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In this edition of Views and News ETI is pleased to discuss the investor reaction to Netflix's video streaming business model, and a possibly overlooked complication with the current streaming pricing regime. We also examine the market implications of Sprint's move to discontinue unlimited data plans. Finally, ETI will be discussing the FCC's recent USF/ICC order at the NASUCA 2011 Annual Meeting in St. Louis.
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Netflix's bet on streaming video spooks customers and investors -- but maybe for the wrong reason
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Reed Hastings, the founder and CEO of Netflix, built an incredibly successful enterprise by figuring out a way to marry a suite of sophisticated high-tech IT-driven management systems with a low-tech delivery system – snail-mail. When Netflix initiated its DVD rental-by-mail service back in 1998, the US postal service offered an efficient and (by 1998 standards) a very inexpensive means for delivering 4- to 6-Gigabytes of digital data to the mass market. With most consumer Internet access being accomplished either on a 56 kbps dial-up basis or via a relatively low-speed DSL service offering download speeds of 1 or 2 mbps, downloading a full-length movie would have taken a minimum of 1-1/2 to 2 hours – and probably a good deal longer depending upon Internet traffic loads. Real-time streaming was not possible, because the download could not occur as fast as the film, resulting in long and annoying pauses. Mailing out the DVDs in those red envelopes was a good solution. You ordered the movie over the Internet, but the "download" was via the US mail.
The rapid growth in broadband subscribership coupled with a significant jump in download speeds being offered to many residential consumers (sometimes as fast as 15 to 25 mbps or more), coupled with orders-of-magnitude increases in Internet backbone capacity, has dramatically improved the user experience with streaming and has created a whole new means of delivering video entertainment – electronically rather than via a physical medium such as a DVD. These services – referred to generically as "TVE" (for "TV Everywhere") enable users to receive video on a broad range of fixed and mobile devices – and include, in addition to Netflix, such other players as Hulu, Amazon, cable operators such as Comcast and Time Warner, as well as TV networks and motion picture studios that own some or all of the content that they offer.
But is streaming actually less expensive than mailing?
Continue reading at econtech.com
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Sprint yanks unlimited data plans for existing mobile hotspot customers
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Not more than two weeks after it started selling the iPhone for the first time, Sprint announced that the days of unlimited data are over, at least for users of laptop cards and mobile hotspots. Unlimited data will still remain available for smartphones – including the iPhone–at least for now.
From an industry-wide perspective, the move comes as no surprise. The nation's number three wireless carrier is simply following in the footsteps of AT&T Mobility and Verizon Wireless, which abandoned unlimited data plans some time ago. As consumers' appetite for mobile data grows exponentially, the major wireless carriers have had to limit data consumption in order to maintain overall network quality as backhaul deployments have failed to keep pace with growing demand. But from a marketing perspective, this about-face by Sprint comes as a bit of a shock. Sprint CEO Dan Hesse, famous for taking the time to star in TV commercials for the ailing company, ran an advertisement about the meaning of the word "unlimited," and flaunted Sprint as the only provider to offer truly unlimited calling, texting and data. Sprint's website (sprint.com/unlimited) still highlights this product differentiation. Whether predictable or a surprise, this move has larger repercussions beyond Sprint's own marketing strategy.
Continue reading at econtech.com
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ETI to present at 2011 NASUCA Annual Meeting
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Colin B. Weir, Vice President at ETI, will join panelists including Commissioner James H. Cawley of the Pennsylvania Public Utility Commission and State Chairman on the Federal-State Joint Board on Universal Service; David C. Bergmann, Counsel to NASUCA, formerly of the Office of Ohio Consumers' Counsel and Chairman of NASUCA's Telecommunications Committee; and others at NASUCA's November Annual meeting in Saint Louis. The group will address the FCC's recent order on Universal Service and Intercarrier Compensation in a panel discussion entitled:
"Broadband or Bust at the FCC: Forward-Looking Telecom Reform, or The Great Telecom Robbery of 2011"
On October 27, the FCC voted out an order intended to tackle the vital and extremely complex issues of high cost Universal Service Reform, broadband deployment and revisions to the federal Intercarrier Compensation structure. The FCC's NPRM focused almost exclusively on the ILEC's "ABC Plan," a regulatory backward proposal to shift over $4 billion of high cost rural telephone service support to broadband, and reducing interstate access charges to near-zero. In its public meeting, the FCC signaled that it would not wholly adopt the ABC Plan, but would order significant revisions to the access charge structure and an additional customer surcharge, relying on "competition" to force carriers to pass through access charge reductions in the form of reduced rates. Key elements of the plan are being pushed into a further NPRM.
ETI previously discussed the ABC plan at length in Views and News, September 2011, and in the paper the Price Cap LECs' "Broadband Connectivity Plan": Protecting Their Past, Hijacking the Nation's Future, also published in September.
Continue reading at econtech.com
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About ETI. Founded in 1972, Economics and Technology, Inc. is a leading research and consulting firm specializing in telecommunications regulation and policy, litigation support, taxation, service procurement, and negotiation. ETI serves a wide range of telecom industry stakeholders in the US and abroad, including telecommunications carriers, attorneys and their clients, consumer advocates, state and local governments, regulatory agencies, and large corporate, institutional and government purchasers of telecom services. |
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