This article originally appeared in the November 2010 issue of NGN.
What a difference a year makes.
2010 has seen some big moves by the federal government to address broadband accessibility; the introduction of at least one new iconic connected product; a continued shift to mobile communications; acceptance for on-demand services and pricing models; an expansion of video and social networking applications and uptake; and continued discussion about what all of the above means for service providers, particularly those that operate and own the underlying networks. At the same time, the worldwide economic problems remained top of mind for those in the communications industry and their customers this year, as they all continued to look for more cost-efficient ways of doing business.
Let’s a take a walk down memory lane.
The Broadband Stimulus
The federal government’s broadband stimulus effort – through which the Rural Utilities Service and the National Telecommunications Information Administration are to dole out something like $7.2 billion in an effort to make broadband connectivity more accessible and affordable to those that would otherwise find it out of reach – has been among the major focal points for the communications industry in 2010.
At first, many current or would-be network operators, community stakeholders and broadband gear suppliers were pretty excited about the prospect of the federal government handing out billions – and plenty of them still are.
The bad news was that the Federal Communications Commission, which helped orchestrate the broadband stimulus, introduced a fair amount of uncertainly around the program by tweaking deadlines and broadband definitions along the way. Worse yet was the fact that some operators may have delayed network investments while they waited to get word on their applications. Jason Smith, solutions marketing manager at packet optical networking supplier BTI Systems, is among those that refer to the broadband stimulus as a “de-stimulus.”
The good news is that RUS and NTIA hit the Sept. 30 deadline for announcing the final stimulus award winners (although Daniel Locklear, senior director of LTE solutions market at Alcatel-Lucent tells NGN Magazine that as of early October some companies were still submitting applications for funding). That means these network builds will soon commence, which is expected to create new jobs and other positive economic impacts. In fact, several of the award winners in the past few months have named suppliers like ADTRAN, Calix, Cyan and others, creating a stimulating effect on the broadband equipment front. It also means those that didn’t receive awards are now free to move forward with network investments as well, says Smith, adding that BTI Systems recently has seen an increase in purchase orders among this group.
The Wireless Wave
During discussions about the broadband stimulus and The National Broadband Plan, FCC Chairman Julius Genachowski repeatedly referred to the importance of wireless networks and mobility. This probably shouldn’t have come as a surprise, given the mobile data boom.
Joe Staples, chief marketing officer at Interactive Intelligence Inc., in a speech at the recent SocialCRM EXPO event at ITEXPO West, noted that the mobile web has seen 110 percent growth in the U.S. in the past year. In the first half of 2010, global mobile data bandwidth usage increased 68 percent, according to Allot (News - Alert) Communications, which reports that video streaming continues to be the fastest growing application type, with a 92 percent increase in the period.
The bandwidth demands on mobile networks are triggering several movements, including a move by regulators to make more spectrum available; a change in how wireless service providers charge for their services (at least in some cases); efforts to allow for optimization of wireless networks; and the creation of new, higher capacity, all-IP wireless networks.
To provide more spectrum to support the mobile data boom, the FCC this year issued an order to free up the unused TV spectrum known as white space. FCC Chairman Julius Genachowski said the initiative was “the first significant release of unlicensed spectrum in 25 years.”
The National Broadband Plan noted the importance of unlicensed spectrum in creating opportunities for new technologies to blossom and recommended that the commission complete the TV white spaces proceeding as expeditiously as possible.
Because white space signals travel at least three times further than transmissions via other unlicensed spectrum, coverage in this spectrum is strong. That apparently excites many big names in communications, including Hewlett-Packard, Intel, Microsoft and Motorola, which reportedly are all testing white space-related products. FCC Commissioner Robert McDowell (News - Alert) also commented that by making available white space spectrum , the commission would open the door to new competitive to existing broadband providers, which might help the commission avoid a big showdown on the net neutrality issue.
While that’s all well and good, not everybody is cheering about the white space decision. Broadcasters lobbied heavily against the FCC’s move to free the spectrum. And country singer Dolly Parton, who uses wireless microphones during her act, also famously came out against the effort early in the discussion.
While growth in mobile data is getting the FCC, wireless equipment and backhaul providers, and some content outfits all excited, it’s not necessarily good news for wireless network operators. That’s because it’s eating up network bandwidth at an unprecedented rate, which is not so great if you’re a network operator that sells all-you-can-eat connectivity.
That’s why, more and more, service providers are starting to reconsider how they package and price for mobile broadband services. For example, AT&T Wireless this year instituted usage-sensitive pricing on iPhones and iPads. Orange (News - Alert) and Vodafone have done the same in Europe. And Verizon Wireless indicated that it will sell data by the bucket on its new LTE networks.
The idea of moving customers from unlimited bandwidth to connectivity more targeted to their usage and particular application needs has been a long time coming, both on wireless and wireline networks. This year that started to happen.
The Move to 4G
Speaking of LTE, the technology has made some significant gains in 2010.
Verizon Wireless, the LTE poster child, expects to go live with LTE in as many as 30 major metropolitan areas by the end of this year. That’s up from its initial target.
While the Verizon Wireless effort is the most high-profile build, MetroPCS Communications grabbed headlines this fall when it was first to market with an LTE network launch. The company is now live in at least two markets – Dallas/Ft. Worth and Las Vegas – and expects to bring up additional LTE networks in its other markets in the coming months.
AT&T, meanwhile, has been involved in trials of LTE this year, and recently disclosed plans to launch LTE commercially. The company’s goal is to have 70 million LTE-enabled points of presence by the end of 2011, according to Locklear of Alcatel-Lucent, which is one of its suppliers.
Locklear adds that by the end of this year the world will have seen 20 LTE networks go commercial. However, initially only data services will be supported via LTE networks, says Locklear, while phones with 4G data and 3G voice and data are expected to hit the market next year.
Meanwhile, Clearwire is offering WiMAX-based wireless broadband services in a number of markets. It was first to market with 4G in the U.S., but recently the company indicated it will face some delays in completing its original 4G build.
Of course, LTE is expected to be a game changer not only because of the higher bandwidth it delivers, but also because it’s entirely based on IP technology and is expected to avail service provider networks to the web developer community on a whole new scale.
Network Management, Net Neutrality & Fair Use
Because both wireless and wireline networks are being hit hard by growing bandwidth requirements, network owners like the telcos and cablecos are pushing to retain control of their networks.
While net neutrality advocates want to make sure consumers and businesses are able to access the applications of their choice over the broadband connections for which they have already paid, network owners argue that if over-the-top application providers and end users who are bandwidth hogs can eat up mass quantities of network capacity, service quality will degrade for the rest of us and there will be little incentive for facilities-based providers to continue to invest in infrastructure.
Of course, this back and forth is old news. What’s new this year was what appeared to be a stronger push by the FCC to set rules around net neutrality, followed by some surprising new developments.
As the FCC went about its business of drawing up and presenting Congress with The National Broadband Plan – which addressed everything from how to define broadband, to cybersecurity, open networks and much more – a lawsuit was brewing.
Shortly after the plan’s presentation of the plan in March, the U.S. Court of Appeals for the District of Columbia Circuit ruled in Comcast's favor in a lawsuit the cable company filed against the FCC saying the agency lacks the authority to stop it from bandwidth throttling select applications (in this case, BitTorrent P2P traffic). That threw into question the FCC’s role in the whole net neutrality debate.
Then, something else interesting happened. Google and Verizon, which one would think would be on opposite sides of the net neutrality debate, joined forces this summer and presented what they called a policy framework on net neutrality.
In it, the communications giants talked a lot about ensuring consumers have access to all legal content on the Internet and the ability to use whatever applications and devices they want. It went on to disavow discriminatory networking practices, but talked about allowing for the creation and delivery of differentiated online services.
But, as we have seen so many times before with net neutrality, that only set off more heated debate from all sides about net neutrality and fair use. The debate continues.
Cloud, SaaS, On-Demand Services
Of course another key trend of 2010 was the rise of on-demand services and resources.
The appeal of these services is obvious in an economic environment in which everyone is trying to control their costs by paying only for what they use and eliminating new capital investments whenever possible.
A recent study by CompTIA indicates that 72 percent of organizations plan to expand the number and types of cloud computing services they use over the next 12 months. Eight-five of the survey respondents indicated their interest in these services due to a desire to reduce capital expenditures. About the same number indicated interest in driving down costs. And 81 percent said the new services would allow them to add capabilities not available in current IT models.
“Clearly there is growing momentum behind cloud computing, evidenced by climbing adoption rates and greater awareness,” says Carolyn April, director of industry analysis at CompTIA. “But cloud computing adoption is still nascent. The year ahead will be one of evaluation, trial and error and, most importantly, opportunity as the market sorts through the role IT channel companies will play, best business models, sales and marketing strategies and most relevant technologies.”
Nigel Williams, Level 3’s senior vice president of sales, in his 4GWE/ITEXPO keynote speech last month said the carrier is hearing IT managers at enterprises ask for flexible pricing models, resource pooling, on-demand services, improved SLAs, elastic capacity, and lower costs, he said.
“It’s basically coming back down to the cloud,” he added, referring to what all of the above have in common.
Wireless Backhaul & Fiber Optic Investment
Circling back to the wireless discussion, another key area of focus in communications this year has been the frenzy of activity among service providers and equipment suppliers that want to outfit 4G network builders with backhaul solutions. Indeed, wireless backhaul is among the key applications that is driving new investment by existing and new fiber optic companies, as well as companies using other technologies such as microwave.
For example, Allied Fiber, the new venture of Hunter Newby (who founded and later sold Telx), is creating a dark fiber network in the U.S. Part of Allied Fiber’s plan is to offer wireless network operators and their wholesale backhaul suppliers both dark fiber, and space on radio towers along its fiber routes, which run along Norfolk Southern rights of way. Those rights of way already are dotted with towers, which Allied Fiber will help the railroad lease to interested parties.
Benjamin Edmond, executive vice president of sales and marketing at FiberLight, which offers lit services and dark fiber over a network that spans from Baltimore to Miami to Texas, says there’s been a lot of investment in fiber over the last 18 months or so due to wireless backhaul requirements, the government moving from TDM to Ethernet, the video boom, growing storage requirements, and the rise of cloud computing and software as a service.
The M&A Revival
Speaking of fiber networks, this is one of the hot areas for merger and acquisition activity in recent months.
September alone saw a lot of action on this front. At the COMPTEL show in September, PAETEC announced plans to buy Cavalier. That same month Massachusetts-based metro fiber and bandwidth provider Lightower Fiber Networks announced it would buy New York-based dark fiber network builder Lexent Metro Connect. Around the same time Lightower completed its previously announced acquisition of Veroxity Technology Partners, a provider of fiber-based data and Internet connectivity. September also marked the close of a three-way merger of MegaPath, Covad (News - Alert) and Speakeasy.
A month earlier broadband wireless service providers Airband and Sparkplug announced their plans to merge. Meanwhile, Windstream revealed plans to snap up Q-Comm subsidiaries Kentucky Data Link and Norlight. The summer also saw Windstream close its acquisition of Iowa Telecom; that followed Windstream’s close of its NuVox purchase in February and of its Lexcom buy in December.
Of course, all these deals pale in comparison to CenturyLink’s plans to buy Qwest in a $10.6 billion stock swap, which will place the once little-known telco in the No. 3 U.S. telco position, behind AT&T and Verizon. CenturyLink (previously CenturyTel (News - Alert)) announced this acquisition in April of this year.
“Within the fiber space the bulk of the M&A, or a large portion of it, has happened,” Gillis S. Cashman, general partner at M/C Venture Partners, which has created and invested in a wide variety of network operators including Lexcent, LightTower, Veroxity and Zayo Group. “Over 40 to 50 companies have been acquired over the last four years.”
What we’re seeing more of now, and can expect more of in the future, is network operators expanding their business through “horizontal acquisitions” that take them into new, complementary businesses, says Cashman. For example, he says, Cincinnati Bell recently bought data center outfit CyrusOne.
“The biggest development in 2010 is the telecommunications industry itself – it’s recession-proof armor,” Larry Fishelson, co-founder & COO of DynaLink Communications, says. “As the whole economy continues to crash, telecom thrives. Carlos Slim of Telmex is named again as the world’s richest man. CenturyLink aquired Qwest, PAETEC acquired Cavalier – all good business consolidations of the networks, which will drive better technology and flow into more business, which in turn will flow the whole cycle.
“Telecom is trickle-down economics at its best and since it’s unavoidable like death and taxes, it will just continue to reinvent itself,” he adds. “And in a year like 2010, it proved that.”
Edited by Stefania Viscusi