BuddeBlog

Continuing strong growth
Despite some reports that might indicate otherwise, the Australian telecoms industry is in good shape – I would say perhaps in its best form since 2000.

Revenues are increasing by 5.5% in 2005, and a conservative forecast for 2006 is 4.1%. Over the last five years the average growth has been 4.6%, well above most of our western trading partners.

Revenues services market by operator
Year ends June
Telstra
Optus
Fixed SPs*
Mobile SPs*
Data SPs*
Total

$ millions

2004
19,280
6,675
690
2,715
910
30,270

2005(e)
20,090
6,930
800
3,140
960
31,920

2006(e)
20,530
7,230
910
3,560
1,030
33,260

(Source: BuddeComm – Telecoms Industry – Overview and Statistics Report 2005/2006)
* at wholesale value

Telstra the best international performer
Telstra’s profits are world famous. No other similar incumbent telco in the western world even comes close to Telstra’s consistent financial performance.

On competition, we see that competitors now have 45% of the retail market and a 35% share in wholesale values. This is certainly not a bad achievement. We have seen a number of new players coming to the fore, and the situation is now back to what it was in 1999, when we had nine major telcos with revenues of over $100 million per annum. Some of the names have changed, however – they now include Vodafone, AAPT, Hutchison, Commander, SP Telemedia, Macquarie Telecom, PowerTel, iiNet and People Telecom.

Total revenues 2nd tier market
Year
Retail value
Wholesale value

$ million

2004
7,781
4,315

2005(e)
8,505
4,900

2006(e)
9,190
5,500

(Source: BuddeComm Telecoms Industry – Overview and Statistics Report 2005/2006)
Note: Excluding Telstra and Optus

So what are these negative reports all about?

Profit margins set to half
Telstra’s part of the problem relates to the fact that the company will finally have to join the rest of the industry and become used to much lower profit margins.

This could, over time, be as dramatic as a reduction of 50%. The competitors are used to low margins, but they also will experience further pain.

The margins on voice services are going down across the fixed and mobile markets. VoIP (fixed and wireless) will have an even greater impact here during 2007/2008. And the move from dial-up Internet to broadband constitutes a further margin squeeze. While I, of course, welcome the low entry-level prices for broadband, I am not sure if the industry has been managing these margins well. But what’s done is done.

The other reality is that the current telecommunications market is very much a commodity industry. In other words, you need a very large operation to make a profit. Back in 1999 I forecast that this would mean there wouldn’t be room for more than six national competitors, and they would need revenues of $1 billion plus.

And even such a large revenue figure is no guarantee of success. AAPT is still struggling; I remain pessimistic about Hutchison’s ability to deliver a decent ROI; and Vodafone is still only marginally successful. Optus’s margins are also squeezed and, given the current situation, I don’t see them going back to their heydays of double-digit growth.

Value-added services
On the other side we see the success and resilience of many ISPs, most of whom have built interesting value-added services around their businesses, ranging from PC services, web hosting, firewalls, security to home networking and so on. In general terms, most of the telcos have failed to move into value-added areas and the margin squeezes are going to cause further problems in this market.

It is too easy to blame this simply on poor wholesale rates from Telstra.

If we follow the developments of the industry over the last decade then we see that, despite Telstra’s dominance in the market, other telcos and ISPs have made good inroads – customers obviously value the extra services they receive from these competitors.

Infrastructure competition
There are now also more than 50 infrastructure-based projects, either in existence or under construction. These include Fibre-to-the-Home (FttH), Broadband over Powerlines (BPL), and wireless. In the infrastructure business the first few years are always the most difficult, as it is necessary to build before customers can come, but this has now been done by companies such as Unwired, PBA, SP Telemedia, utilities and regional companies such as BushCom, CountryTel and a dozen or so others.

On top of this, there are a dozen WiFi operators who can extend their business into WiMAX, plus an equal number of DSLAM operators who are also able to deliver new innovative services independently of Telstra.

With another $5 billion earmarked for infrastructure investments the future looks bright for telecoms in Australia, as long as we are able to use this money wisely and not fritter it away in political pork-barrelling.

On 24 August, BuddeComm will launch the 2005/2006 edition of its annual reports on the Australian Telecommunications Industry. In all, a set of 12 reports analyses the Australian telecommunications market in great detail.

The launch will take place at two Roundtables – one in Sydney (24 August) and one in Melbourne (25 August).

2005 Australian Publications

Due For Release in August 2005
PDF(SUL)*

Telecoms Industry – Overview and Statistics
$995

Market & Industry Analyses – Moving into 2006
$795

Residential, Business, Government and Regional Markets
$795

Telco Company Profiles – Telstra and Optus
$495

Telco Company Profiles – 2nd Tier Companies
$495

NGN, VoIP, IP and Internet
$795

Broadband Powerlines and Utilities Markets
$795

Mobile Communications – from 2G to 3G
$795

Mobile Data and Content Markets
$795

Broadband Market – DL and cable modems
$795

Wireless Broadband market – the arrival of WiMAX
$795

Released in May 2005

Triple Play: IP, Broadband and Digital TV
$795

Broadcasting and Pay TV Market
$795

*Prices: Single-User PDF Licence excluding GST for Australian customers).
PS
I have put all the synopses of these reports into one pdf file (13 pages), which has become an interesting research document in itself – free for you to download here

‘State of the Industry’ Roundtables with Paul Budde
Sydney – Wednesday 24 August 2005
Melbourne – Thursday 25 August 2005
Theme: Australian Telco Market moving into 2006
Presentations and discussions will mainly concentrate on the latest results contained in our new Australian reports, bringing you up to date regarding the latest research data and, perhaps more importantly, analysing the market with you – highlighting the areas where opportunities exist.

I will bring you up to date regarding the latest research data and, perhaps more importantly, analyse the market with you – highlighting the areas where opportunities exist.

Cost:
$350 per person (excluding GST) – this includes morning/afternoon coffee and lunch
Venues:
24 August: Observatory Hotel, 89-113 Kent Street, Sydney
25 August: The Windsor Hotel, 103 Spring Street, Melbourne.
Booking: Call or e-mail Christine Lewis to make your booking.
Telephone: 02 4998 8144 E-mail: pbc@budde.com.au
Online: Sydney and Melbourne

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On the 24th of August BuddeComm will publish its annual set of reports on the ‘State of the Australian Telecommunications Industry’. In all a set of 12 reports analyse the Australian telecommunications market in great detail.

The launch will take place at two Roundtables one in Sydney (24 August) and one in Melbourne (25th August.

Key highlights:
The market will grow by 5.5% – from $30.270 million in 2004 to $31.920 in 2005 – with a further 4.1% growth expected to deliver $33.260 million in revenues in 2006.
The Australian market is still standing up in the international arena. Revenue growth remains well above GDP. In 2005 growth is still driven by mobile (11.3%) – from 2006 onwards data/broadband will be the driver.
We forecast mobile growth in 2006 to be 6.5%, while broadband will deliver an 8.5% revenue growth.
Telstra’s growth is only slightly below the growth of the overall growth of the market – 4.2% vs 5.5% – demonstrates its continued market dominance. There has normally been a gap by at least two percentage points in favour of its competitors.
Telstra has strengthened its competitive position during 2004/2005 at the cost of Optus, most 2nd tier telcos and the smaller ISPs.
Telstra’s overall market share has been slipping by an average of 2% per annum over the last five years. We expect this to slow to around only 0.1% for the coming year – mainly because Optus’s growth is slowing down and because of the very low margins that apply to broadband, which allows Telstra to keep the lion’s share of these revenues.
As we have been predicting for several years, after a decade of gaining market share Optus’s high levels of growth are coming down and we expect them to settle at around the 22% market share. I don’t expect this to change
After two years of double-digit growth, Optus’ revenue growth, also, is very close to that of Telstra – around the 4% mark. For the first time its growth is below the industry average.
The combined local access and voice market is able to hold its ground. Telstra has been able to compensate for the fall in voice revenues by doubling its access revenues. However, any further increases will see customers moving into mobile more quickly.
However, we do believe that Telstra will be able to compensate for the next round of price cuts, brought upon it by VoIP, through new triple play models. Flexible access packages will allow it to start charging premium prices.

Table 1 – Revenues services market by operator – 2000 – 2005
Year ends June
Telstra
Optus
Fixed SPs*
Mobile SPs*
Data SPs*
Total

$ millions

2000
18,600
4,160
690
1,470
490
25,410

2001
18,270
4,670
820
1,930
650
26,340

2002
18,200
4,850
810
2,000
770
26,630

2003
18,650
5,610
650
2,085
870
27,865

2004
19,280
6,675
690
2,715
910
30,270

2005(e)
20,090
6,930
800
3,140
960
31,920

2006(e)
20,530
7,230
910
3,560
1,030
33,260

(Source: Paul Budde Communication Pty Ltd 2005)
* at wholesale value

Telecoms, Mobile and Broadband in Australia 2005/2006 reports:
Telecoms Industry – Overview and Statistics
$995

Market and Industry Analyses – moving into 2006
$795

Residential, Business, Government and Regional Markets
$795

Telco Company Profiles – Telstra and Optus
$495

Telco Company Profiles – 2nd-tier players
$495

NGN, VoIP, IP and Internet
$795

Broadband Powerline and utilities markets
$795

Mobile Communications – from 2G to 3G
$795

Mobile Data and Content Markets
$795

Broadband Market – DSL and cable modems
$795

Wireless Broadband market – the arrival of WiMAX
$795

Triple Play: IP, Broadband and digital TV
$795

*Prices: Single-User PDF Licence excluding GST for Australian customers).

More information on these reports will be available at the launch.

‘State of the Industry’ Roundtables with Paul Budde
Sydney – Wednesday 24 August 2005
Melbourne – Thursday 25 August 2005
Theme: Australian Telco Market moving into 2006
Presentations and discussions will mainly concentrate on the latest results of our new Australian reports that we will publish at the same time, covering:
Telecoms Industry – Overview and Statistics
Market & Industry Analyses – moving into 2006
Residential, Business, Government and Regional Markets
Telco Company Profiles:
Telstra and Optus
2nd Tier Companies
NGN, VoIP, IP and Internet
Broadband Powerline and utilities markets
Mobile Communications, Data and Content Markets
Broadband Market – DSL and cable modems
Wireless Broadband market- moving towards WiMax mobility
Triple Play: IP, Broadband and Digital TV
Broadcasting and Pay TV Market

I will bring you up to date regarding the latest research data and, perhaps more importantly, analyse the market with you – highlighting the areas where opportunities exist.

Cost:
$350 per person (excluding GST) – this includes morning/afternoon coffee and lunch
Venues: 24 August: Observatory Hotel, 89-113 Kent Street, Sydney, 25 August: The Windsor Hotel, 103 Spring Street, Melbourne. If we can attract 15 people or more in other cities I am prepared to also conduct seminars in those cities.
Booking: Call or e-mail Christine Lewis to make your booking.
Telephone: 02 4998 8144 E-mail: pbc@budde.com.au
Online: Sydney and Melbourne

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Privatisation of Albania’s incumbent, Albtelecom, has been cancelled by the government on the grounds that the privatisation was not in the best interests of the country. The country’s latest attempt at privatisation commenced in July 2004 when the state announced plans to sell a 76% stake. The number of interested parties was initially 12 and included Telekom Slovenije; Turk Telekom and partner Calik Enerji; a venture between South Korea’s Samsung and SK Telecom; a consortium comprised of Kuwaiti mobile operator MTC and Ma Kharafi and US-based Western Wireless. A shortlist of six consortia was drawn up in January 2005 and included the Communicorp Group, Western Wireless, the venture between Samsung and SK Telecom, Turk Telekom and partner Calik Enerji, Telekom Slovenia and the MTC Kuwait-Ma Kharafi consortium. Only one bid was submitted in early May 2005 from the Turk Telekom and Calik Enerji consortium. The bid, for €120 million, was accepted by the government.

The Albanian government has been planning the privatisation of Albtelecom for more than seven years, but was postponed numerous times for various reasons including war in neighbouring Kosovo and on the advice of the International Monetary Fund due to the crash of the global telecoms market.

In an effort to make Albtelecom more attractive for the privatisation, a GSM licence was awarded to the incumbent, which created a wholly-owned mobile subsidiary, Eagle Mobile.

See also:
Albania – Telecoms Market Overview & Statistics;
South Korea telecommunications market overview;
Kuwait – Telecoms Market Overview & Statistics;
Turkey – Key Statistics, Telecommunications Market Overview and Internet.

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Access, a Tokyo-based developer of embedded Web browsers for mobile devices, announced its acquisition of PalmSource, the company behind the Palm OS. Access is best known for its NetFront Web browser, which the company estimates that its browser is in use in over 180 million devices around the globe. Access sees the acquisition as something that will strengthen its position in the mobile content delivery business, as well as wireless Internet access software for mobile devices.

PalmSource was originally the software division of PDA-maker Palm, and was spun off from Palm in October 2003. PalmSource has a licensing contract with Palm, which until July 2005 was known as PalmOne, that runs to December 2009.

See also:
Japan;
Japan – Mobile Market – 3G & Mobile Data.

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After the economic slump of 2000-2002, Argentina’s mobile telephony is again booming. Mobile subscribers soared 76% in 2004, reaching 16.5 million by mid-2005.

Argentine mobile phone providers face intense competition to expand their networks and capture new users. In fact, the mobile landscape is undergoing major transformations in 2005.

In January 2005, the number of competing companies decreased from four to three, following Telefónica’s acquisition of Movicom BellSouth. The merged company gained uncontested market leadership, with around 42% market share, and was re-launched under the Movistar brand in April 2005.

By mid-2005, the erstwhile market leader, Telecom Personal (Telecom Argentina), had fallen into third place, while CTI Móvil (America Móvil) had moved into the number two position.

With the merging of BellSouth’s and Telefónica’s Argentine mobile operations, Movistar ended up accumulating over 90MHz of radio spectrum. As a condition of the merger, the government required Movistar to relinquish 42.5MHz of spectrum within two years of the merger.

Movistar began the process of returning part of its frequency spectrum in October 2005, starting with excess held the northern and southern cities. It said it further planned to relinquish frequency for some of the country’s metropolitan areas in the medium term.

The government intends to allocate the returned spectrum to a new entrant. The clear favourite is cooperative start-up venture Comarcoop, which is waiting for a frequency allocation in order to launch services.

In July 2005, CTI Móvil asked the regulator for an allocation of 10MHz in the 850MHz band to improve its service quality. Comarcoop said it was willing to share the 42.5MHz of spectrum with CTI Móvil, since it plans to use only what it needs to launch services.

See also:
Argentina – Mobile Communications and Mobile Data Market;
America Movil.

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A weblog, or simply a blog, is a website which is regularly updated (often several times a day) and where the information is offered in a chronological sequence. The front page of the blog provides the latest additions. The operator of the blog provides a more or less personal logbook of information (posts) that he will share with the visitors to his weblog.

Blogs are a logical extension of the virtual communities that have surfaced around the world. The idea appeals to the tribal nature of societies. Blogs, however, play a unique role, as, at the same time, they can be ultra-personal. Those blogs that harness both issues will be amongst the most successful.

Mediacracy
While blogs can be, and are, used in connection with a wide range of topics, the most popular ones are politically oriented, on international, national (but especially local and community) issues. Many community-based organisations and politicians operate their own blogs to stay in contact with grassroots sentiment, ideas, suggestions and comments. It allows for active participation from individual citizens in political decision-making processes.

This allows citizens to bypass the media, and this process of media democratisation is also called mediacracy. In a rapidly commercialised news market, where the company share price rules, and which is characterised by the dumbing-down and Americanisation of news and information, blogging is rapidly conquering the world through the millions of people who reject the way the news system presently works. The same applies to the spin-doctoring that is taking place, with a great deal of political and commercial information being massaged into the traditional media.

Blogs offers citizens a way round this.

Traditional media can’t provide for the direct participation of its readers in political (and other) debates. Blogs can provide such a democratic service and it is therefore in the interests of democracy to investigate and maximise the possibilities that blogging can offer to politicians, the media and the wider community.

Proactive politicians, journalists and other opinion architects could become the leaders of the blog revolution. At the same time, scanning blogs will enable proactive leaders to detect new trends, developments, opinions and ideas at an early stage. Many companies already have an active monitoring program to detect comments regarding their companies, brands, products and services.

The fact that young people around the world are massively abandoning the traditional news media is a warning sign that the current media are unable to maintain this important role in democratic societies, and it is therefore important that we investigate what roles blogs can play in the media policies of democratic nations and communities. With newspaper circulations in the western world at an all time low, it is about time for this industry to start looking at innovations.

Affecting traditional news media
Blogs will, in some cases, undermine the traditional news media; but more innovative media will find ways to incorporate blogs into their services – in other words, readers become journalists. Having said this, there are, of course, serious hooks connected to these systems. The media doesn’t want to be held liable for blogs that appear on their Internet site, and implementing censorship defeats the purpose of blogging.

For that reason alone the majority of blogs will therefore remain in the public domain.

Nevertheless, the traditional new media will need to very seriously investigate blogging in order to see how they can support their own operations, and use blogs, themselves, to check if they are reporting the news in the way people want. It allows them to keep an ear to the ground.

The media also need to have a much better understanding of how people use news. This has far-reaching consequences – not just in relation to blogging, but also to other media, for example, the Internet, video-based broadband, mobile, wireless and so on.

News needs, by default, to be multimedia. The current structure of separate text-based, video-based and audio-based news media does not make sense in our converging world. Most news media, however, are asleep at the wheel. At the same time more and more bloggers are already understanding this and are including video and audio applications into their blogs.

Key elements in the converging world are: personalisation, diversification and interactivity and all media will need to take these changes very seriously. Most media are still looking at their business with blinkers on. They are more concerned about the effect newspapers, magazines, TV and radio have on each other, and they are missing the point – that the real threat (and the real opportunities) are coming from a totally different direction.

Most media are looking on blogs as a threat, and are therefore avoiding the phenomenon as far as possible.

Other blog terms
Most blogs also allow for posting notes and comments on previously posted blogs, in sequence. Each blog gets its own list, and so can be cross-referred individually – for instance to other weblogs.

Trackbacks allow others who mention or discuss other weblogs to post a reference back to the original blog. Blogrolls are lists of links to other related blogs. Blog systems allow for elaborate archiving systems.

Happy blogging
Paul

See also:
Global – Convergence of Media & Telecommunications
Global – Broadcasting (Digital, Cable, Satellite TV)

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A weblog, or simply a blog, is a website which is regularly updated (often several times a day) and where the information is offered in a chronological sequence. The front page of the blog provides the latest additions. The operator of the blog provides a more or less personal logbook of information (posts) that he will share with the visitors to his weblog.

Blogs are a logical extension of the virtual communities that have surfaced around the world. The idea appeals to the tribal nature of societies. Blogs, however, play a unique role, as, at the same time, they can be ultra-personal. Those blogs that harness both issues will be amongst the most successful.

Mediacracy
While blogs can be, and are, used in connection with a wide range of topics, the most popular ones are politically oriented, on international, national (but especially local and community) issues. Many community-based organisations and politicians operate their own blogs to stay in contact with grassroots sentiment, ideas, suggestions and comments. It allows for active participation from individual citizens in political decision-making processes.

This allows citizens to bypass the media, and this process of media democratisation is also called mediacracy. In a rapidly commercialised news market, where the company share price rules, and which is characterised by the dumbing-down and Americanisation of news and information, blogging is rapidly conquering the world through the millions of people who reject the way the news system presently works. The same applies to the spin-doctoring that is taking place, with a great deal of political and commercial information being massaged into the traditional media.

Blogs offers citizens a way round this.

Traditional media can’t provide for the direct participation of its readers in political (and other) debates. Blogs can provide such a democratic service and it is therefore in the interests of democracy to investigate and maximise the possibilities that blogging can offer to politicians, the media and the wider community.

Proactive politicians, journalists and other opinion architects could become the leaders of the blog revolution. At the same time, scanning blogs will enable proactive leaders to detect new trends, developments, opinions and ideas at an early stage. Many companies already have an active monitoring program to detect comments regarding their companies, brands, products and services.

The fact that young people around the world are massively abandoning the traditional news media is a warning sign that the current media are unable to maintain this important role in democratic societies, and it is therefore important that we investigate what roles blogs can play in the media policies of democratic nations and communities. With newspaper circulations in the western world at an all time low, it is about time for this industry to start looking at innovations.

Affecting traditional news media
Blogs will, in some cases, undermine the traditional news media; but more innovative media will find ways to incorporate blogs into their services – in other words, readers become journalists. Having said this, there are, of course, serious hooks connected to these systems. The media doesn’t want to be held liable for blogs that appear on their Internet site, and implementing censorship defeats the purpose of blogging.

For that reason alone the majority of blogs will therefore remain in the public domain.

Nevertheless, the traditional new media will need to very seriously investigate blogging in order to see how they can support their own operations, and use blogs, themselves, to check if they are reporting the news in the way people want. It allows them to keep an ear to the ground.

The media also need to have a much better understanding of how people use news. This has far-reaching consequences – not just in relation to blogging, but also to other media, for example, the Internet, video-based broadband, mobile, wireless and so on.

News needs, by default, to be multimedia. The current structure of separate text-based, video-based and audio-based news media does not make sense in our converging world. Most news media, however, are asleep at the wheel. At the same time more and more bloggers are already understanding this and are including video and audio applications into their blogs.

Key elements in the converging world are: personalisation, diversification and interactivity and all media will need to take these changes very seriously. Most media are still looking at their business with blinkers on. They are more concerned about the effect newspapers, magazines, TV and radio have on each other, and they are missing the point – that the real threat (and the real opportunities) are coming from a totally different direction.

Most media are looking on blogs as a threat, and are therefore avoiding the phenomenon as far as possible.

Other blog terms
Most blogs also allow for posting notes and comments on previously posted blogs, in sequence. Each blog gets its own list, and so can be cross-referred individually – for instance to other weblogs.

Trackbacks allow others who mention or discuss other weblogs to post a reference back to the original blog. Blogrolls are lists of links to other related blogs. Blog systems allow for elaborate archiving systems.

Happy blogging
Paul

See also:
Global – Convergence of Media & Telecommunications
Global – Broadcasting (Digital, Cable, Satellite TV)

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Bell Canada and Starbuck, the world’s largest coffee chain, have announced that they will begin rolling out WiFi services across 140 shops in the state of Ontario. If successful, the agreement will be extended to cover 400 locations in British Columbia, Alberta, Manitoba and Saskatchewan. Bell has subcontracted installation and management of the networks to Ottawa-based WiFi pioneer Boldstreet Inc. Customers can have their WiFi Internet access billed to a cellphone bill, or pay by credit card.

See also:
Canada – Major Telcos – Overview & Statistics.
Canada – Broadband Market Overview & Statistics

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In September 2005, Broadcast Communications was in the process of scoping out how it could deliver Free-To-Air Digital Television as well as preparing a commercial business case aimed at meeting the needs of New Zealand’s broadcasters. The work is being completed in co-operation with TV broadcasters and the New Zealand Television Broadcasters Council. By September 2005, BCL had spent $40 million upgrading its network from analogue to digital. BCL believes that ultimately Digital TV infrastructure maybe a mixture of satellite and terrestrial technology solutions, but that terrestrial technology would provide the delivery of high definition television more effectively.

See also:
New Zealand – Broadcasting Market – Major Players, Teletext and Captioning;
New Zealand – Broadcasting Market – Television and Radio.

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Intense competition between cable MSOs and RBOCs to be chosen as the broadband pipeline into the home is delivering higher speeds and lower prices to consumers. The result has been an acceleration of broadband takeup. In the year to June 2005, the number of US households subscribing to broadband Internet grew by a record 46%.

In August 2005, SG Gowen research reported that cable modem had become on average 78% more expensive than DSL. It reported that during 2005, DSL prices decreased by 9.2% and cable broadband increased 4.1%. During the first half of 2005, cable broadband took only 47% of new broadband subscribers, compared with 50% in 2004 and 61% in 2003.

Price competition was boosted in July 2005, when SBC almost halved its DSL entry price to $14.95 per month, lower than many of the dial-up offerings on the market. In August 2005, Verizon matched the offer at $14.95.

Most of the MSOs, however, have been sitting tight and keeping their prices in the $40 range, aiming to retain customers by increasing data speeds and offering triple-play bundle discounts. Over the last year, Comcast has boosted speeds in several steps without increasing prices.

Many of the cable operators have begun to offer a low-speed service aimed at capturing or retaining price sensitive customers. MSOs that offer low-speed services include Charter, Cox, Adelphia and Mediacom with typical prices around $25 per month for download speeds in the 128-384Kb/s range.

In the markets where Verizon Communications is launching its FiOS Fibre-to-the-Home (FttH) service, the war has become particularly intense. In May 2005, number three MSO Cox increased speeds in Northern Virginia to 15Mb/s, and did the same in June 2005 in Rhode Island. In July 2005, Adelphia raised its access speeds to 16Mb/s in Leesburg, Va, and Cablevision, began offering a 100Mb/s service to its business customers in Oyster Bay, on Long Island, NY.

Coincidentally or not, in each of the markets where cable companies have increased speeds, Verizon has begun offering its FiOS service, which the company claims can scale to 100Mb/s. Since 2004, Verizon has spent billions of dollars digging up streets to lay FttH network in half of the states where it provides local phone services. So far, the network is hooked up in roughly 250 communities on the East Coast and in Texas.

The base plan for FiOS offers access speeds of 5Mb/s download and 2Mb/s upload for $39.95 per month. For $49.95, consumers get download speeds up to 15Mb/s, and for $199.95 download speeds up to 30Mb/s.

The war between the MSOs and RBOCs, however, has just begun. The stakes are set to become much higher when the RBOCs launch their IPTV video offerings, and enter the video content industry in their own right.

In September 2005, Verizon started taking its first orders for FiOS TV, offering a monthly subscription price around $10 less than standard cable cost and sparking considerable price pressure across the multi-channel video market.

Verizon launched its first FiOS TV service in Keller, a suburb of Dallas, Texas, offering over 180 digital video and music channels for $39.95 per month, compared to average cable TV prices of around $50 per month and satellite TV price of around $42 per month. If one considers that FiOS TV is all-digital, the price differential is greater. The average price for all-digital cable TV is around $65, giving a price difference to FiOS TV of $25.

Verizon is offering three tiers of video service:
Basic $12.95/mo – 15-35 local broadcast, weather and community channels, video-on-demand, in analogue form or with a digital set-top box;
La Conexion $32.95 per month – designed for bi-lingual customers – 140 standard and HD channels with English and Spanish programming, 600 VOD titles;
Standard $39.95/mo – over 330 channels, over 20 high definition channels, 600 VOD titles (1,800 by year end), special interest channels, interactive programming guide.

The entry of Verizon and soon-to-come SBC into the triple play market will undermine the MSOs attitude of product supremacy, which has held them back from entering in to the high-speed Internet market price war against DSL. The cable industry is nervous enough to oppose efforts by Verizon and SBC to streamline the local franchising process. Verizon has set a primary goal of reaching 20% market penetration with FiOS TV, and is trying to accelerate deployments by lobbying for a streamlined state of federal-level video franchising process. Verizon and SBC currently have to negotiate with each municipal government for a video franchise that will add local competition.

See also:
USA – Broadband Market – Broadband over Power Line (BPL);
USA – Broadband Market – Cable modem and DSL;
USA – Broadband Market – Fibre to the Home (FttH);
USA – Broadband Market – Wireless Broadband;
USA – Convergence – Triple Play;
USA – Major Telcos – Statistics & Analysis;
USA – Convergence – Digital TV and Interactive TV;
USA – Key Statistics, Telecom Market Overview and Analysis – 2005.

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