A bit more than a year after Nortel announced its landmark deal with Verizon, the reality is that the RBOC only replaced between 5 to 10 of its Class 5 switches, which represents less than 1% of its total Class 5 switches in service (2,500).  This result is not surprising.  I recommended a lot of caution right from the early going.  I recall using a hockey game analogy in an interview I had at about the same time last year.  It was just the first period, and Nortel had just scored a goal, I said.  But it was still early. 

Also, while a couple of legacy Lucent switches were replaced, at such a low pace, it would seem that Lucent was able to just about maintain its share of the Verizon Class 5 installed base, with the other replacements being older Nortel DMS switches.  Since Nortel's exclusivity expires in July of this year, Lucent will still be given a few chances to get a significant portion of the replacement opportunity.  This just goes to show that, despite the initial Nortel win, it is still very hard to replace the incumbent, and in the worst case scenario, Lucent will still be the secondary supplier.  So expect that the months following July will be a good acid test for the recently acquired Telica softswitch (company acquired on May 2004 for $295 million).

Verizon's own Class 5 VoIP plan called for a an agressive 5 to 6 year deployment, but right now, a more likely scenario would be a 5 to 10 year exercise, with a rough annual spend of $100 to $200 million.  But that is assuming that Verizon will stick to its original allocated capex for class 5 switch replacement of roughly $1 billion.  And that other high priority items (e.g. FTTH project, IMS, etc.) will not draw more resources.  Those are two big ifs.  Nothing but a big dose of reality for those engaged in a bit of "irrational exuberance". 

With all the talk about how the RBOCs should start building out fiber-based video networks instead of relying on the satellite approach, one would think that the fiber deployments should be happening in full force in 2005. Verizon (NYSE:VZ) is favoring a FTTP (Fiber To The Premises) strategy, whereas SBC (NYSE:SBC) and others are more inclined to a FTTN (Fiber To The Node) approach.

No doubt that FTTN is the "quick fix" method, being faster and cheaper, however there are risks (i.e. is there sufficient bandwidth for when the loop length exceeds a certain threshold, or for HDTV). Also, the standards issues persist (VDSL or ADSL2+?) and then, there is also the question of the cost and availability of the set top boxes. 

FTTP is slower, and entails a higher upfront cost, but it should give Verizon the best network asset among its peers.  But the buildout will be slow, as Verizon plans to launch FTTH to 10 million homes over the next five years. 

SBC's Project Lightspeed is highly ambitious in terms of their video share gain assumptions, which call for a higher portion of the pie than what DBS players get today.  But their roll-out pace, opex and capex estimates presented in November of last year look reasonable.  However, despite the fact that these numbers were well received by Wall Street, some naysayers still point to past experiences as the best predictor of how long this deployment will take (who remembers Project Pronto?).

Another factor that might definitely dampen the RBOCs pace of fiber deployment is the potential SBC and AT&T merger.  Om Malik highlights a Merrill Lynch report that should the deal close, US wireline CAPEX might decrease by 10% (or roughly US$ 2 billion).  The SBC and AT&T were planning to spend about $7 billion of wireline capex this year, but a combined organization would mean a shrinkage of 30% (or $2.1 billion).  Of course, some of this reduction might also trickle down to Project Lightspeed, as SBC focuses on integrating the AT&T network.  In such a scenario, it remains to be seen whether or not Verizon, after seeing a combined SBC/AT&T spending less, will also follow suit.

Regardless, the MSOs will have a significant time-to-market advantage in bundling voice service versus the RBOCs in bundling video with their fiber buildouts.

Looks like Jeff Pulver has done it again.  After his very first FWD (Free World Dialup) back in the mid 90's (with Vocaltec's Internet Phone, a program which I was lucky to get a free license for, as a thank you for being one of the original beta testers), his second one FWD launched in 2002 (courtesy of a SIP registrar), Jeff now has topped himself again by having a new service called Bellster (maybe a wordplay meaning how to get Bell service the Napster way - i.e. for free).

Bellster is essentially a P2P (Peer To Peer) service that enables users to share their phone lines to make "free" calls anywhere within the reach of the global PSTN network.  The system does not provide actual PSTN access, but it assists a user to find other users sharing their lines via Asterisk (please see photo to the left), an open-source PBX (believe it or not, for an open source PBX, Asterisk has quite a decent list of features that is growing over time - it has been impressive to see this grow over time). 

Callers can call any phone number in the world by sending the call via Internet to a shared phone line near the person that is being called.  That is pretty similar to the very first FWD, except for certain rules.  The system is setup based on a "social rules arbitrage" code.  In other words, users have to earn credits before being able to make these free calls, and these credits are directly proportional to the amount and duration of calls that users allow to move over their private lines.  Jeff Pulver already listed in this blog the countries that are currently supported by Bellster, and the list includes the US, Canada, Russia, France, Italy, the UK, Germany, Argentina and Brazil, among others.

So what is the catch?  For one, the investment in the Asterisk PBX ($1,030, quite a steep initial investment to make supposedly "free" calls - a payback period of more than 20 months for someone making $50 worth of calls per month).  The second possible deterrent is privacy.  Because the call goes through the Internet, there could be very little in the way of assurances of a secure call.  Hence, security could be a major concern.  But still, this is cutting edge in that calls can be made from a PC to a phone anywhere else in the world.  It is also a service that is growing quite fast, with the recent tally showing 22 countries available and 487 nodes registered across them.

Update (26/01): Another issue that I forgot to mention is the cost of local calls in some regions.  For instance, in South America and Europe, each local call costs (taking Brazil as an example, each local call during business hours costs an "impulse" for the first few minutes, and then additional ones after that, much like a pay phone in the US; the story changes during the evenings and weekends when each call is one impulse, no matter how long it is).  These costs would be billed to the local user, so obviously there is an imbalance there versus in North America (US and Canada), where users can make unlimitted local calls paying the same monthly flat fee.  That said, on the plus side, the receiving end does not need to have a computer or any broadband access (in case someone wants to call their grandma who is not a computer user).

It came as a surprise to some, but FCC Chairman Michael Powell has called it quits, announcing his resignation from the post this past Friday. I had been made aware of this event late Thursday night, but was under a "friendly NDA" from one of my insider sources and Friday at 6:43 AM, the Wall Street Journal was the first to break the news, when one could see the following story on the online version (requires a subscription).  "You read it here first," the story read, "FCC Chairman Michael Powell will resign today."  Here are a few other interesting insights from Jeff Pulver, Om Malik, and The Economist. 

Undoubtedly, VoIP is losing one of its biggest allies, who fought innumerous battles inside and outside the Beltway to sustain the free market concept, and recognizing its powers over politics, centralized planning or regulation.  Powell saw the benefits of allowing a nascent VoIP industry a chance to grow, instead of killing it before it was born, and he deserves a lot of credit for that, particularly considering his stance was new and refreshing for someone representing a regulatory body such as the FCC.

There are a lot of folks rumored to be in the running to replace Powell, as reported in Light Reading or Greg Galitzine's TMCNet VoIP blog.  Regardless of who replaces him, he will be really missed.  I certainly hope that Powell's successor will continue following his consumer empowerment steps, and recognizing the following freedoms (so eloquently written in Jeff Pulver's blog entry):

• the right to access the content and applications of their choice
• the right to attach the personal devices of their choice
• the right to service plan information

There have been quite a few rumors about a possible takeover of Canadian high-tech star Research In Motion (Nasdaq:RIMM).  RIM, the makers of the popular Blackberry device, has been rumored to be taken, due to the success of the product, which has reached an impressive installed base of over 2 million users.  In a Goldman Sachs report, RIM was called "a very attractive acquisition", with possible suitors such as Nokia or Motorola being mentioned.  The new Blackberry 7100 series is being regarded as one of the key catalysts for growth this year, because of its form factor (looks more like a cell phone, it is slim, has a color display and only weighs 122 grams).  RIM has been relying on licensing its software to rival hardware makers in order to compete against the likes of Extended Systems or Good Technology.  Goldman believes RIM will be able to add between 20 to 30 new carrier customers this year.

Cisco (Nasdaq:CSCO) confirmed rumors of making another acquisition in the WLAN space after making public this past Tuesday its acquisition of startup Airespace.  This is yet another company that Cisco has purchased in this space (other notables in the past included Aironet, bought in 1999, and Linksys, acquired in 2003).  Aironet solidified Cisco's entrance in the enterprise WLAN arena, while Linksys gave the San Jose-based company a solid position in the consumer/SOHO WLAN market.  However, the acquisition of Airespace definitely indicates that Cisco finally turned the page on the "fat" AP (Access Point) model (the architecture used by its Aironet solution), and the company seems to now be finally ready to embrace the centralized WLAN switch architecture which has become the industry standard.

The rationale for the new "thin" AP approach is the centralization of the network management function, responsible for tasks such as compensation for failing APs, surveillance of possible rogue access points, load balancing of the traffic between AP, and other functions such as authentication and encryption. Another consideration was that centralizing these functions at the switch translates into cost savings for enterprises deploying large, ubiquitous WLANs.

The key developments to watch following the deal are:

1- Disruption in the WLAN plans of Airespace OEM partners (including Alcatel, NEC and Nortel): we have seen the same disruption before in the UM space, when Cisco bought the Unity portion of Active Voice, and the havoc that caused to Unity OEM partners such as Alcatel and Siemens.

2- Impact to the Cisco product lineup: early indications are that Cisco will continue supporting its newer WLAN switch (SWAN strategy with the WLSM blade for the Catalyst switches) and the Airespace product lines.  But the latter solution is much broader and easier to use.

3- With Siemens' acquisition of Chantry Networks late last year and Cisco's purchase of Airespace, who is next?  The WLAN space still has a few innovative startup players that are left, some of which could be potential targets, including the like of Aruba Networks, Meru Networks, Strix Systems, and Trapeze Networks.  Could one of them be snapped up by any of the Cisco rivals that had partnered with Airespace in the past?  If so, what would be the multiples involved?  Stay tuned... there will be more acquisitions in this space happening this year.

4- Other ramifications: Om Malik points out something interesting in his blog, namely that Airespace's relationship with PoE (Power over Ethernet) mind share leader PowerDsine might finally help the Israeli company to establish stronger ties with Cisco.

The National Post had a good editorial today, peppered with some interesting comments about the cellular service gap between the U.S. and Canada. Surely, the wireline story this side of the border is good - here in Canada we enjoy good, reliable service at very reasonable rates.  But on the wireless front, the story is totally different.  Currently, we only have three options as far as mobile operators are concerned: Bell Mobility (NYSE:BCE), Rogers Wireless (NYSE:RCN) and Telus (NYSE:TU).  

The editorial made some fine points (I suspect that both techie reporters from the National Post - Mark Evans and Kevin Restivo contributed to the article).  One of the main themes was the fact that the Canadian wireless market is in fact more of an oligopoly in comparison to the highly competitive U.S. mobile communications environment.  One of the reasons mentioned was the fact that Canada is in fact a small market, so the subscribers up here do not benefit from the highly competitive pressures of other markets such as the U.S., Europe and Asia/Pacific.  As a result, features are lacking and prices tend to be higher. 

One example that I can mention is voice mail: all major U.S. wireless operators offer voice mail for free for any customer signing a two or three year plan.  By contrast, in Canada, all long-term deals from Bell, Telus or Rogers only offer free voice mail for a few months, and after that, users have to pay a monthly fee for the service (usually in the $3 to $4 range). 

The article's example is pretty compelling - Cingular Wireless' offering of 1,000 "anytime" minutes for US$39.99 a month, including long-distance, within the continental U.S. simply cannot be matched in Canada, with the closest deal being $35 per month for 310 local minutes during peak business hours and unlimited evening and weekend calling, with extra charges applying for long distance. 

Other differences in the Canadian versus U.S. plans include billing (per minute versus per second billing) and the lack of "rollover" minutes (in the U.S. unused minutes from one month could be added to the next month).  Another factor that reduces the competitive pressures in Canada is the lack of Wireless Number Portability (WNP).  Americans can switch their mobile carriers without needing to change their cellular numbers.  Canadian operators, fearing that WNP would allow subscribers to lower their fees by playing one company off against others, have thus far not offered this important feature.  

From my own perspective, I can also add a few insights on this subject.  First, Rogers' acquisition of Microcell effectively took out the most price competitive offering in the marketplace.  Rogers (which beat out Telus on that acquisition) claims that it will keep the Fido brand, but obviously, it will not keep the Fido prices (note that the CP story was picked up by the Telus site).  So the only other alternative player that might offer slightly more competitive prices could potentially be Virgin Mobile, although relying on the Bell network might leave Virgin little room to maneuver its price.

Second, from my personal experience, it seems that Canadian operators seem to offer new customers better deals than their existing ones - which is interesting, given the low churn rates of our wireless industry.  Case in point: my own contract with Bell Mobility recently expired, and I had gotten a very tempting offer from Rogers, but in the end, after some negotiating and "social engineering" with the Bell call center agent, she matched the deal and I stayed with Bell (the tie breaker being the "one bill" bundle).  Contract expiry time seems to be the only time when subscribers get a bit of leverage to negotiate better deals.  But VM still costs me an extra $4 per month...

So the Sprint (NYSE:FON) and Nextel (Nasdaq:NXTL) merger was concluded after all the speculation and some naysayers claiming that elements such as the disparate networks of both operators would make a fusion practically impossible.  The new merged company will have about 40 million subscribers, compared to 47 million subs from Cingular, the industry leader.  In the deal (called "a merger of equals"), Sprint (the number 3 wireless operator) is purchasing Nextel (the number 5 wireless carrier) in exchange for stock and cash.

As part of the fallout of the deal, there has been some speculation that Motorola (NYSE:MOT) would lose its privileged monopoly status with Nextel.  This is because Sprint's 20.1 million customers rely on CDMA technology, whereas Nextel's 15.3 million subscribers belong to iDEN (Integrated Digital Enhanced Network), a network based on Motorola's digital radio technology.

However, Sprint Nextel management claimed that it plans to continue investing in the iDEN network through 2007. Therefore, based on that, there does not seem to be likely for there to be an impact to Moto's short term bottom line, particularly given the fact that the deal is not expected to be finalized at least until late 2005. Moreover, there is the push to provide dual-mode iDEN/EV-DO phones to the new company.  Despite that, the margins for these dual mode phones are not expected to be as attractive, particularly due to the CDMA royalties on the handsets and the high level of complexity in such dual mode devices. 

Motorola will have a challenge in trying to get additional CDMA cell phone business at Sprint.  For one thing, the competition will be tough: Samsung and Sanyo have a good penetration at Sprint, whereas LG is apparently the only vendor that seems to be gaining some better traction. 

Last week, the U.S. Supreme Court agreed to review an Appeals Court ruling that can potentially force cable companies to give third-party ISPs access to their networks.  In October of 2003, the U.S. Court of Appeals for the 9th Circuit in San Francisco held that MSOs should allow competing Internet Service Providers on their broadband networks.  This ruling went against the FCC opinion made public in March 2002 - namely, that cable operators should not be regulated as telecom carriers, since High Speed Internet (HSI) over cable was just an "information service" that is different than a telecom service.

As a result of the FCC's classification, the MSOs would not be forced to share their networks with other ISPs (an obligation that they would need to comply with should HSI be ruled a "telecommunications service").  That was the de-facto standard until Brand X, a Santa Monica ISP challenged the FCC view in court, which eventually lead to the appeals court decision last October. 

The FCC and NCTA were granted a stay of the court decision pending a request of the Supreme Court to hear the case.  MSOs have in fact resisted the telecom service notion of "open access" for a long time, claiming that it would create a lot of constraints to the industry due to new regulation, and create technical issues. 

One interesting point about this case is that the courts often seek the advice of expert agencies when pondering upon complex policy nuances such as the current telecom versus information service debate.  But the Appeals Court in San Francisco chose its own interpretation rather than deferring the decision to the FCC. 

It will be interesting to see how the Supreme Court will rule - just because it agreed to review the case, that does not imply that it cannot remand the case to the FCC for further clarification.  The FCC has been deliberating on the regulatory issue of how to classify VoIP for years, and thus far, it chose a rather friendly stance, in order to help the industry flourish.  The oral arguments are set to begin on March 23rd, 2005, with a ruling anticipated before the Supreme Court recess in June.

Of course no sooner than the issue of Philadelphia's mega-WLAN deployment was discussed here, Verizon changed its initial position in support of the controversial House Bill 30, and allowed the project to go through (at least for Philly).  The bottom line was that HB 30 was still signed, and the implication of that is that ILECs such as Verizon would have the right to keep local governments from setting up paid services like Philadelphia after January 1st, 2006.

Philly sought assurances from Verizon that the carrier would not fight its WiFi project in the event that its in-service date would not meet the requirements of HB 30.  There are indications that the city believes it will complete the $7-10 million deployment only by June of 2006.  So what's the bottom line?  Other cities in Pennsylvania will only be able to deploy a similar service until the first day of 2006.  After that, the ILEC will get the first rights of refusal (in other words, the local government will have to offer the ILEC the right to provide the service).  This bill will not affect free services.

It is laudable that Verizon allowed the Philly deployment to go through.  But the issue still is that the RBOC will have a first hand say (after the start of 2006) about which service gets deployed in each municipality from its ILEC region.  The fundamental question then becomes: will this law set a precedent that will influence similar projects in cities across the U.S.?

Amidst the flurry of announcements about the acceleration of Project Lightspeed, the availability of residential VoIP services and the IPTV deal with Microsoft, SBC also publicized its plans about a new offering geared towards VoIP service providers.  Namely, in a filing made on November 24th, SBC made the FCC aware of its TIPToP (True IP to PSTN) service, which enables VoIP providers to connect IP traffic to circuit-switched network through a specially designed interface

This last announcement did not go unnoticed by folks like Jeff Pulver, Om Malik, or groups such as the Internet Innovation Alliance.  So what's the issue?  Well, FCC Chairman Michael Powell, who is known for his VoIP friendly stance, stated:

"Should we conclude that this tariff is being used to justify the imposition of traditional tariffed access charges on VoIP providers or to discriminate against SBC's competitors, the commission will take appropriate action."

Powell already has three decisions to make related to charges applicable to VoIP services.  One of the matters to be resolved is related to intercarrier compensation.  He remains committed to ensuring the commission avoids any action that might slow down the "IP services revolution". 

Even though SBC still has not made the tariff public, there is some concern that offerings such as TIPToP might block some competitors from using the tandem interconnection altogether - making it not a viable option.  These tandem connections allow the LECs (Local Exchange Carriers) to connect with each other.  Some players such as Vonage go through CLECs to tap into the RBOC networks.

SBC is claiming that TIPToP is a voluntary product that should not impact the FCC's ruling on intercarrier payments, and that it has already gotten some interest in the offering.  BellSouth (NYSE:BLS) has already been promoting a similar service since May of 2003 (although BellSouth's service converts the VoIP call into signaling traditional phone networks understand, a more complicated and costly process than what is provided by SBC), whereas Verizon (NYSE:VZ) offers a nationwide VoIP service, but it requires customers to maintain their local main lines with the company, marketing the service as a second-line replacement.

Soon, we will find out where Powell will draw the line.  The key issue is that even as a "voluntary" service, TIPToP can potentially become a back-door way to impose the access charges that were initially rejected by the FCC.

Business Week had an interesting article today on the advent of XORP (the eXtensible Open Router Platform).  The concept is simple: provide enterprises cheaper and more flexible routers built on commodity hardware and open-source software.  The cheaper hardware comes from microprocessor vendors such as Intel (Nasdaq:INTC), whereas the software would be open-source.  The project has the backing of players such as Microsoft (Nasdaq:MSFT) and the NSF (National Science Foundation).  The first release of XORP came out in July, and more are expected in the future. 

Of course, this is still very much a work in progress, which at this point in time is still far from posing a threat to other router vendors such as Cisco, Extreme or Foundry.  Also, this is not the first attempt to create a software-based router based on open-source code.  But the backing of above-mentioned players lends some level of credibility to this work.  Perhaps another validation comes from the fact that nowadays, even Cisco has a line of low-priced networking gear based on Linux, that targets the pragmatic, cost conscious consumer.

But ultimately, the appeal of XORP is not only the lower cost, but also the level of customization that it empowers end-users with.  These end-users can configure the software to suit their own particular needs and/or applications.  Not only that, the network routing can be embedded as software inside a server or other devices.   

Back in September, Philadelphia's WiFi plans were discussed here. The ambitious project called for turning the city's entire main core of 135 square miles into the world's largest wireless Internet hot spot.  The plan was to offer inexpensive wireless Internet as a low-cost municipal service, charging end-users less than what is currently charged for DSL or cable broadband. That announcement generated a lot of optimism, since it epitomized the good that a forward-thinking government can deliver to its citizens.

Unfortunately, that did not initially sit well with the commercial interests of the local incumbent phone company, Verizon Communications Inc. (NYSE:VZ).  The RBOC did back House Bill 30 (HB30), a measure that would curb the ability of city governments to provide high-speed Internet access for a fee, effectively making providing a subsidized low-cost service illegal. High tech enthusiasts, activists and users at large are urging legislators and Gov. Rendell to postpone that bill's passage, or perhaps even kill it outright. Governor Rendell has until Nov. 30 to veto the bill or sign it into law.

For that matter, Verizon was not alone in trying to impede these types of deployments.  Other regional and long-distance phone companies (selling broadband Internet to consumers and businesses) have recently increased their efforts to quash similar creative municipal wireless initiatives, in locations such as San Francisco, Chaska (Minn.) and St. Cloud (Fla.).  Verizon has changed its attitude since coming out in support of HB30 and now states unequivocally that it will not block Philadelphia's WiFi plans.

Despite that, the marketplace consensus is that the RBOCs, IXCs and other broadband service providers are crying foul because they argue that a city can raise money via taxes, while a private company must pay interest on borrowed capital.  In the meantime, consumer advocates are claiming that cheap WiFi services fill a void that the operators either cannot or simply have no intention to deliver.  Philly's CIO (Dinah Neff), claims that Philadelphia currently ranks 33rd in the US in terms of availability of wired or wireless connections (less than 60 percent of the city's neighborhoods have the option of subscribing to broadband, either DSL or cable).

The bottom line is that the City of Brotherly Love can still deploy its network (according to this article), as long as it can be operational by January 1, 2006 (the city originally hoped for an in-service date of June 2006). 

But ultimately, the government will have the final say.  If the U.S. is to accelerate its broadband penetration and catch up to leaders such as Korea and Japan, more proactive measures that encourage these types of municipal initiatives are required.  And bills such as HB30 should be shot down, because having a legislature overturn a municipality's ambitious "broadband for all" plan - just for the benefit of a few service providers - does not make sense at all.

Note: Another couple of good articles on the same thread can be found here (another good insight from MuniWireless.com) and here (WSJ article, so password is required).

There have not been too many positives for Nortel's stock lately, whose performance has been plagued by the company's ability to get its financial restatements done in a timely fashion.  Because of the delays in reporting the results, Nortel (NYSE:NT) stock has been downgraded by the likes of Prudential, Goldman Sachs, and CIBC World Markets, among others.  

For most shareholders, the delay in the restatements has been an unfortunate development, particularly now that the company is making positive strides on the technology side of the equation.  For instance, in VoIP, Nortel has a leadership position in the Class 5 softswitching market, as reported on Light Reading.  Nortel has also a strong position in the wireless market, having been on the short list for many RFPs for CDMA and UMTS tenders.  Despite all the accounting woes, the company still is able to be at the forefront of cutting edge technologies, such as mesh networking.  And the enterprise IP PBX opportunity should be also a positive development, as the existing installed base begins to mature and starts transitioning from TDM to IP (Nortel has a substantial installed base of TDM equipment - Meridian PBXs and Norstar key systems).

Still, all this progress is not as relevant now, as the company focuses in delivering its results before the end of the year.  The bookkeeping blunders need to end in order for Nortel to avoid the unthinkable: delisting.  For instance, the NYSE listing can come up for formal review unless the vendor can file the restatements by year-end.  The company is working diligently in meeting that deadline.  Mark Evans, the technology reporter for The National Post, found the following gem (John Manley, a board member, offered the following comments on the accounting efforts):

Nortel shareholders hope that John is right and that this time around, all the numbers will be OK.  In the meantime, there was some good news this week.  Nortel claimed (following discussion with the Office of the Chief Accountant at the SEC) that it will not change its accounting treatment for optical product sales. This is good news, since it might be a clue that the restatements will not go back to the years before 2001.  Hence, it could also mean a higher likelihood that the 2001-2003 numbers will be filed within the next six weeks.  The other piece of good news is that Nortel confirmed what some Wall Street analyst firms (such as Solomon Smith Barney) already suspected to be the case: the NYSE will not begin a delisting review process until after December 30th, and Nortel would likely have an additional three month grace period.

So, in conclusion, Nortel would likely not be delisted (in a worst case scenario) until April 1, 2005. Right now, it looks more likely that NT will file at the latest by January 2005, so it should be able to avoid the bleak delisting scenario. All in all, the probability of such an event was decreased with this week's news. Hopefully, after the restatement becomes a reality, past accounting practices will no longer overhang the stock, and investors will finally be able to focus on the company's fundamentals, technology and market performance.

Broadcom (Nasdaq:BRCM) has introduced a new line of 802.11 chipsets geared towards increasing the range of WiFi networks by as much as 50 percent.  The new BroadRange 54g chips are enhanced with the company's BroadRange technology, which utilizes advanced digital signal processing techniques to deliver the highest receive sensitivity of any 802.11g chipset on the market. The general rule of thumb for WLLAN systems is that as the wireless endpoint (PDA, laptop, 802.11 handset) moves away from the AP (Access Point), the transmission worsens.  Hence, the WLAN system has to transmit at a lower bit rate to compensate for that.  With the BroadRange chips, the connection does not degrade as quickly with the increase in distance, and hence, higher throughputs can be achieved at longer distances away from APs.  Another important new feature supported by BroadRange is lower power consumption (as little as 9 mW in idle mode). 

As if users did not have enough worries about viruses hitting their PCs (whether at home or at work), the latest Trojan hit mobile handsets running Symbian-based OS.  The latest piece of malicious code has been dubbed "Skulls" by the anti-virus experts, and comes disguised as a theme manager for Nokia phones in the Symbian Installation Format, such as the 7610.   The virus kills off system applications and then replaces their icons with skull images.

But Skulls is not alone in Trojans creating havoc for cell phone users.  A program called Delf, was used in Russia to infect PCs so that spam could be sent to mobile users across Russia.  Similar viruses have been written to attempt to infect devices such as PDAs running on Windows CE.  Hackers will be increasingly focusing on creating viruses that can infect mobile handsets.   

Three years after spinning off its mmO2 subsidiary, BT (NYSE:BT) launched a new mobile service. The MVNO service, dubbed BT Mobile, offers a range of enterprise mobile services. The introduction is part of the company's new network agreement with Vodafone. BT Mobile will therefore act as "virtual network provider" with its customers' calls being carried over Vodafone's network.

The new agreement should supercede any prior arrangements, including former deals with mmO2 (allowing the telco to offer BT enterprise customers airtime on the O2 network) and T-Mobile (a deal geared towards consumer subscribers).    The 305 k existing wireless customers will be transferred to the new BT Mobile service within the next few months.  There are plans for plans for a combined mobile and fixed-line phone service.  BT also announced its plans to hold a wireless broadband WiMAX trial sometime next year.

Satellite radio has been getting quite a lot of press lately, particularly after radio celebrity "shock jock" Howard Stern signed a deal in October with Sirius Satellite Radio (Nasdaq:SIRI), one of two satellite radio service providers.  Many Wall Street analysts feel that Sirius was able to overcome some problems and catch up to its competitor XM Satellite Radio (Nasdaq:XMSR).  Sirius has attained more than 700,000 subscribers (representing roughly a 20% market share) and relies mainly on two distribution channels: automotive OEMs (BMW, Daimler Chrysler and Ford) and aftermarket (via plug-and-play radios sold via Best Buy, Circuit City and Radio Shack).  There are some OEMs that are nonexclusive (e.g. Nissan and Toyota), and those are expected to have a 50/50 split between XM and Sirius.

This week's announcement that Mel Karmazin will take over as the new CEO of Sirius (with the current CEO Joseph Clayton becoming the Chairman of the Board) has been viewed very positively by the Street.  The optimism is due to Mr. Karmazin's extensive operating experience in the media industry (including his recent tenure as President and COO of Viacom for the past four years, his years at CBS, where he played a key role in the TV network's turnaround and his role at Infinity Broadcasting). Karmazin represents a great coup for Sirius, because it instantly makes a positive impact on the depth, quality and credibility of the company's management team. Moreover, he has a great reputation as a strong manager with a tight focus on cost controls, which could improve Sirius' financial discipline as it relates to advertising, distribution and programming deals.

More about the satellite radio industry:  many observers expect satellite radio will eventually be viewed as a traditional duopolistic market (with Sirius and XM as the two players). This is the prevalent thinking for the time being, because the FCC is unlikely to allocate additional spectrum for new entrants. Moreover, it would be very difficult for a new entrant to obtain funding, given the uneven history of the existing players and the long-term exclusive distribution contracts that XM and Sirius have signed.

Sirius and XM will be competing for talent both against each other and non-satellite radio operators. Sirius paid top dollar to get NFL rights and sign Howard Stern, whereas XM locked in Major League Baseball. Also, another factor that is still to be determined is whether or not the FCC will clamp down on content in the future.  Right now, Sirius is exempt from FCC decency regulations, which allows it to carry risque programming such as Howard Stern and Eminem.

Om Malik had a thought-provoking article on Business 2.0 about Microsoft's VoIP plans.  They are nothing less than ambitious: become the key enabler of the technology (via Longhorn - the next-gen OS that will include SIP addresses everywhere, a corporate IM client codenamed Istanbul, and its newest release of LCS).  Again, I personally believe that Microsoft will not quite compete against the likes of Avaya, Nortel, Cisco and other PBX/IP PBX vendors. 

However, there is little doubt that the folks from Redmond want to be an integral part of applications that will be key in providing the productivity enhancements that VoIP promises to deliver.  For instance, the tight integration of Istanbul and LCS can mean that a conference call can be simply initiatied by dragging and dropping (via MS OLE) a bunch of contacts from a Microsoft Outlook address book.  A phone number in that same contact list might have an embedded SIP link that will automatically spawn a VoIP call.  This means Microsoft will be, at least on the application side of things, the de-facto platform for VoIP in the enterprise (despite the fact that the currently, the only two vendors running Microsoft Windows OS on their IP PBX servers are Cisco, with the Call Manager, and Siemens, with the HiPath 5000). 

SBC (NYSE:SBC) became the latest RBOC to announce the availability of residential VoIP services.  The service provider expects to go live with VoIP in early 2005, and has already been testing technology with about 1,000 customers in Los Angeles, Dallas, Chicago, and San Antonio.

The VoIP service will rely on DSL to deliver not only voice calling but also additional enhanced features, including a web portal and advanced call- management capabilities that make it easier for customers to manage their communications. Among these features are "find me" and "do not disturb," which enable subscribers to specify which numbers can ring through, in addition to a click-to-call capability allowing customers to call friends and family with the click of a mouse.

This comes on the backdrop of SBC's announcement of Project Lightspeed, an initiative to deliver digital TV, VoIP and super high- speed broadband services to 18 million customers in two to three years (via FTTN with VDSL/ADSL 2+). After the FCC's RBOC-friendly fiber ruling, observers expected these deployments to be accelerated.

Note: SBC also announced during the week that it has chosen the new Microsoft IPTV edition software for Project Lightspeed.  The deal, worth $400 million over 10 years, calls for the deployment of IPTV software in set-tops that will be deployed as part of the Lightspeed buildout.  SBC Labs had been testing the Microsoft platform since June of this year, and trials are expected in mid-2005, with commercial availability expected in late 2005.  Features include IPGs (Interactive Program Guides), customizable channel lineups, VOD, DVR, event notifications, instant channel changing and a security system that includes subscriber digital rights management technology to protect content across devices.

Motorola (NYSE:MOT) announced yesterday the acquisition of MeshNetworks, a Florida based startup focusing on wireless application development.  No financial terms were disclosed, and the transaction is expected to close by the end of the year.  Motorola had already been licensing MeshNetworks' software.

Mesh networking is a cutting edge technology that allows users of mobile devices "create self-forming and self-healing wireless networks" that can go above and beyond the range of established wireless hotspots.  In other words, mesh networking also empowers network operators to move beyond the limitations of 'hotspots' that typically restrict wireless service to within 100 meters of an access point.  Mesh networks can therefore augment the reach of wireless networks and offer continuous outdoor coverage over large metropolitan areas.

MeshNetworks relies on a proprietary technology called QDMA, which can send and receive data in vehicles travelling up to 200 miles an hour, compared with about 30 miles an hour for WiFi, which operates in the same 2.4GHz radio spectrum.

Another innovation milestone was reached by Korean manufacturer LG Electronics (LGE).  The company announced this week the introduction of the world's first wireless handset able to receive terrestrial DMB (Digital Media Broadcast).  In achieving this goal, LGE won the DMB satellite race, becoming the first cellular phone manufacturer to make handsets that allow consumers to receive satellite broadcasts to watch satellite programs while simultaneously speaking via a mobile phone.   

The Korean-based vendor incorporated the standard home TV antenna functionality into the new mobile handset to receive broadband DMB.  The total investment in this project was about 20 billion won (roughly 18.3 million dollars).  In achieving this feat, LGE's team of 130 researchers was able to solve issues such as power consumption and bulky terminal size.  The DMB receptor chip is currently an OEM, but LGE plans to make its own chip by the end of 2005.

Outsourcing is also bringing a lot of contact centers to India.  The latest example is Dell, which opened up a 300 agent contact center in Chandigarh:

The Indian market has been quite hot in the past couple of years, with newcomers adopting aggressive strategies such as offering premium salaries for the agents and substantially discounting services, in order to get a piece of the $400 million Indian contact center outsourcing pie.  This has lowered margins even more in an industry already known for tight margins. 

Note: There is an interesting web site totally dedicated to the Indian contact center industry and offshore call centers: Call Centers India.

With the advent of VoIP, cable companies have started making a foray into the telecom marketplace by offering bundles of voice, video and data services (constituting the so-called "triple play"). In competing against the RBOCs, the MSOs have one compelling advantage (video), but also one potential Achilles' heel: the possibility of a "quad play" with wireless services. Hence, it was not surprising to see yesterday's story on IT Manager's Journal that the cablecos are considering launching a joint cell phone venture.

According to some insider information from the Wall Street Journal, the US largest MSOs have been discussing the possible formation of a joint venture geared towards offering cell phone service.  The informal consortium includes cablecos such as Advance/Newhouse Communications, Comcast (Nasdaq:CMCSA), Charter Communications (Nasdaq:CHTR), Cox Communications (NYSE:COX) and Time Warner (NYSE:TWX).

The idea of such a JV for these large MSOs has been floating around for quite sometime, but there have been rumors that the talks to carry out this plan have heated up in the past few weeks, with the cablecos interviewing investment banks to act as advisors for a potential deal. 

One alternative is the outright acquisition of an existing cellular operator.  Another more likely option would be to use the cellular network of an established wireless operator, reselling the service under a separate brand.  Virgin Mobile uses such an arrangement in the US (with Sprint PCS) and Canada (with Bell Mobility).  Ditto for Qwest, which also uses Sprint's PCS wireless service.  MCI and Sprint both signed contracts with Time Warner to carry and terminate VoIP traffic.  

The potential MSO cell phone JV can really add wood to the fire in the MSO versus RBOC war, improving the cablecos position on the "quad play".

After attending VON last week, I was unable to go to the CTIA show happening this week at the Moscone Center in San Francisco, but some of my colleagues attending have given me the latest scoop of some of the major developments and announcements at the event.  Among the major developments at the show were:

Intel (Nasdaq:INTC) announced today at the CTIA show that it will make a "significant" investment with Clearwire, a wireless broadband startup funded by Craig McCaw.  The partnership is geared towards accelerating the development and deployment of WiMax networks.  The agreement stipulates that both companies will be actively engaged working collaboratively to develop WiMax products and deploy WiMax networks as the technology matures.  The Intel VC arm (Intel Capital) did not disclose any specific financial terms of the deal. 

Clearwire already offers WiMax service in Jacksonville, FL and St. Cloud, MN.  The company is planning to offer services based on the emerging 802.16e IEEE standard (an extension of the original 802.16 WiMax standard that addresses the mobility aspect).  The plan is for NextNet Wireless (a Clearwire subsidiary) to use the newly unveiled Rosedale Intel chip in new WiMax gear.  The deal will be a catalyst for the fixed wireless broadband industry, and Intel believes that next-gen products supporting mobility and using its chips should be widely available by 2006.

The last few days have kept me quite busy at VON.  It has been the most attended VON event that I have ever been at, and there has been some electricity in the air (perhaps due to the rosier prospects of VoIP or maybe because the Red Sox have come back in dramatic fashion on a couple of occasions to force a deciding game 7 today against the Yankees).

Due to the great attendance at the show, the enterprise panel session in which I participated had a big audience.  This was a bit of a pleasant surprise to yours truly, given the fact that concurrently, Anoop Gupta, the VP of the RTC (Real Time Collaboration) Business Group at Microsoft was delivering his keynote speech (I heard that in Anoop's session, there was standing room only, and that auditorium was much bigger than the room in which the analyst round table discussion was held). 

As suspected, Microsoft (Nasdaq:MSFT) unveiled its unified desktop client, dubbed Istanbul.  I was able to get the details from Ellen Muraskin, who wrote an article in eWeek about that session.  Istanbul, which runs in concert with the new version of the LCS (Live Communications Server), is a client application offering integrated IM, desktop videoconferencing, and IP telephony capabilities.  The product is currently undergoing beta testing and should become generally available in the first semester of 2005.

The key question is: does this mean that Microsoft will finally make a foray into the IP PBX marketplace?  I suspect that the answer to that question is no, at least not in the short term future.  However, in the longer term future, anything is possible, particularly if the traditional PBX/IP PBX model, as we know it today, goes through some changes (particularly for small and medium enterprises - SMEs).  The crown jewel of the PBX is the call processing software: that is the highest margin piece of the product. 

It is conceivable that in the future, some vendors might adopt a software-based model for SME products, and offer platform vendor independence (i.e. standard hardware/servers from vendors such as Dell, IBM, HP, etc.).  In that case, instead of the single, monolithic PBX, we would have call processing functions plus some standards-based hardware.  With this Istanbul move, Microsoft definitely makes a push into trying to control some of these functions.  However, from there to developing a full blown IP PBX, there is a lot of room.  It is more likely that Microsoft will initially want to become a technology enabler for some of these services.  As Gupta said: "We need a sophisticated ecosystem surrounding this. We don't build PBXes".

Much has been already written about the FCC decision on fiber and the impact it will have on the consumer broadband choices. Since I am in Boston for the Fall VON Show, here is a take on the subject by Hiawatha Bray from the Boston Globe.

But I also enjoyed Om Malik's opinions on the topic and its implications.  In one entry, Om states his disbelief that alternative technologies such as BPL or WiMAX can provide the competition necessary to make the duopolistic equilibrium price (i.e. the current set price of MSOs and RBOCs) lower - au contraire, the consumer bills will sky rocket.  In another story, Om focuses about how RBOCs like SBC will proceed with their plans: FTTH (FTTP) in some situations such as greenfields, and mostly, FTTC with ADSL 2+ or VDSL. 

I will zero in on the technical considerations of going with a FTTC with ADSL2+/VDSL solution. As the figure below shows, there is a tradeoff between the loop range and the throughputs (upstream/downstream): the longer the range, the lower the data speeds.  Distance matters for digital service lines, because they represent a "dedicated line configuration".

The implications can be arrived at from loop length analysis (data is available from several sources including DSL Prime, Telcordia, the NCTA, etc.).  Verizon, for instance, has about 50% of its loops in the 11,000 feet and longer range.  SBC has roughly over 50% of its loops in the 11k feet and higher range.  Bell South has about 45 percent in the 11k feet and more and the same is true for Qwest.  So what can be done with that?  One option is another location, sometimes co-located with the DLC.  This is in the Service Area Interface (SAI) or a cross-connect cabinet.  Hence, the rollouts that are being talked about the RBOCs are either FTTH (in a few cases only, for new greenfields, particularly after the FCC ruling) or bringing fiber to the above "neighborhood nodes" instead of to the curb.  Also, FTTC with ADSL 2+/VDSL will be used for the shorter distance loop lengths.

Since Avaya, Proxim and Motorola announced the initial results of their research on seamless roaming between 802.11 (WLAN) and 2.5/3G cellular networks earlier this summer, there have been a flurry of announcements of plans to converge cellular and Wi-Fi networks. Case in point: yesterday, Chris Rice, the CTO of SBC (NYSE:SBC), claimed that the carrier's public Wi-Fi hotspots will be used to carry calls from Cingular users by 2006.  The new modus operandi will be for phones to become aware when a WLAN Access Point (AP) is nearby and automatically handoff the call to the Wi-Fi network (what I call the ABC - Always Best Connected - model) 

Rice said that SBC can improve Cingular's cellular coverage by filling in the gaps, relying on Wi-Fi hotspots in places like restaurants, hotel lobbies, coffee houses, etc. to mitigate some of the spectrum demands on the wireless operator.  Achieving this goal might be a challenge from a timeline perspective, as there are quite a few details that still need to be worked out.  For instance the systems that can support the 3G/WLAN seamless roaming entail special client equipment, only working with APs supporting newer technology (e.g. 802.11e, which is the QoS standard that also enables longer battery life, due to the "deep sleep feature").  What about all the older APs that have already been deployed?  Nevertheless, it was interesting to see SBC give a sneak preview about its future Wi-Fi/wireless strategy.

Motorola (NYSE:MOT) has teamed up with Master Card to develop mobile handsets that are able to perform secure financial transactions.  The phones are being equipped with PayPass, a contactless payment service developed by Master Card and VivoTech.  Master Card is seeking for customers having many low-value transactions that are mainly cash based.  McDonald's, for instance, is one of the restaurants that announced it will accept the transaction system by the end of the year (i.e. in Dallas and NYC, with more cities to be added in 2005).  Master Card is also teaming up with other cellular phone manufacturers such as Nokia (NYSE:NOK) on tests of Pay Pass capable phones in Dallas, TX.