Internet traffic to increase for online video

Cisco Systems Inc. is projecting that traffic on the world’s networks will jump 46% a year from 2007 to 2012. In 2012, Cisco claims Internet video traffic will be a stunning 400x carried on the U.S. Internet backbone in 2000. Video-on-demand, IP-TV, P2P and Internet video will account for 90% of all consumer IP traffic in 2012.

The networking-equipment maker, as part of a study called the Cisco Visual Networking Index, predicts that Internet video, which accounted for 5% of data traffic in 2005, will represent 30% of total data transfers by the end of this year. That will swell to 50% by 2012. Behind the trend is the surging popularity of Web sites such as Google Inc.'s YouTube, where users go to watch and share videos. Video already accounts for more traffic than the entire Internet generated in 2000, according to the study.

Cisco developed the study to help communications carriers make such plans. In recent years, the rapid growth of traffic has worried some Internet providers, which fear that the torrent of data could block their networks. Cisco prepared the study by collecting data from phone and cable customers as well as market researchers and internal experts. Web-based video is projected to overtake file-sharing as a percentage of Internet traffic in two years.

The study also found that Internet traffic is growing fastest in Latin America, followed by Western Europe and the Asia-Pacific region. The upswing in Internet penetration and the increasing number of universities and businesses with high-speed Internet connections will result in Latin America having the highest growth rate through 2012, according to the report.




Cisco Visual Networking Index

Sprint Nextel Bets on WiMax

Today, Sprint Nextel Corp. announced a move that would change the business model of its wireless operations. On top of selling traditional wireless service to subscribers, the wireless carrier is seeking to give access to the network to other type of products, such as digital cameras and billboards. The early WiMax revenue generated by Sprint will probably come from the subscription model. Longer term, though, the company hopes to make money from advertising. For example, it has a deal with Google Inc. in which more than half of the mobile-advertising revenue from the WiMax network goes to Sprint. It expects to post revenue of $2 billion to $2.5 billion from the network in 2010.

WiMax is a wider-ranging form of Internet access similar to Wi-Fi, but it uses licensed spectrum and is considered more dependable. The company has teamed with Intel Corp., Motorola Inc., Samsung Electronics Co. and Nokia Corp. to release 50 million WiMax products over the next three years, which would boost demand for WiMax services. For instance, Sprint could sell service, either as a one-time fee or regular subscription, that would allow consumers to send photos to their home computer from the camera through the WiMax connection. Nevertheless, the 50 million devices expected over the next three years still are light in comparison to Wi-Fi-enabled devices. Roughly 200 million consumer-electronic devices are expected to carry Wi-Fi chips by 2010, according to ABI Research.

Sprint’s bet will be expensive, about $5 billion through 2010. Its WiMax network, which it calls 4G technology, would pay off by winning new customers. The network won't just benefit Sprint. Fred Wright, who heads up cellular-network products and WiMax for Motorola, said he sees revenue opportunity in providing consumer devices, modems and networking equipment to support WiMax. In the 2010 to 2012 time frame, the market will be worth "billions of billions of dollars," he said.

There is no question that Sprint Nextel needs the help. The wireless carrier has been steadily losing customers over the past several quarters, and only in the recent quarter did it turn itself around. They hope the new brand for the business, Xohm, be powerful enough to put them back on track to compete with AT&T and Verizon Wireless.

AT&T Brings Video Competition to the State of Nevada

AT&T Inc. has announced plans to invest about $100 million over the next several years in fiber network upgrades, further broadband deployment and Internet-based technologies to bring new services, including television, to Nevada consumers.

So first, let’s take a look at politics. The investment commitment is the result of the enactment of Nevada Assembly Bill 526, which reforms video-franchising regulations. We congratulate and welcome the decision. The bill brings the benefits of video competition to Nevada consumers by establishing statewide uniform standards that restructure the video-provider authorization process and encourage competition and new investment.

"Today's announcement by AT&T indicates that when we create a pro-business culture in Nevada, companies will want to come here not only to do business but to plant the seeds or create investments that will allow them to grow in our communities," said Gov. Jim Gibbons. Ok, enough politics.

How about technology? AT&T will be able to deliver competitive video offers and bring several options to consumers. In part, AT&T's new technology upgrades will support Internet Protocol (IP)-based television, high speed Internet access and, in the future, Voice over Internet Protocol (VoIP) services. The infrastructure and investment will be part of a new set of communications and entertainment through the much advertised AT&T U-verse(SM) service. New services, more competition, that’s all good news for customers in Nevada.

Dobson’a acquisition was easy to spot

Last week on this same blog, I wrote about Dobson Communications Corp. exploring strategic options, including the sale of the company (see related story). It turned out that all comments on my review on Dobson were right on target. It was pretty obvious it was a happy story for everybody. We foresaw Dobson should sale the company for a considerable profit (especially in these market conditions), whereas any big wireless carrier that would buy them would gain additional cellular coverage without making huge capital investments.

Last Friday, AT&T Inc. agreed to purchase wireless carrier Dobson for approximately $2.8 billion in cash. The price represents a nearly 17% premium over Dobson's share price as of last Thursday. Including net debt as of the first quarter of 2007, the total transaction value is approximately $5.1 billion. Some Dobson investors were hoping for a strategic buyer such as AT&T to emerge, betting that such a company could manage a larger premium over Dobson's share price than a potential private-equity buyer.

AT&T seemed to be at the right place at the right time. Dobson offers access to markets where cellular penetration is not as high as in major metropolitan markets, thus leaving more room for future growth. And even though roaming partnerships with larger wireless carriers will be difficult to maintain, AT&T expects to save about $2.5 billion through overhead cuts and reduced "roaming" expenses.

In the past years, AT&T made several large deals that expanded its wireless and landline reach, such as the acquisitions of AT&T Wireless and BellSouth Corp. However, consolidation in the telecom industry has left AT&T and other large operators with fewer options for big acquisitions. But there are many small wireless and wireline carriers for them to chase. Some observer's on Wall Street have said a broader "roll-up" of such rural carriers could be in store.