to Kai-Uwe Ricke, Ricke might have done something before the board fired him this week. For the record, I printed Jason’s magazine years ago and sometimes visited his show at Pseudo.

October 31-November 3

• Cable Operators Blocking Internet TV
• Korea leads the world again
• China Telecom Q3 + 2.09M to 27.35M, Netcom  + 783K to 14,289
• Disappointing quarter as fixed lines flat to down
• TI predicts slow ADSL to VDSL shift
• Rajesh Vashist built Ikanos into a dominating leader in VDSL, but now is leaving as sales fell Q3 and look to Startling Results: Cell Phone Infertility, Chip Manufacturing Cancers
• If confirmed, major changes required
• DSL Contribution Up 50% at BellSouth
• ‘At scale … all or a vast majority of the revenues flows through to the margin”
• AT&T Confirms Heavy Churn
• Slow Growth Explains Coming $10 promotion
• Briefs: Covad, LD prices in the U.S. are going up, Scott Cleland, Om, Scott Leith, Zhone

• I’ve been hired by Alan Meckler of Jupitermedia and Internet.com to program a web video conference. It will probably be June in California, and I’ll make sure it’s an event worth attending. Jupiter reporting is mostly oriented towards developers and enterprises rather telecom, so I’m just putting in this brief notice, rather than the more prominent one when I consulted for the more activist Jeff Pulver.

• Covad dropped 16K lines on the quarter, with continued losses and overall flat revenue. The bright spot was the completion of almost 700 COs of ADSL2+, which will allow Covad and partner EarthLink to offer 10 and 15 meg service in many cities.
• Confirming that LD prices in the U.S. are going up, Oren Schaeffer of Qwest told the street “Wholesale long distance revenue grew 6.1%, both sequentially and year-over-year, on growth in minutes of 2.4% year-over-year.” He’s also serving more connections with 3% fewer people, and claims productivity growth of 6% a year. 
• “A bandwidth-lean ecosystem” is David Gale’s powerful image of the problems in South Africa.

• Scott Cleland, Bell lobbyist and recently failed stock analyst,  embarrassed Eric Rabe and Jim Cicconi badly with article attacking Larry Lessig that was loaded with errors and half truths. At least Mike McCurry is funny in his ignorance. Eric, Jim - you wouldn't make the kind of uninformed comments Cleland is making in your name, so why are you paying his bills?

• Om sees the decline in Verizon DSL adds “Another proof that the DSL market is seriously slowing down. All these gains were not enough to offset the problems in traditional voice and other businesses. Wireline revenues were down 4.7% for the quarter.” For the last couple of years, DSL growth has roughly paralleled wireline revenue decline at many carriers such as FT. Wireline continues to fall rapidly, and neither DSL nor FIOS is likely to make up the lost revenue. Deutsche Telecom and AT&T are responding with massive layoffs and every price increase they can get past regulators, strategies most other telcos are likely to adopt. Bad time to work for a phone company.
• Scott Leith of the Atlanta Journal-Constitution is one of the few reporters who took the time to read FCC submissions on the merger, finding gems like Jesse Jackson’s support of the deal. Amazing what even a hero of mine will do for their share of $100M.

• Zhone has gone up nearly 40% since CEO Mory Ejabat purchased about 215,000 shares and CFO Kirk Misaka bought nearly 84,000 shares, ANT & Sons reports.

October 16, 2006