Irish regulator ComReg, for example, notes that there were 1.27 million broadband subscribers at the end of March, up 28 percent from a year earlier and up six percent from the previous quarter.

But this has been driven mainly by mobile broadband subscriptions, which have almost doubled over a year with 90.6 percent growth.

And Ericsson predicts that mobile broadband connections will surpass fixed broadband connections as soon as 2010.

Originally "dimensioned" to cope with small-screen devices used occasionally, 3G networks are having to cope with laptop-sized video downloads, hours-long social networking sessions and rich Web 2.0 sites which download content "in the background".

In some cases, says researchers at Telco 2.0, the revenues from mobile broadband services are not even covering the costs of delivering data to the users.

That suggests mobile operators may have to revisit their pricing and packaging plans.

Today, most mobile broadband subscribers buy traditional monthly contracts, typically over 12 to 24 month periods. The problem is the perceived value versus price, if an increasing number of mobile broadband devices are put into service and most of those devices use little data.

Broadband connectivity costs are evaluated one way when a single connection at home can be shared among many users, and when usage is fairly frequent. Broadband costs will be looked at quite differently when each user must buy multiple connections on a device-by-device basis.

That suggests an eventual need for pricing mechanisms of all sorts, most based on ways to better match usage to cost.

Session-based access, similar to the familiar WiFi hotspot model, is one option. Temporary access is yet another possibility.

Bundling of mobile broadband with other services such as fixed broadband or mobile voice services, or creation of broadband family plans, are other options.

-- Gary Kim

Think of it this way: Sprint believes network management no longer provides strategic benefits.

Steve Elfman, president, Sprint network operations and wholesale, says that although the company will not disclose precise savings, Sprint expects cost reductions per labor unit, plus avoided software investment, less investment in inventory and less spending on software licenses.

Some 6,000 Sprint employees will transition over to Ericsson Services at the end of the third quarter as part of the deal.

Sprint says the outsourcing will allow the company to divert investment and resources to cusotmer facing features including the network, service quality and development of new services.

Sprint retains full ownership and control of its network assets, and solely owns network strategy and investment decisions.

Customers will continue to work directly with Sprint employees as their primary contact, as Sprint retains full control of the customer experience, customer technical support and services review.

Sprint also retains technology and vendor selections.

Ericsson assumes responsibility for the day-to-day services, provisioning and maintenance for the Sprint-owned CDMA, iDEN and wireline networks.

Transferred Sprint employees will become part of Ericsson Services Inc., a wholly-owned Ericsson subsidiary based in Overland Park, KS, a move that retains jobs in the United States. No force reductions are currently contemplated as a result of this agreement.

Yankee Group analyst Camille Mendler says “the North American telecom market has finally cracked." Owning a network still provides strategic value, as do customer-facing operations, the move suggests. But network operations do not.

Mendler believes Sprint’s deal is a game changer. “Until today, North American telecom operators had proved unwilling to outsource network functions on such a large scale," she notes.

The deal provides support for the idea that, in the future, mobile networks will focus either on customer-facing retail operations, while others will focus on wholesale. Sprint's choice to focus on customer-facing operations is unaffected by the outsourcing. So far, none of the major U.S. mobile operators has decided to focus on wholesale, though executives in some other markets, such as Europe, seem more intrigued by the idea.

--Gary Kim

According to Atlantic, ICC has a monopoly over all LEC and pay-television operations in the USVI, and ICC makes sure they don't compete against each other.  Atlantic argues the only way to develop broadband infrastructure in the USVI is through inter-modal cable-telco operation.  Atlantic relies on ICC's own testimony before the PSC in the USVI to show that the current network offers no true broadband services and has fallen into such disrepair that it is held together with "scotch tape and baling wire."  Atlantic believes the only solution is to have the telco and cable TV operations compete against each other, and that can't happen unless they are independently owned.

Adding spice to the story, Atlantic recounts how ICC was forced into bankruptcy when tens of millions of dollars were siphoned from ICC by its former Chairman, Mr. Jeffrey Prosser, for personal uses, including houses, paintings, art, jewelry, wine, airplanes, cars, sports tickets, and antiques.  Atlantic questions whether the millions of dollars in annual FCC subsidies that ICC receives were caught in the "upstreaming" of funds to Prosser.  Atlantic notes that neither RTFC nor the PSC detected Prosser's massive extraction of operating funds from the ICC operations.

-- Bob Titsch

-- Danny Adams

That said, how many operating executives really believe attributes such as customer service actually are more important than price, once value is established?

Perhaps more should rethink what they believe to be true. Forrester Research asked nearly 4,600 consumers how they choose the companies they do business with. "Across all 12 industries we examined, good customer service was more important than low prices," says Bruce Temkin, Forrester Research analyst.

While customer service is a critical element across industries, Gen Y consumers (18 to 28) were the least enamored with good service, and Younger Boomers (43 to 52) were the most interested in low prices, Temkin notes.

When it comes to the difference between the need for customer service and the need for low prices, seven industries are more likely to be sensitive to service attributes. Among them: banks (31%), investment firms (26%), and health insurance plans (18%). In other words, though "lowest price" is seen as important, "good customer service" is relatively more important.

Four industries had the lowest spread:  TV service providers, airlines, credit card providers, and retailers. In those four industries, in other words, the relative importance of price was higher. In fact, says Timkin, retailers are "expected" to offer low prices. In these businesses, low price and customer service are relatively evenly ranked in importance.

Internet service and wireless service were in the middle: service is viewed as more important than when buying TV service.

One might question whether what people tell pollsters and what they do is congruent. In other words, people might say one attribute is important, but then act as though some other attribute was the key driver of behavior. Lots of telecom executives are likely to take the findings with a grain of salt.

But most of us probably can recite instances where poor customer service did, in fact, outweigh price, in our own purchasing of products and services. Perhaps the key take away is that both price and customer service quality must be within some acceptable range. But it is striking that in every industry studied, customer service was deemed more important than price.

That tends always to be the case for enterprise buyers. What is significant is that even consumers report similar attitudes.

-- Gary Kim

Likewise, nobody would argue that text communications are not equally valuable. Twitter use exploded in March 2009, for example. The number of visitors to Twitter.com jumped 131 percent in March to 9.3 million visitors, up from five million in February. And then there is email, text messaging and instant messaging, all of which are vital tools for most people. But, with the exception of SMS, few of these tools lend themselves to any traditional monetization method.

User-generated video and over-the-top music and content, likewise points to the same process in the content business.

That has most observers insisting that voice, communications and content are becoming commodity-style products that offer few opportunities for differentiation and profit margin. And it is hard to argue, at some level, with the observation.

The disappearance of AT&T and MCI Worldcom as independent entities provides evidence enough that, for most traditional service providers, "long distance is not a stand-alone business model."

That doesn't mean stand-alone long distance cannot be a viable business model, though, or that voice "inevitably" is a commodity. Consider Skype. It's current annual revenues are north of $550 million and executives think they can grow that to $1 billion by 2011 or so.

So the proper way to view matters is that stand-alone long distance is not an attractive or viable business for some contestants with high fixed costs. Given the right cost structure, it remains possible to operate as a stand-alone long distance provider.

But it is worth keeping in mind that when an executive says something cannot be done, what that really means is that "I cannot, with my cost structure, personnel or technology holdings, do that." Skype will be able to compete as a stand-alone long distance provider. To greater or lesser degrees, much the same can be said for calling card providers, conferencing services providers and others with an optimized cost structure.

Still, for facilities-based access providers, high fixed costs do mean that scope economies (multiple services, same pipe) are necessary to maintain an attractive business case. "Dumb pipe" (broadband access only) is unlikely to prove a viable long-term business model.

But it is a mistake to say that "nobody" can make a viable business case from voice, data communications, content or text. Over time, more applications will be created and provided by firms with lower fixed costs, different distribution channels (mostly using a Web browser interface) and use models.

Increasingly, the values voice and text communications provide are being disaggregated, creating numerous products that we used to associate with "phone service." Telephone numbers, devices, origination and termination, voice mail, speech-to-text, call distribution, dialing, conferencing and other features are "discrete" elements that can be packaged and sold in lots of different ways.

What remains to be seen are the ways a viable revenue ecosystem can be created and maintained under such circumstances. For most providers, reliance on any single feature or revenue stream (only voice, only long distance, only broadband access, only video) will prove relatively unattractive. So most of the attention has to shift to ways new partnerships can be leveraged to create lots of different revenue streams from lots of applications that have genuine value, even when it seems that value and "revenue model" are not direct.

Cablevision Systems offers its cable modem users "free" access to Wi-Fi hotspots in the New York metro area. But the revenue model is cable modem service. Email for many years was the "killer app" that drove Internet access subscriptions. Real-time services now provide the business driver for broadband access. Fleshing out broadband application models now is the next crucial test for access providers as "access" and "applications" increasingly are distinct business models.

In a real sense, the Apple iPhone has played that role for AT&T: Mobile Web applications and a compelling device experience have been the driver for connectivity subscriptions. So far, though, subscription activity has been driven to a large extent by user involvement with Facebook, Twitter and other social networking apps that are easier to use on an iPhone or other smart phones than on most other devices.

But that's just a start. At some point, access subscriptions will fail to drive continued revenue growth. Precisely what form all the new partnerships will take is at this point largely unknown. But they will happen.

At the same time, it bears noting: voice is not strictly speaking a "commodity." SIP trunking is a discrete voice app whose primary value is origination and termination. Conferencing is another discrete app. So are various other call management features. Different companies will leverage those features in different ways to create viable business models. The biggest mistake any firm can make is assuming IP-based voice is simply POTS sold at a lower price.

--Gary Kim

Matt Walker, Ovum principal analyst and author of the report, says “the financial market turmoil resulted in the acceleration of some deals, but uncertainty was the dominant factor. While this uncertainty lasts, there is incentive to sit and wait, until expectations and valuations stabilize. Preliminary analysis of 1Q09 results confirms this view, but finds activity picking up in some areas.”

Noting that telecom is a huge industry worldwide, with service revenues of roughly US$1.4 trillion in 2008, and network capex of $200 billion, Walker says it was inevitable that the industry be impacted by macroeconomic conditions. However, he adds, “Telco financial health is stronger than several years ago. The industry has a variety of funding mechanisms available, and it is still perceived as central to economic growth.” Further, in several large markets -- such as China, the U.S., Germany and Australia –- telecom players are receiving government support (e.g. direct subsidy, tax breaks, and so on) aimed at offsetting the recession’s impact on telecom’s fortunes.

Looking ahead, M&A activity is likely to pick up again in late 2009, with deals concentrated in emerging markets after a couple of large ones in the U.S. in 2008 (Verizon-Alltel and CenturyTel-Embarq). After a relatively quiet 2008, vendor M&A in 2009 will likely be more significant, as exemplified by the (non-telecom) acquisition of Sun by Oracle on April 20. Venture financing should be broadly consistent with 2008, when wireless, software/applications, and chips were the hottest segments, along with a smattering of deals in the optical, packet, and FTTx/IPTV area.

As for public offerings, as long as stock markets remain jittery, telcos and vendors will look to private placements and other vehicles for needed capital. Emerging markets may see more public offerings in 2009, as was the case in 2008, when the biggest public deals globally came from Turk Telecom ($2.0B IPO in May) and Zain Saudi Arabia ($1.9B in March).

For example, the administration proposes to let telecom companies establish fiber-optic and satellite links between the U.S. and Cuba, let U.S. carriers enter into roaming service agreements with the island's carriers, let U.S. satellite radio and television companies provide service in the country and allow people to donate consumer telecommunication devices to Cuba without a license.

Obviously, the Castro government needs to agree to issue licenses or permission before these changes can occur. But Cuba is a large country for the Caribbean so theoretically it has potential to make a nice new market. According to the International Telecommunications Union, only 11 percent of Cuba's population subscribes to telephone services, and only about 2 percent of the population subscribes to cellphone services.  And though 12 percent of the population uses the Internet, less than 1 percent subscribe to  broadband.

"Roaming might be a nice new option for Cubans, but using WiFi enabled mobile phones to bypass roaming and get the lowest possible international rates seems like the best option," says Danny Adams, partner with D.C. law firm Kelley Drye.

Carrier execs say that interest in long distance routes to Cuba has been increasing for months -- long before the Obama administration's recent announcement. Historically, it's been extremely difficult to get quality long distance routes to Cuba. Telecom Italia is the only carrier with a direct "white" route into the country and its wholesale rate hovers around 83 cents per minute. Numerous other carriers offer much cheaper "gray" routes, but service is spotty. Sometimes it can take up to 30 seconds before the call starts to ring (called "Post-dial ring"). In these scenarios various carriers could be passing the call through a dozen different IP switches before it finally connects and rings.

But if Cuba "plays" with the Obama administration in the cellular and satellite areas, long distance routes to the country could open up too. 

According to the latest ChangeWave survey of U.S. consumers, conducted January 5-9, there were signs that consumer spending may finally be stabilizing. While overall spending still looks terrible, ChangeWave notes, the 90-day outlook is not quite as "horrible" as it was in the December 2008 survey.

Fifty-seven percent of U.S. respondents said they'll spend less during the next 90 days than they did a year ago, but that's three points better than in the December survey. Another 13 percent said they'll spend more -- two points better than previously.

Observers watching intently for some sign of how the recession is affecting communications services have a major new data point. Verizon Communications has reported what happened in its fourth quarter, and revenue growth accelerated. There is lots more data required, but so far, the recession has not had a negative effect on Verizon.

In fact, Verizon Communications continued to grow sales of broadband, wireless and strategic business services in the fourth quarter 2008. Verizon's total operating revenues grew 3.4 percent in the fourth quarter 2008, increasing to $24.6 billion from $23.8 billion in the fourth quarter 2007.

After adjusting for the spinoff of non-strategic local exchange and related wireline business assets early in 2008, this represents an increase of 4.6 percent.

Wireless organic growth totaled 1.4 million net customer additions. Verizon Wireless also continued to have low churn of 1.35 percent churn among all customers, and 1.05 percent among the company's retail post-paid customers.

Average monthly revenue per customer increased for the 11th consecutive quarter. Total service ARPU of $51.72 was up 1.4 percent year over year, reflecting strong growth in total data ARPU, which was up 27.9 percent over the same period.

Verizon added 303,000 net new FiOS TV customers, compared with 226,000 in the fourth quarter 2007.

FiOS TV sales penetration (sales as a percentage of potential customers) increased to 20.8 percent, compared with 16.0 percent in the fourth quarter 2007. FiOS TV service was available for sale to 9.2 million premises by year-end 2008. This represented a 57 percent increase in the availability of FiOS TV - and, by extension, of "triple play" bundles of FiOS TV, Internet and voice services - since year-end 2007.

Verizon added 282,000 net new FiOS Internet customers, compared with 244,000 in the fourth quarter 2007.

FiOS Internet sales penetration increased to 24.9 percent, compared with 20.7 percent in the fourth quarter 2007. FiOS Internet was available for sale to nearly 10 million premises by year-end 2008.

Broadband and video revenues from consumer customers totaled nearly $1.2 billion in the fourth quarter 2008, representing year-over-year quarterly growth of 42.0 percent.

Growing revenue from broadband and video services drove consumer ARPU in legacy Verizon wireline markets (which excludes consumer markets served by the former MCI) to $68.46 for the fourth quarter 2008, a 14.3 percent increase compared with the fourth quarter 2007.

Verizon Telecom, which serves domestic consumer and small-business customers, and Verizon Business, which serves large-business and government customers worldwide, each had 2.3 percent year-over-year quarterly revenue declines, continuing the secular trend of voice line loss This was the smallest decrease in 12 quarters, however.

Total broadband connections were 8.7 million, a net increase of 214,000 over the third quarter 2008. This includes a decrease of 68,000 DSL-based Verizon High Speed Internet connections, which was more than offset by the increase in FiOS Internet customers. The 8.7 million is an increase of 8.2 percent year over year.

Broadband and TV products now account for more than 31 percent of consumer ARPU in legacy markets, compared with 22.7 percent in the fourth quarter 2007. The ARPU among FiOS customers continues to grow and is more than $133 per month.

Wireline data revenues, which represented 43.6 percent of total wireline revenues, were $5.2 billion in the fourth quarter 2008, an increase of 10.9 percent compared with the fourth quarter 2007.

That might one of the more-important developments. Where its wireless business had been anchored by voice, Verizon now has grown data to nearly 44 percent of total.

Respondents were also queried on their current impressions of the economy and, once again, while things look bad, they don't appear quite as awful as they did in December. About 12 percent said they think the economy will improve in the next 90 days, three points better than in December. About 56 percent said they think the economy will worsen during the next 90 days, but a significant 10 points better than the December low.

Other sentiment indicators also show some improvement, according to the study.

Some five percent said they are very satisfied with the current state of their personal finances, up one point from the record low in December, while another 39 percent said they're somewhat satisfied, up eight points.

Twenty-six percent said they are now more confident in the U.S. stock market than they were 90 days ago, 13 points better than previously. Only 31 percent said they're less confident, a 25-point improvement

The new data is important because the first step in the recovery is for a bottom to be reached. Changing sentiment is one such sign. In past recessions, peak unemployment claims have been an indicator as well, as significant layoffs are a lagging metric. Often, if not typically, the "bottom" is reached about 30 days after a month where "peak" layoffs occur.