Mr. Stephenson to become AT&T’s Chairman and CEO

AT&T said on Friday that Mr. Edward E. Whitacre Jr., current chairman and CEO, will retire in June after 17 years at the helm. Mr. Whitacre worked his way up as a manager and navigated through the breakup of the Bell system in 1984. When he became CEO in 1990 he began to work on putting it back together with a string of acquisitions that culminated with a $85 billion deal to take over BellSouth and gain full control of the two companies' joint venture, Cingular Wireless. Today, AT&T is the biggest service provider in the world based on market cap, with a very different business than 17 years ago. Huge round of applauses for Mr. Whitacre.

Welcome Mr. Randall Stephenson. When he joined AT&T in the information-technology department, the company was known as Southwestern Bell Telephone. He has spent most of his career overseeing telecom finances in various positions. In 1996, he was named controller, and also has served as senior vice president for consumer marketing. As chief financial officer he reduced the company's net debt from $30 billion to nearly zero by 2004, positioning AT&T for future takeovers. Mr. Stephenson was always loyal to Mr. Whitacre and supported him to grow AT&T from a small Baby Bell into a super-sized phone giant. Another round of applauses for Mr. Stephenson.

Now, let’s focus on the huge business challenges for Mr. Stephenson. For starters, AT&T will be looking to become the preferred provider of telecommunications services to multinational corporations around the world. They will also look for business partners rather than make large acquisitions. Secondly, a new set of competitors is coming up, such as Google and cable companies, which have aggressively entered the phone business. Third and most importantly, he will have to face that its landline phone service business is slowly dying in the age of wireless and Internet telephony.

Welcome Mr. Wireless. Mr. Stephenson expects to use the massive appeal of Apple and its soon-to-come new iPhone to attract new subscribers from other competing carriers. The battle began a while ago when AT&T gave up several conditions to win the exclusive rights to offer the Apple device through its wireless unit, formerly called Cingular Wireless. He is also making other aggressive moves, such as rolling out a mobile-broadcast TV service. Further, he is entering into the advertising world with his three-screen strategy, selling ads to appear on mobile phones, the Internet and its television service.

So, there is no question that Mr. Stephenson will face very interesting times at the helm on AT&T. It will be entirely up to him to survive and excel in this frenetic race to capture customer attention. And that is not minor challenge these days…

Comcast attacks again

Not surprisingly, Comcast Corp. has joined the race over which Web site is going to become the top destination for TV shows, movies and other professionally produced videos. Point taken, it will be facing fierce competition, from Google Inc.'s YouTube to major Internet players including Amazon.com Inc., Time Warner Inc.'s AOL division, Joost, Brightcove and Apple Inc. It hopes to play the same middleman role on the Internet that it does on traditional TV. They buy programming from entertainment companies and packaging it for consumers. Earlier this month, Comcast announced plans to launch Fancast.com, an ad-supported free TV and entertainment site. Comcast has stuck deals to carry prime-time content produced by CBS, Fox and NBC on Fancast.

No question that Comcast's push into the Web comes at a time when there is widespread speculation that video on the Internet will pose a major threat to the cable industry's bread-and-butter TV business. And competition from other sources continues to rise as some programmers and movie studios already have begun to pipe high-quality video directly over the Internet to viewers' televisions, bypassing cable operators.

Strategically, Comcast’s move makes absolute sense. The company is the country's second-largest provider of high-speed Internet hookups, after AT&T Inc., with over 11.5 million customers. It already has used that business to turn its portal, Comcast.net, into one of the most visited domain on the Web for U.S. users. Not a minor accomplishment in the war to capture web traffic. It has been loading up Comcast.net with music videos, movie trailers and other short content as a way of attracting and retaining high-speed Internet subscribers. The move has been part of Comcast's broader strategy to combine its TV, Internet and telephone services. Also, Comcast also has begun looking to extract revenue out of its Web sites as well. The company currently is choosing among Google, Yahoo Inc., Microsoft Corp. and AOL for Internet advertising and search services for Comcast.net and its other sites.

On the other hand, it won’t be an easy task. Competing for viewers on the Internet presents a different set of challenges. In its traditional business, Comcast usually is the only cable operator in an area, giving it enormous leverage over programmers. But on the Web, Comcast will just be one of many sites carrying the same content. Full-length NBC shows already are being carried on the network's own site, iTunes and will also be available on a new Internet TV site that Fox and NBC are creating together. Further, customers have shown they don't all go to one place for content. So there might be an opportunity to give them as much choice as possibly can. However, competitors are adding social networking and other features to their sites to distinguish them from traditional television and this is a potential problem for a traditional TV programming provider with little or no experience with these new challenges.

Now, the most difficult part. How to create new places for consumers to view TV programming without hurting the value of their traditional cable business. So far Web TV doesn't seem to be cannibalizing traditional television as prime time shows offered on the Internet seem to increase the audience for their regular TV programming and keep up with a series by watching a missed episode on the Web. Of course, Comcast doesn't want to cede the central role it plays in traditional TV to some other player on the Internet. Comcast has designed Fancast to be the leading source of content and information on the Web about TV and the movies.

Bottom line, it’s still very early to name a winner on this amazing race. In my opinion, Comcast has the unique chance to become a friendly partner to content owners by giving them a place for offering video legally. And that is a major advantage on this cmplicated chess game.

Let's face it, Internet is not neutral

Comcast recently surprised users when it cut off Internet access to those it considers "bandwidth hogs." So here we go again, how strong is the link between net neutrality and digital piracy. Of course, it all depends on what side of the net neutrality debate one is on. The Comcast cut-off could be viewed as proof that ISPs have too much power or that ISPs really do need to protect their networks from abuse.

On the one hand, Comcast has a responsibility to provide customers with a superior experience and to address any excessive usage issues that may impact that experience. Apparently some people were downloading or sending the equivalent of 13 million e-mail messages or 256,000 photos a month, that's a lot of data! Either these people are huge spammers or they must be downloading tons of movies and songs, most likely illegal. While it's true that legal downloading of music and movies is on the rise, illegal downloading by digital pirates still consumes much bandwidth.

On the other hand, people claim that if you are blocked or removed then it is not Net neutral. The big problem here is that regular consumer bandwidth was not originally designed for commercial use or peer-to-peer applications running 24 hours a day. So my question is, to what extent are supporters of net neutrality also supporting piracy and illegal downloads?

Network neutrality sounds really nice, but it is a failed ideological theory. In the real world, the net is not neutral. Some Web site operators spend more than others to make their sites more appealing to consumers and, in the music industry, some songs will now be sold for a decidedly non-neutral price. Take the Apple example, which announced that it will start selling DRM-free songs for US$1.29 which will be of higher audio quality than the other 99-cent, DRM-encoded songs sold through iTunes. Technically, that is not network neutrality.

Of course, Net neutrality legislation won't pass this year, but at least it is expected that Congress will revisit the subject. They should keep in mind that it's difficult for ISPs to manage their networks and perhaps bandwidth hogs should not be able to download whatever they want all the time.

Will SP architectures be robust enough for the coming wave?

In just a short period of time, video has taken on a new form as a pervasive entertainment medium, migrating from our living rooms, out to the Internet, and now back again. The combination of new video enabled consumer devices, nearly instant worldwide availability, and ubiquitous broadband access has whet the viewer's appetite for the ability to access video, at any time and on any screen. In order to meet this growing demand, SPs will need to be able to provide the appropriate amount of bandwidth necessary to ensure a quality viewing experience. At the same time, SPs are being challenged to find new ways to increase their relevance in a video market that may contain unfamiliar territory for them.

Consumer viewing patterns, and the bandwidth requirements to support them, are changing rapidly and drastically. As IDC points out below, in the United States, average downstream bandwidth has grown significantly over the course of only two years.

Much of this US bandwidth growth has been as a result of the increase in popularity of Internet-based video and streaming media. As digital media's popularity growth continues, increases in the number and duration of simultaneous connections will have an impact on the access bandwidth. While these applications can run fairly well in limited-bandwidth environments, the SP's access architecture must be robust enough to handle the projected traffic. That access traffic load will be increasing drastically as wireline SPs bundle High Definition IPTV as part of their quad play service offerings.

In order to provide the amount of bandwidth required for HD-based videos, interactive gaming, and other bandwidth-intensive applications, wireline SPs worldwide are working to ensure the right technology is in place. While SP's may build out their broadband architectures using a variety of access methods, many are using a Fiber to the Home (FTTH) strategy incorporating Passive Optical Network (PON) technology. PON's three main standards have differing transmission characteristics, including differences in the amount of shared bandwidth available to end users.

A recent ABI Research report indicates a significant worldwide increase in GPON subscribers worldwide, relative to BPON and EPON, as a direct result of the greater amount of bandwidth available. From a global theater perspective, the Asia Pacific region currently has the greatest PON subscriber penetration, based upon a regional focus on providing broadband to the home, driven mainly by China, Japan, India, and South Korea. North America is expected to remain relatively consistent at 13-18% of total PON subscribers, as Europe begins to emerge in the CY08 timeframe. So, I wonder, is John Chambers correct once again and we are in the beginning of yet another explotion of Internet usage?