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". 

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Of course no sooner that I wrote a slightly more positive spin on a particular spammer (Amir Gans, the top Israeli spammer, courtesy of the MIT Technology Review blog), another bad consequence of spamming came to light. 

A few months ago, I discovered an interesting blog listing site called Blizg.  According to its own old "raison d'etre", Blizg was "created out of a desire to use blog metadata in interesting ways. We want to seek out and understand the relationships between and among blogs. We want to help you find blogs of interest."   Meta tag content was indeed a great way to connect like-minded bloggers.

Unfortunately, the site went down late last year (around December sometime?) and I always wondered why (thought it might have been lack of funding).  So I went on a fishing expedition to discover what went wrong.  And I finally found the answer on Blog Cafe: spamming.  Brandon Stone, the webmeister of Blizg, had to shut it down because of the incredible amount of spam the site was getting.  He did not have the time and/or resources to clean that mess up.  It is sad that spammers infiltrate every corner of blogsphere, including a unique site such as Blizg.  I hope Brandon comes back with a new site name and a bit more security to prevent that next time.
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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.

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Trying to capitalize on the success of electronic pets, high Christmas sales of Robosapien and the increasing popularity of MP3 players such as Apple's iPod, Sega Toys revealed plans to launch iDog, a new "music entertainment pet".  The electronic pet is able to actually "feel" four emotions: anger, humor, joy and pathos.  These emotions are expressed via seven colored LED lights mounted on the face. 

Built into this gizmo is an MP3 player that can store roughly 70 children themes and is also able to mimic one's voice (via playing sounds that are in a similar wavelength).  The pet is touch-sensitive: touching its noise will trigger a happy mood, while touching the tail will cause the dog to become upset.  The iDog also comes with a built-in microphone and analog audio input, which makes it also a rather different type of karaoke machine.

SegaToys is planning to distribute the iDog in 57 countries across the world, and the launch in the Japanese market is planned for April 2.  The company hopes to sell half a million units in Japan alone, and the iDog will definitely be distributed in the US, so it is expected it will be a hot seller over this side of the Ocean as well.

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About Robotics.  I received feedback on a couple of fronts.  First, Swan Solutions Managing Director Bart Delgado (whom I had the pleasure of meeting at Inter-Tel's analyst conference earlier this month) had an interesting insight about the Seiko Epson flying micro robot video link that I included in a TF entry last year.  Bart makes a few interesting observations, including the pendulum-like motion and the blue background.  I went back to the Gizmodo entry on the same topic, and did not see any updates.  Funny how the Gizmodo folks also noticed the "enthusiasm" of the demo girl.  But I will have to see this flying micro robot for myself before making any judgments. 

Bart, being a big heli enthusiast, mentioned the Hirobo XRB Sky Robo Silver Lama (shown to the left), a radio controlled electric indoor heli, as being the closest available robot to this Seiko Epson model.  Bart also gave me a verbal update on UK sales of Robosapien, the robot that I nearly bought while visiting Boston last summer with wife.  According to Bart, this was one of the hottest toys sold during Christmas, for an 80£ price tag.  Indeed, according to this Times Online article, Hamleys (a London toy shop) expected to sell 180,000 models, whereas online gadget shop sold 20,000.

Another TF reader from the Netherlands, who has been actively involved in robotics research, designed quite a provocative scientific calendar.  The calendar is meant as a nice joke, showing robots in some insinuating positions (please see photo to the right) or showing their "private parts".  Of course, the idea of the calendar is to provide information about robotics conferences and events, but with a slightly different, funny twist.  No porn is tolerated here at TF, but the eRobotica 2005 PlayBot Calendar is given a "poetic license" here, since it disseminates robotics conferences info in a quite creative fashion.  So be sure to check out their web site and download your copy of the calendar!   more »

Simson Garfinkel, one of the major contributors to the MIT Technology Review blog, wrote an interesting entry at the beginning of the month, talking about a Haaretz article in which Israel's top spammer was interviewed.  Since the article was written in early January, the link is no longer valid, but there is a Google cached copy of the interview with Amir Gans, the fellow who is responsible for sending out 50% of the total volume of junk mail sent in Israel.  The 30-year old entrepreneur advertises all sorts of items, including discounted ink cartridges for printers, security systems for businesses, calendars for the new year, Plasma televisions, water filters, plans for tuition payment for students, poker clubs, luxury watches, flowers and telephones.

Not that I am trying to defend spamming, but this spammer is different than most of his fellow "spam professionals" - he updates his removal lists twice a week, and really keeps his word in not sending these 77k plus addresses any junk e-mail. He also distributes public service messages without charge, such as for instance, asking for a kidney donation for a sick person.  But what's interesting about the article are the details such as how he gets e-mail addresses to add to his lists, or gets lists of people who have already purchased at least one product from a spammer.  It is a great insight into foreign spamming.

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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).

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Is it just me or is the amount of hack headlines increasing?  I keep reading about the threats of "evil twin" hotspots (actually, a quick search on Google News produced 135 results) and how it can allow hackers can clone an AP that behaves as part of an integral WLAN.  As more attacks become known, it seems like some hackers enjoy the extra notoriety, leaving their "signatures" on the sites knowing that their hacks will be publicized later.

Here are a few recent ones:

- T-Mobile: hackers penetrated their systems and read e-mails from an agent from the US Secret Service, among other company customers (400 total, including sensitive information such as their social security numbers.

- Gmail: sometimes, people discover vulnerabilities by accident, such as on this instance, when a Unix community group found a way to retrieve username and password information from Gmail users.

- Harvard University: some hacks do not even need to be sophisticated due to really lax security practices.  In this case, confidential drug purchase histories of Harvard students could be obtained by anyone knowing their student ID numbers. 

This reminds me of my days at Nortel, where I once worked on the Symposium Contact Center product.  All user manuals, training, etc. highlighted the fact that the default password to the product needed to be changed by the system administrator.  Then, I remember seeing an article that appeared on 2600, one of the most widely read hacker magazines.  I was amazed to discover the amount of system administrators who just never bother to follow those instructions (this was not Nortel's fault, of course, but pure carelessness by the sysops).  Of course, this poor practice could potentially expose their systems to hackers. 

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A couple of weeks ago, IBM announced it was going to offer open access to 500 key open-source software patents for the developer community at large to develop open source programs and work on operating system alternatives to Microsoft Windows (such as Linux).  My favorite French VC blogger (Marc Goldberg) had a good entry on the topic, including a link to a great insight from Business Week:

Why would IBM allow others to use its intellectual property free of charge? In a word: Microsoft. The move is central to IBM's efforts to fend off Microsoft and its Windows monopoly. While the computing giant will continue to innovate and gather new patents as aggressively as ever, at the same time it is stepping up efforts to bolster the world of open-source software. IBM figures that doing so will give it a leg up in selling the software and services that work with the open-source programs it helped develop.

Of course, since Marc wrote his article, Sun Microsystems announced it will open source a component of its Solaris OS.  This is just a precursor to fully opening Solaris 10 completely.  Apparently, Sun is not too worried about IBM or HP taking an application such as DTrace and incorporating it into their own OS versions.  Sun's COO and President (Jonathan Schwartz) challenged IBM in an open letter in his own blog to port its various packages such as DB2, Tivoli and Websphere to run on the Solaris 10 OS (which analysts believe will begin shipping in March). 

Despite all this open source action during the last couple of weeks, open source penetration remains relatively low, with Linux expected to reach 6% of the market by 2007, up from 3% today. By collaborating on the development of operating systems such as Linux and Solaris, players such as IBM and Sun can secure a solid foundation on which to build tech projects and save substantial funds in programming costs as they battle Microsoft for OS supremacy. 

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The National Post had an interesting column by Paul Kedrosky today talking about an eventual drop in the stock of high-flying Internet search engine giant Google (Nasdaq:GOOG).  Paul initially makes the point that the other three high-tech stocks that were flying high came down within the past year (eBay, Yahoo! and Amazon).  eBay, particularly, came down crashing 19% just this past Thursday, lowering its market cap by an amazing $13 billion, just for narrowly missing analyst estimates (33 cents versus 34 cents a share estimated by Wall Street).

Then, the article points out the earnings multiple of 220 times last year's earnings, and some other details highlighted by Mark Evans in his blog article.  Paul does not question the soundness of the ad-centric search business, pointing out that this year is expected to be the first one in which online ad revenue exceeds offline revenue.

But one of the main reasons for Kedrosky's forecasted drop in GOOG shares is the 14 million shares that will be newly tradable in February, and his belief that a substantial portion of those will find their way to the market.  The volume this last Friday was 9.3 million shares, according to Yahoo!, the average volume over the past 3 months has been around 10.8 million (Paul mentioned 6 million shares a day in his article).  But regardless of the daily volume, the new shares will play a significant impact on the sell side, and as the eBay example last week indicates, even a slight slip-up can be enough to cause a major correction.  Arguably, an adjustment already took place, with the stock now trading at $188, down from over $200 at the beginning of the month.

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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

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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.

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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.

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Blogging has been light this past month, as my wife and I have been moving to our first house.  I borrowed a cute photograph from Ross Rader's blog (Byte.org) which captures the essence of the experience.  Ross was absolutely right - this can in fact be one of the most stressful events a human can experience.  But to add a bit of pain - how about doing it amidst the adverse weather conditions of the Canadian winter (snow and -15 Celsius temperatures followed by continuous rain for a day and about +5 Celsius)?  Not enough?  How about doing it over the Christmas/New Year break, when getting a van, piano movers, etc. gets to be harder?  Well, the worst part is over, and now comes the "order in progress" part (i.e. clearing out all the boxes and re-arranging some furniture).  At least the computer is out of the box and the Internet service is up and running - so blogging is back!

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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...

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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. 

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The satellite radio market got a boost this week, as Toyota (the fourth largest automaker in the U.S. behind GM, Ford and Chrysler) announced this past Tuesday that it has selected XM Satellite Radio for factory-installations starting from 2006.  XM (Nasdaq:XMSR) already had an existing relationship with Toyota, in which the Japanese car manufacturer was offering XM as a dealer-installed option.  Another part of the deal is that Toyota also selected XM as its supplier for data services, such as XM’s NavTraffic real-time traffic information service.  The number of models offering XM as a dealer-installed option will increase in 2005, with new models such as the Toyota Avalon and the Lexus GS 330 being added to the already existing 10-model lineup. XM also has partnerships with Honda and GM.

On the same day, SIRIUS (Nasdaq: SIRI) also announced that Toyota has selected SIRIUS as a post-production (dealer installed) option beginning in February 2005 for the 9 models on which Toyota is already offering XM as a dealer-installed option.  It is widely believed that this deal came as a result of Sirus' relationship with Penske, the largest owner of Toyota dealerships in the U.S.  While the Toyota deal was a positive for Sirius, factory-installations still are the holy grail, and typically drive a substantially higher volume of activations, making things more difficult for the company to replace XM.  Moreover, XM is better entrenched due to the NavTraffic (the real-time traffic information service) portion of its deal with Toyota.  The company already offers NavTraffic on the 2005 Acura RL model, with service currently available in 20 U.S. metropolitan areas.

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After AOL introduced AOL Journals and Google acquired Blogger to offer it as a blog publishing service, you knew Microsoft (Nasdaq:MSFT) would not stand pat. Last week, Microsoft's MSN Internet division introduced a preliminary version of MSN Spaces, a new blogging service "for the masses", as quoted by Blake Irving, an MSN corporate VP.

Any subscriber to Microsoft services such as Hotmail or MSN Messenger can setup a free blog on MSNSpaces.  The blog publishing service is supported by subscriptions and advertising revenues.  MSDN Channel 9 has a 14 minute video demo of the MSNSpaces' features, some of which include user restricted access, photo albums, favorite song lists, etc. Readers can subscribe to their favorite blogs via the RSS (Really Simple Syndication) web publishing system. 

Leslie Walker (techie reporter from the Washignton Post) testdrove the system and reported that MSNSpaces still is pretty much a work in progress.  Of course, in the future, Microsoft will devote its impressive resources towards this endeavor as well, thereby improving this offering.  Time will tell what the user adoption curve will be like, but thus far, I find that the existing Blogware system that I am using for Technology Futurist (courtesy of the folks from Tucows, who so generously donated the space on their server) offers blogmeisters a much richer environment and customization features.

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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.

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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.?

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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.

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CNN has a story that is a great validation for the growing popularity of blogs.  Merriam Webster, a famous dictionary publisher, claims that the word "blog" is their top word of the year, based on total number of web searches.  As a result, the word BLOG will be added to the 2005 version of the Merriam-Webster Collegiate Dictionary.

Note: The complete list of words of the year is available at the Merriam-Webster site.

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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.   

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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.

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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).

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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):

Nov. 23 (Bloomberg) - Nortel Networks Corp. board member John Manley said he's "very optimistic" that the telephone- equipment maker will file a restatement of its financial reports within the 30 to 60 day deadline it set on Nov. 11. The reports that will be prepared for filing by Brampton, Ontario-based Nortel are more than 2,000 pages with over 8,000 numbers, Manley, who joined Nortel's board in May, said in an interview. "People can't work any harder than they are," said Manley, a former deputy prime minister of Canada. "The limiting factor is there's a lot of numbers. Everything has to be right this time. We can't revise them again."

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.

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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). 

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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.   

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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.

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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.

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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.

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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). 

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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.

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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.

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