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Monthly Archives: March 2013

More Than A Feeling

This is not a Sunday Brief, but is a Sunday post.  I was talking to a friend and analyst colleague about the fact that I felt different about the recovery now that I lived in Texas.  I described it in the same manner as I had from 1989-1992 living in Charlotte and Raleigh.  Yes, there is a recession, but it felt like someone else’s recession.  That’s how I feel in Texas.

So I sat down over the weekend to see if there was any justification for this feeling.  Here’s the data (source is the Bureau of Labor Statistics and the Department of Commerce.  Both sets of information, including a state-by-state analysis of job growth is found here).

Geographic Differences


There is a lot of data in this chart, but one thing is clear:  If you live in Texas, Florida, Louisiana, North Carolina, Georgia, or Tennessee you have a different economic perspective than if you live anywhere north of the Mason-Dixon Line.

In fact, Texas alone has grown more jobs in the past 12 months (regardless of the survey) than New York + Pennsylvania + Ohio + Indiana + Illinois + Michigan.  They have done this on an employment base that approximately one third as large as the six states mentioned.  In fact, if one were to include New Jersey, Connecticut, Massachusetts, Vermont, New Hampshire, Delaware, Maine and Rhode Island – the resulting 14 state job growth total would only be slightly larger than that produced by Texas.

When you bring in other Southern population centers (excluding Virginia), you get to a population base that is similar to the six Northern population centers  (32.6 million for the North vs. 31.4 million for the South).  In total, these 12 states make up 47% of the total US employment population regardless of the survey.

The growth picture could not be more different.  Using CES data, the South is creating 2.4 jobs for every job created in the North.  This ratio swells to 7.2 using the CPS data (CPS data us used to determine the unemployment rate; CES data is used to determine the non-farm payroll jobs added or lost, a.k.a. the “headline jobs number”).

In fact, adding in California to the South Six, we see that seven states (34% of the employee population of the US) are generating more than half (52% in the CES survey; 66% in the CPS survey) of all job growth.

To quote the rock group Boston, this is truly “More than a Feeling.”  It’s an emigration from North to South (and West).  In next week’s Sunday Brief, we will look at the effects of this on increased broadband investment.  Comments welcome.




comScore Video Rankings Feb 2013

Comscore Video Rankings Feb 2013

This is a good data source for anyone looking for addressable market in video. 85% of total unique visitors hit YouTube (or another Google site). However, it’s only 34% of the total videos viewed.

The Sunday Brief: Latency is the New Differentiator


HopdoddyGreetings from Dallas and Austin, where there’s a burger bar called Hopdoddy’s that’s a “must eat” location.  I had the opportunity to catch up and talk tech there with Mark Dewey (nicknamed Yedi by his Darden classmates, as he has been AWOL from tech since starting and running AOL Metro).

This has been a news-filled week, with T-Mobile/ MetroPCS receiving their last governmental approval (from the Committee for Foreign Investment in the U.S.), as well as a demand letter from an activist shareholder mandating that CEO Roger Lindquist resign if the deal is not approved.  Rhetoric is increasing from some shareholders, but with only 12% publicly opposed, the merger appears likely to move forward after the April 12 shareholder vote.

The Blackberry Z10 launched at AT&T.  Unlike the Nokia launch, which occurred on Easter Sunday while most stores were closed, this year the Blackberry launched at AT&T pre-Easter.  The Wall Street Journal’s  take was that sales were about as robust as last year’s Windows phone launch.  According to the article, the in-store experience was anything but spectacular:

When a customer asked to see the Z10 at an AT&T store in downtown San Francisco, the store’s representatives had to retrieve it from the back. The device hadn’t been put out on display at the store’s opening because of difficulties setting it up, a store employee said. The device was eventually installed on a display at a back corner of the store, away from a large sign advertising the iPhone 5.

Talk about a soft launch.  As we have discussed ad nauseam, if the store reps are not excited, it will not move – new or not.  Lacking front placement, large displays, store employee incentives, and app promotions, the ability to rise more quickly up the ranks in the US is going to be more difficult (see the  link to the New York Times article above for a description of how Blackberry financed 1,400 Best Buy experts).  The Z10 is Blackberry’s test against Android and Apple – one virtual keyboard smartphone vs. another (the Q10 due late summer includes a physical keyboard).  Blackberry is definitely a contender, but if it cannot get store placement, it’s going to be hard to convince smartphone switchers that it’s the “next thing to own.”

picture 1

Julius Genachowski announced his resignation from the FCC (no surprise), with rumors circulating that (Venture Capitalist) Tom Wheeler will be the next FCC Chairman.  Tom is a deep and detailed thinker who has been chairing the FCC’s Technology Advisory Council.  His recent blog post on the purpose of the most recent council is here.  Tom knows cable (NCTA Chairman 1979-1984), and he was the head of the CTIA until 2004.  He is currently a partner at Core Capital Partners.  He’s a blogger (see here). He has founded his own company (SmartBrief).  He’s not a lawyer.  Sounds like a great candidate for the job.

One of Mr. Wheeler’s cable colleagues, John Malone, decided to take a 27% stake in Stamford-based Charter Communications this week.  That transaction valued Charter at close to $10 billion.  By Friday, the value of the company increased to about $10.5 billion ($103.28/ share).  Not bad for a stock that emerged from bankruptcy at $33.50 at the beginning of 2010 (208% return in 39 months). This transaction was not an infusion of new capital, but a purchase of several private equity firms’ stakes.  Malone is an old hand at cable, particularly video retransmission, having been CEO of TCI prior to its acquisition by AT&T.  He’s rich like Paul Allen, but that’s where the similarities end.

We could spend the entire week discussing industry goings-on.  However, in keeping with our 3-part series, this week’s Sunday Brief focuses on a topic that is near and dear to anyone who has been working on applications development or Internet services:  Latency.

Latency is defined by the Linux Information Project (also known as LINFO) as:

…the amount of time a message takes to traverse a system.  In a computer network, it is an expression of how much time it takes for a packet of data to get from one designated point to another. It is sometimes measured as the time required for a packet to be returned to its sender.

Yes, latency is becoming the new measure (along with throughput) of a network’s power.  Lower latency enables tomorrow’s video-based applications to succeed.

To demonstrate the effect of latency, imagine that you were going to set up a mobile application focused on delivering live person-to-person video (we could call it something snappy like FaceTime, ooVoo, Skype, Hangout, Tango, Fring, or BBM Video with Screen Share).  Your new service/ app will be available globally on day one, and you are trying to figure out where to put your servers.
picture 2 (3)Being a start-up, you figure an East Coast US (e.g., Ashburn VA), West Coast US (San Jose), Tokyo, and London would be a good place to start.  However, when the new product launches, many users sign up from Rio de Janeiro.  Specifically, the calling community is from Dallas to Rio.

As the picture shows, the video call path is between Dallas and Ashburn (probably 100 milliseconds (ms) or less connection time, depending on the Internet routing) and Ashburn and Rio (which could be as high as 500 ms).

All of this depends on the routing scheme (and bandwidth quantity) between the service provider for the customer at point A and the service provider at point C.  If the route takes many “hops” between routers, latency will rise (a bad customer experience).  The customer at point A may have LTE speeds (10 Mbps), but if the network has to connect to three or more routers before reaching point B (and another two prior to connecting to point C), the customer experience will be degraded.

Putting an application server closer to the customers at point A and C would help, but only if the packets in between did not need to travel through point C.  What is needed is more bandwidth and router efficiency between points A and C to accommodate increased applications needs.

Many of you have probably stopped reading by now, thinking this is nuanced engineering “topic of the day” stuff.  But consider the following:

  1. Applications drive smartphone/desktop/ laptop usage and bandwidth
  2. An increasing number of applications include (or are solely devoted to) low-latency video
  3. More bandwidth means more revenue to AT&T and Verizon consumers
  4. Bandwidth drives scale and profitability

After LTE networks are deployed in the United States (let’s assume AT&T and Verizon complete their deployments in 2013 or 2014, with Sprint and T-Mobile to follow in 2015), what creates differentiation?  It’s applications performance.  What drives better real-time applications performance?  Low latency Internet connections.

picture 3 (1)

This demand is being driven today by a distinct demographic.  At least 15% of the postpaid user base at AT&T and Verizon makes less than 20 minutes of calls per month, every month.  They may be texting, Tweeting, Facebook posting, or video chatting, but the only minutes they are using are those to and from very close family (likely their parents).  As a result, concerns about large numbers of dropped calls are foreign to them.

Internet performance, however, is very familiar and important to this demographic.  They likely have performed one or more Speed Performance tests, and they likely know which Wi-Fi network is best (because they have already presumed that Wi-Fi performs better than carrier networks).  They may not articulate it in this manner, but to the 15-29 year old generation, voice is dead, but video (particularly gaming and chat) is not.

This is the new face of wireless communication.  It’s not simply about the advertised speeds of LTE anymore.  It’s about the quality of connections to other users through one or more servers.  That’s the new frontier in wireless (and, with virtualization taking off in the business marketplace, with wireline).  Speed and pipe size matter.  How the increasing demand for real-time services collides with the societal need for net neutrality will be a hot topic for years to come.

For more information on the topic, have a look at this week’s Ars Technica article on latency.  If you want to be “in the know” on inter-carrier backbone latency at any time, bookmark this page from Keynote Systems.

Unless there is earth shattering telecom news, we will not publish a Sunday Brief next week due to the Easter holiday.  If you have friends who would like to be added to this email blog, please have them drop a quick note to sundaybrief@gmail.com and we’ll add them to the following week’s issue.  Have a terrific week! 

An Assist from Ars Technica on Next Week’s Sunday Brief


I love it when a plan comes together.  For those of you who regularly read The Sunday Brief, the last of the three-part series focuses on the effects of latency (or, as I will refer to it next Sunday, latency is the “light saber” of telecom).  Coincidentally (?), my good friends at Ars Technica ran a decent article on latency yesterday.  It’s not easy to explain (unless you are a gamer or use video a lot), but latency is one or the gathering storm clouds on the horizon.  Comments welcome.

The Sunday Brief: Winning the Greater War, Not Just Tomorrow’s Battle

Happy St. Patrick’s Day from Dallas, Las Vegas, and several points in between (the shirt on the left shows this year’s stops on the BBQapalooza my son went on late this week).  As we mentioned in last week’s column, it was good to catch up with many of you at the COMPTEL show last week in Vegas.  The quality of the speakers, from Terry Jones (Travelocity) in his keynote appearance to the joint appearance of Clint Heiden (Sidera) and Scott Widham (Alpheus) at the CEO breakfast was impeccable.  The panel that I led on enterprise application delivery to mobile/ remote devices also went extremely well.  Many thanks to Stefan Bewley (Altman Vilandrie), Bill Weber (Cbeyond), and Randy Jeter (RapidScale) for an active and informative discussion.

Many of you have asked about my reference to a special announcement in last week’s column.  About a month ago, I received a phone call from a Sunday Brief regular who also happens to be the editor of RCR Wireless asking if I would consider hosting a video-based version of the Sunday Brief.  As most of you know, the RCR Wireless folks edit several Sunday Brief columns each year and publish them under their Reality Check series.  In fact, there are many vintage columns posted here.

The Sunday Brief is going to take the plunge into multimedia starting in May for a 12-week summer pilot.  The format will be pretty simple – wireless.  I have full editorial control as long as the topic relates to wireless.  We’ll probably start with a brief discussion of the previous week’s column, and then highlight one or more companies that are impacting the wireless space.  Participants need to have a video camera on their laptop or some other means of transmission.  No trick questions, and no crazy Howard Stern stuff.  If you have a company or division you think should be featured, you know where to reach me.  There are only eleven opportunities so get your nominations in – quickly!

We already have our first featured company (a start-up that I have been working with for much of this past year), but I am looking for more.  Specifically, divisions of larger companies that rarely see the light of day and want a thoughtful and friendly interview.

a) the results of the samsung phoneRootMetrics studyOne more note:  We are foregoing the “Week in Review” section in this week’s Sunday Brief, but I have posted three articles that might be of interest to the website: on 3G, 4G, and 4G LTE coverage that was posted earlier in the week (which have strong tie-ins to last week’s column);

b) a retrospective on Samsung smartphones through the years as told by Ars Technica (although they are missing a few devices like the Instinct); and

c) an analysis of Phil Schiller’s pre-announcement comments on Android’s fragmentation deficiencies.  Check out www.mysundaybrief.com and have a look.  Yes, we are still prettying up the site, and ideas on how to improve its look and feel (particularly over mobile devices) are welcome.

Last week, we discussed Verizon’s transition advantage – how they are speeding up the network with AWS deployments, and the nearing probability that they will be the first to move to LTE-only devices.  As a review, we talked about three broad themes in the telecom and technology world in 2013:

1)      Transition/ Migration as a competitive advantage

2)      Exceeding synergy expectations is the “new” expectation

3)      Latency improvements: The best is yet to come

Creating shareholder value can come through many sources – a continuous string of internally developed and innovative products, an exclusive partnership or distribution agreement that creates market share leadership, operational excellence and focus that result in superior profit margins or asset utilization.

Every once in a while, a company emerges that can create value through inorganic growth (e.g., through mergers and acquisitions).  Those companies always build upon one of the foundations described above (usually operational excellence) to create an integration discipline or methodology.

There is a large body of work showing that the most successful inorganic growth companies are those that organize around a small but critical set of principles to guide large and small decisions.  They are likely time-based and customer-focused.  They form the mantra for a small but experienced integration team.  The “rinse and repeat” formula employed by SBC when they bought Pacific Bell, Ameritech, Southern New England Telephone, AT&T (Long Lines), Bell South, and then Cingular is a prime example of this discipline.  When you look at the current AT&T management team, you’ll see men and women who lived through the pains of integration over that decade of change.

This focused discipline allows the best companies to be able to grow through M&A.  It is not for the weak of heart, and there are only a few examples of success in telecom.

Right now, we are in the midst of several mergers and acquisitions.  Here are few that have been announced over the past six months:combined t-mobile metro pcs map

  1. T-Mobile is acquiring MetroPCS (approved by the FCC this week)
  2. Sprint is acquiring Clearwire (unless Dish makes a bold move this week)
  3. Sprint is in turn being acquired by Softbank
  4. Sprint is acquiring spectrum and other assets from US Cellular
  5. Comcast is in the process of completing the acquisition of NBC Universal
  6. Charter is acquiring cable assets (f.k.a. Bresnan) from Cablevision

Each of these acquisitions has created expectations.  “Because of this transaction, our company will be able to deliver a) growth of $X; b) profit margins of $Y; and c) free cash flow of $Z.”  For example, here are the promises made to the MetroPCS and Deutsche Telecom shareholders in their merger announcement:

  • $6-7 billlon (net present value) of cost synergies and additional upside from revenue synergies
  • Five-year compounded annual growth rates in the range of 3% to 5% for revenues, 7% to 10% for EBITDA and 15% to 20% for free cash flow;
  • EBITDA margins in the range of 34% to 36% at the end of the five-year period and achievable projected cost synergy realization with an annual run-rate of $1.2-1.5 billion

The full T-Mobile/ Metro PCS presentation can be found here under the “Events and Presentations” section.

To maximize the effectiveness of any telecom merger or acquisition, three things are needed:

1.  Deep knowledge of how to best integrate the assets is required.  For example, MetroPCS has LTE deployed across (nearly all of) their footprint.  T-Mobile wants to take advantage of this deployed network as quickly as possible.  A plan needs to be (and I am confident has been) devised allowing new handsets to quickly access MetroPCS’ spectrum and improve the customer experience.  (It’s a lot harder to do the inverse as current MetroPCS devices do not have GSM/ HSPA+ radios.  The immediate roaming savings for MetroPCS cannot happen until the handset changes).  Provided that the integration is not too difficult (e.g., Qualcomm Q-Chat which was going to make the Sprint Nextel merger easy), this involves smart engineers and systems planners, lots of whiteboards, and good debates.

2.  A well-constructed, thorough, interconnected, and acknowledged “Day 1-90” plan.  Those of you who have been involved with mergers know that the words “Day One” have a lot more to do with the completion of requisite regulatory and shareholder approvals.  They are about a new customer experience (pricing plans, branding, compensation, etc.).  But they are also about a new organization, kind of like your first day at middle school.  “New turf, new plays, new season” is how one of you described it to me this week.  The degree to which the plays (and players) change drives the importance of the Day One plan.

In the case of T-Mobile, the change is substantial – to continue the football example, there’s an entirely new defensive line.  In the case of Sprint and Softbank (or Sprint and Clearwire for that matter), it’s a new Owner/ General Manager but the coaches and players are staying around for another season or two (or more).

In the case of Charter/ Bresnan, the change is fairly minor. New talent, but generally it’s a case of some new plays (brought over from Charter’s new coach, Tom Rutledge, who just happens to have been the offensive coordinator at Cablevision, the selling company).

The most critical elements of the Day 1-90 plan are coordination, communication, execution, and customer acknowledgement.  This involves more than sending out an email to each employee with a new organization chart.  It involves a rallying cry (see  Braveheart clip here), a purpose, and a plan.  Align the message to the magnitude of the change, but practice your plan to avoid opening day jitters.

3.  Thinking Forward.  Delivering on items #1 and #2 above requires a solid and thorough understanding of today’s systems, architecture, organization, and culture.  Today might even extend into 2014 due to plans that are already in place.  But how many times have organizations failed to capture opportunities beyond the short-term synergies?  “I’m not paid a bonus to think about that” was what one Nextel executive told me when I brought up the idea of embedding Sprint Nextel “futurists” into each operational review.  Too many times, the merging organizations solely focus on today, and fail to think forward.  They effectively answer the “How do I meet my synergy goal?” but fail to answer “How do I beat _________?” This robs the combined organization of its full potential, and shortchanges shareholders in the process.

We will hear a lot of talk in a month or so on telecom earnings calls about the best laid plans.  But, as the great poet Robert Burns put it:

“The best laid schemes of mice and men
Go often awry,
And leave us nothing but grief and pain,
For promised joy!”

It is not enough to achieve a number – the resulting product/ organization/ network must be able to triumph.  In the world of mobile device saturation (at least for higher revenue-producing products), that entails competitive differentiation.  The forward thinking companies should not be hard to identify – they are the ones who strike fear, not smirks from their larger competitors because they are battle ready.  They are the ones who rise to win the greater war, not merely tomorrow’s battle.

If you have friends who would like to be added to this email blog, please have them drop a quick note to sundaybrief@gmail.com and we’ll add them to the following week’s issue.  Have a terrific week!

Apple’s Jive Talkin’

Apple’s Jive Talkin’

Apple’s marketing chief went on the offensive (click on link above for the Reuters article.  Click here for the Wikipedia definition of Jive Talkin’).  When I read the original interview in The Wall Street Journal, I thought “Well, Phil Schiller is right.  Android is fragmented.  But does that matter to me?”  Having worked through a lot of Google naming conventions (Eclair, Gingerbread, Honeycomb) as we were starting Mobile Symmetry, I can say that fragmentation is an issue…  But that issue is primarily for software developers, not customers.  Have a read of the Reuters article for yourself by clicking on the link in the title.  If the Samsung Galaxy S4 has a larger screen, better camera, NFC (not on the iPhone5), and creative commercials to market all of these, can Apple really make a marketing campaign out of operating system unity?

My other thought was that it’s kind of neat to get an Android update without having to get a whole new phone.  I just got Android 4.1 on my Galaxy S3 and the fonts are clearer, the designs are better and I was delighted to get an improvement without having to shell out a dime.  Maybe, in a very unique and devious way, fragmentation allows the customer to get a “present” in between hardware purchases.

I love Apple.  I love the iPhone5.  But the development community (particularly in India, where Apple is low double digit market share) is speaking and Apple is not listening.  If India/ Asia is willing to put up with fragmentation, should Apple be surprised that Android is gaining mind share?