What ever happened to ... Verizon Wireless and their "open" network?

With much fanfare, Verizon Wireless announced a plan to open their network in November 2007 (see this). A podcast I was listening to today lamented that Google's Nexus One has become a GSM-only developer phone (despite the success of the Android platform on CDMA). This caused me to wonder about what happened to device portability on CDMA ... I have seen or read precious little about this project since then.

So was the Nov 2007 announcement a public relation stunt to appease regulators? Was it more difficult to implement device portability on CDMA more difficult than they had imagined? Did consumer interest in portability not materialize?

Verizon + Google = Western Union + Associated Press

This report of talks between Verizon, who operates one of the largest Tier 1 ISPs, and Google,arguably the largest provider of Internet content, is eerily reminiscent of the deal between Western Union and the Associated Press. You can read the background here, but the basic story outline is as follows:

1) As early as 1846, newspapers saw the economic benefit of sharing the cost of gathering and sending news from different locations. Instead of having one reporter for each newspaper in each location, they needed only to have one reporter in each location.

2) As telegraph emerged as an important information transmission medium, newspapers saw the advantage of using this to distribute news more quickly

3) Telegraph became economically concentrated (as infrastructure industries tend to do) and the economics of newsgathering also led to concentration

4) By 1870, WU was a de facto monopoly and AP was the dominant news gathering agency

5) WU, with agents in every town, had the infrastructure to enter the newsgathering business, and AP generated enough traffic to sustain a private or even rival telegraph network.

6) Instead of entering each other's markets, they basically entered into an exclusivity and non-compete agreement. WU would not get into newsgathering, and AP would not build or use another telegraph system (see this for the gory details)

Now, substitute "Verizon" for "WU" and "Google" for "AP", change the dates, and do you now get something like the NYT story cited above?

Verizon is considering licensing their 4G spectrum to rural carriers

This item is interesting. It seems that they would be engaging rural carriers as partners in building the LTE infrastructure. I get the distinct impression that the carriers would have to make the infrastructure investments. If so, Verizon is taking a page out of Western Union's playbook (yes, Western Union) by engaging partners to build infrastructure.

Apple, Google, AT&T and Verizon

This article over at Seeking Alpha is interesting. It describes the "small numbers bargaining problem" in telecom. Quoting the article:

Verizon has already shown resistance to putting the Apple iPhone on its platform for fear that it will use tremendous amounts of data without sharing any of the third party application profits with the carrier. Now VZ is beginning to play games with Google saying that they won’t pick up the Nexus One, planned to be released spring of 2010. Google loses access to the carrier’s more than 90 million users, and seems to have stumbled for the time being in becoming a major player in the mobile handset market.

AT&T has not picked up the phone either. But AT&T has more problems than just Google, they are trapped in a mutually hated relationship with Apple now, where neither party can get rid of the other. It really is the marriage from hell. Apple doesn’t have another carrier, and AT&T can’t throw Apple off for fear that its massive amount of iPhone users will defect from its completely inferior network. So AT&T is trapped having to provide Apple with more and more bandwidth, towers and other infrastructure, as the public and media scream at AT&T to get their network up to Verizon’s standards, not to even mention how well Sprint (S) works. AT&T is for sure frustrated that they have to make these capital expenditures and see no increased profit from them, it’s like bailing out the water from a ship with a 20 foot hole in the bottom. You’re just spending energy trying to stay afloat.

Something has to give here, this can’t go on forever, and I think we are soon to see a resolution to the issue of the telecom giants paying for the network on which Apple and Google make tremendous amounts of money. Maybe the telecoms chose the nuclear option and just stop building their networks holding Apple’s feet to the fire. Steve Jobs can’t revolutionize the content distribution market without a network to do it on, and believe me, the stuff that he wants to do is going to take a lot more bandwidth than is available today. Do we really think the carriers are going to pay for that to happen? Maybe Apple will buy a carrier, or perhaps even build its own network with a next generation technology they have been developing.

I wonder to what extent the independent LTE network proposed by Harbinger (see this) will be the event that shakes things up? In many ways, the situation described above seems to be an analog of the drama being played out over network neutrality in that we have infrastructure investments required for applications that are not easily monetized by the infrastructure owners.

Verizon FiOS buildout

This story is interesting:

They [Verizon] have now canceled planned FiOS deployments for all new territories such as Alexandria, Virginia. According to Bryant Ruiz Switzky in the Washington Business Journal, Verizon is "suspending Fios franchise expansion nationwide." They are "indefinitely postponing" building Alexandria after telling the city they would begin construction several months ago. Alexandria is one of the richest suburbs in the world and a natural part of the network with a lower than average likely construction cost. Verizon "will now focus on installing its network and gaining market share within the areas where it already has agreements." Bostonians and 10M other Verizon customers are apparently screwed.

Verizon has buildout commitments to New York and other cities that will keep some crews working, but had already suggested they might cut FiOS builds by 2/3rds in 2011. This is now a further cutback, canceling areas that for years they had been promising to serve. Verizon's Harry Mitchell sends their perspective. "The bottom line is that Verizon said in 2004 we’d build to pass about 18 million homes by year-end 2010, and we’re on track to do that with the franchises we currently have. Of course, we will also meet any buildout commitments we made in individual jurisdictions beyond 2010."

The article goes on to speculate that Verizon is hoping to get Federal support for this buildout under the broadband plan. If this is the case, then it is a classic illustration of the "moral hazard" of government interventions in markets. Why should a company take private risks when public funding is available?

But this may not be the only explanation. Others have speculated that the business case for FiOS (and similar systems) is weak to begin with. If this is the case, then Verizon's actions are rational.

Google and Verizon

This joint statement is interesting less for what it says than for who is saying it (see also this item).

We can frame the net neut discussion as a faceoff between application providers and network operators about who gets to pay (and how much) -- i.e., we frame it as a problem in political economy. In that world, Google is the 800 kg gorilla amongst the apps provider and Verizon is the 800 kg gorilla (at least for a significant fraction of the US population) amongst the operators. An agreement between these two is likely to set the tone for the rest of the community (the joint statement is far from an agreement).

This is eerily reminiscent of the bargaining that took place between the Associated Press and Western Union in the 1860s. At the time, AP was WU's biggest customer, so AP had the traffic to build their own telegraph network; WU had the local resources (in telegraph operators) to build their own news agency. The agreement between the two was basically an agreement to not compete with each other in their core markets.

Is this shaping up to be a similar business arrangement? Are there parallels worth considering or is the WU/AP analogy worthless?

LTE testing in the US

If you're interested in technology migration in the wireless industry, you might find this item over at Ars Technica interesting. The article reports on this news release:

Verizon Wireless today completed its first successful Long Term Evolution (LTE) fourth generation (4G) data call in Boston based on the 3GPP Release 8 standard; the company also announced today that it had earlier completed the first LTE 4G data call based on the 3GPP Release 8 standard in Seattle. The successful data calls involved streaming video, file uploads and downloads, and Web browsing. Significantly, Verizon Wireless has successfully made data calls using Voice over Internet Protocol (VoIP) to enable voice transmissions over the LTE 4G network.

----------SNIP-------------

Boston and Seattle each now have 10 LTE 4G cell sites up and running on the 700 MHz spectrum. These LTE 4G markets were selected by network planners due to their geographic configuration of suburban and urban areas as well as the areas’ high-technology population. The trials will help Verizon Wireless and its LTE 4G network partners understand issues that include how to best prepare cell sites and how to add the new technology to the network.

Surely Verizon is interested in LTE because it provides a bridge to the GSM world, which it now lacks.

In regards to the competition with WiMAX in the race to 4G, Ars observed:

The announcement also made one of LTE's advantages over WiMax clear: a number of traditional wireless telecom powers were backing it. The tests' description read a bit like a who's who of the cellular world. Network equipment came from Starent Networks and Nokia Siemens Networks, Alcatel-Lucent and Ericsson provided the base station hardware, and devices were provided by LG and Samsung.

But a key factor may ultimately wind up being bank balances. Verizon has continued to grow its earnings throughout the financial crisis, and wireless services account for nearly 90 percent of its income; it can't afford to appear as an also-ran, and has the money to make sure that it doesn't. Clearwire benefits from the deep pockets of its backers, most notably Intel, and has nearly $2.5 billion in the bank, according to its recent earnings release. But, at its current rate of operating losses, that cash will last it less than three years.

In other words, it may have little or nothing to do with the technical benefits of one versus the other, but rather with the ability to sustain the technological conversion. This reveals one of the essential features of telecom: that large capital investments are required before revenue can be earned, giving incumbents a powerful advantage.

Here is a related article from GigaOM.

Broadband carriers and government funding

This article is interesting. According to the atricle

As the Aug. 20 deadline nears to apply for $4.7 billion in broadband grants, AT&T, Verizon and Comcast are unlikely to go for the stimulus money, sources close to the companies said.

Their reasons are varied. All three say they are flush with cash, enough to upgrade and expand their broadband networks on their own. Some say taking money could draw unwanted scrutiny of business practices and compensation, as seen with automakers and banks that have taken government bailouts. And privately, some companies are griping about conditions attached to the money, including a net-neutrality rule that they say would prevent them from managing traffic on their networks in the way they want.

While it is quite possible that some of the rules, such as "network neutrality" may affect them anyway, it is clear that the carriers felt that the cost of participating in this program outweighed the benefits. A significant part of their concern is related to uncertainty about the consequences of an irreversible commitment. Thus, it seems an apt subject for a real options analysis.

Doing such an analysis rigorously would be challenging since the uncertainty is not easily quantifiable. But clearly carriers have concluded that the high probability of a modest upside does not outweigh the uncertain probability of a potentially large downside.

Phone line shrinkage at AT&T

I have blogged before about the decrease in access lines (see this, for example). While it is not surprising given the increase in wireless only households, this article over at GigaOm shows that the decline has been in the 6% per year range for AT&T, not the 3% range.

As the article correctly points out, this is one of the reasons that the large ILECs have been aggressive in rolling out their broadband infrastructures. Since consumers are increasingly opting for wireless for voice, the only way that the ILECs have to continue receiving a share of the consumer's communications expenditures is to build out broadband, which enables them to compete with cablecos for television and internet access expenditures.

If they don't they have to depreciate their infrastructure at a faster rate than consumers are leaving it, else investors (the company owners) will be left holding the bag. Of course, this is an end-game that they would only play if they decided to cede the marketplace to other access providers. There is no sign that ILECs are interested in that strategy!

Rate flexibility and market power

This article over at USA Today points to one of the tensions in deregulation. Carriers, who gain pricing flexibility, will use it to maximize their competitive position and profits. In this case, it appears that the incumbents with market power are using nominal prices to motivate their customers to adopt bundles of services (such as voice, long distance, mobile and video). These bundles tend to lock consumers in to their services since it becomes much more costly to purchase these services individually. This is the same basic issue that I brought up earlier related to text message charges.

While it is hard to imagine that these services experienced large costs increases (they are software, after all), I would like to point out that the services indicated in the article are hardly essential, mainstream services. Given that, is there a need to regulate? How many "elderly and low income" families actually use these services?

Text Message: 15 Cents

This article "exposes" some interesting phenomena in my mind. Quoting the article:

When the big four cellular companies decided to hike the price of sending a text message, they all managed to settle on precisely the same increase. Sprint Nextelraised its price from 10 cents to 15 cents per message in 2006. AT&T quickly followed suit, as did Verizon Wireless and finally, in June 2007, T-Mobile. And now Sprint has raised its price again, to 20 cents.

Today those copycat price hikes are producing banner results for the carriers. In the most recent quarter, the Big Four's customers coughed up anywhere from 29% to 64% more for data services (that is, everything but regular phone calls) than they had the previous year. The four carriers collectively produced $17 billion in operating income on $104 billion in revenue in the first nine months of last year. The carriers say that consumers can buy a monthly package that lowers the cost of a text message. But without the huge surge in payments for data, revenue per user would have fallen at every company.

Their ability to hike prices on text messages certainly can't be explained by the companies' costs. On modern cellular networks the few hundred bits of information that make up a text message take up such a minuscule amount of capacity that they can be carried for a fraction of a cent.

The first paragraph basically points to implicit collusion in price setting. As any economist with tell you, this is one of the principal problems in oligopoly. In this case, it was evident even with four industry participants, which suggests either that the price for text messaging is quite inelastic or that this "ala carte" price doesn't reflect consumer experience. Since avid SMS-ers purchase packages, the actual price is far less, so, I believe the latter explanation dominates.

The end of the second paragraph makes little sense ... data services and SMS are quite different and appeal to different markets. It is clear, though, that non-voice services are the future for profits in this sector.

Verizon Obtains FCC Approval for TPE cable landing

While cable landing approvals are not big news -- the are approved fairly routinely, this item is notable because of the capacity it adds between China and the US (1.28 Terabits/sec). Unfortunately cost data is not included in this press release.

Cable TV standardization

Some months ago, I had written this article regarding cable, set top boxes, and standards. So, when Forbes posted this item. According to the article:

Facing pressure from regulators, the cable TV industry plans to make good on a promise to standardize its technology and open the door to televisions and other gadgets that don't need cable boxes to receive video-on-demand programs and other interactive services.

An industry initiative, to be renamed "tru2way" after a decade in the works, is expected to allow electronics manufacturers to make TVs and other gear that will work regardless of cable provider. By making devices compatible, the standard also could encourage the development of new services and features that rely on two-way communication over the cable network.

Note that Engadget and CED are framing this as merely a rebranding of "OpenCable". Comcast CEO Brian Roberts is claiming that there is more to it (from the Forbes article):

Our business model has changed completely, from a closed, proprietary model to an open architecture that will work across cable companies - not just across Comcast. That was a Herculean job to accomplish.

Suppose we took Roberts' view at face value. Is it reasonable to imagine the industry model evolving from a vertically integrated "customer experience" to a "platform-based" one? That is, is it reasonable to imagine that the initial innovation in an industry would require a high degree of control, so that specific investments in physical infrastructure could be coupled with specific investments in "software"?

In fact, we have seen this initially in telephony:

• The introduction of automatic switching had to be closely coupled with end user devices.
• The transitition to a "common battery" for handsets (from locally powered devices) also had to be closely coordinated. It is interesting that we seem to be gradually transititioning back to the locally powered paradigm, but that's another story.

Are we seeing this in wireless as well, with Verizon announcing the opening of their wireless network?

Update on the Fairpoint case

I thought you might be interested in an update of this item, posted earlier. As Forbes reported today, the Maine PUC approved Fairpoint's acquisition of Verizon's lines in its state. Recall that Vermont did not approve this.

Questions about appropriate regulation or inappropriate micromanagement aside, I think this case provides an interesting window into the machinations necessary in telecom for commercial transactions such as this. These kinds of processes are not required in other industries and adds to the "friction" of these markets, which leads to economic inefficiency. Quoting the article:

The deal also requires approval from Vermont and New Hampshire regulators. On Dec. 21, Vermont's Public Service Board rejected the deal but invited the company to submit a revised application. New Hampshire's PUC staff recommended against the initial proposal, but it is also willing to consider a revised deal.

The deal is subject to review by the Federal Communications Commission.

Maine's PUC attached several conditions to its approval. The commission suggested reducing FairPoint's debt to Verizon by $100 million by scaling back fees FairPoint will pay to lease equipment from Verizon Communications.

Verizon general counsel Don Boecke dismissed that approach as "pretty much a nonstarter," but left the door open to an alternative. FairPoint Chief Executive Officer Gene Johnson then told the PUC a number of options that would have the same financial impact were available.

Some of those include reducing dividends, selling noncore assets, selling more stock and suspending dividends if necessary, he said.

Other conditions ordered by the PUC included having FairPoint develop and implement a policy protecting customers' privacy, and not having the other two states' regulators materially change FairPoint's financial condition.

Johnson said he did not see the latter condition as a problem, saying he believes the agreement approved in Maine will serve as a "roadmap" in New Hampshire and Vermont.

Update (2008-1-15): The FCC approved this transaction (see the order for details):

In accordance with the terms of sections 214(a) and 310(d), we must determine whether the Applicants have demonstrated that the proposed transactions would serve the public interest, convenience, and necessity. Based on the record before us, we find that the transaction meets this standard. We conclude that it is unlikely the merger will result in any anticompetitive effects or other public interest harms. Specifically, the Applicants do not compete in any of the relevant local exchanges. Moreover, after consummation of the transaction, the Applicants will compete for large business and long distance customers. The transaction also is likely to produce public interest benefits, including the accelerated deployment of broadband throughout the region.

Note that the FCC's analysis is motivated by a different set of concerns than the states' ... the latter group is interested (at least on paper) in the viability of Fairpoint after the transaction. This difference can be seen in Commissioner Copps's dissent.

Regulation or micromanagement?

This item from Forbes reports on the process of gaining regulatory clearance for a sale of access lines. FairPoint Communications had agreed to purchase Verizon's 1.6 million landline operations in northern New England for US$2.7 billion (or about US$1700 per access line). Transactions such as this are subject to regulatory approval because they involve the transfer of an operating license. According to the article,

An MPUC staff report last month recommended that the proposal be rejected unless the companies satisfy dozens of conditions.

The most controversial conditions would require Verizon to lower the selling price by $600 million and make FairPoint cut its dividends to shareholders by 30 percent, spend more to expand high-speed Internet and meet stronger quality standards for service.

According to the Examiner's Report, this recommendation is a result of concerns about FairPoint's ability to meet the needs of the residents, i.e., FairPoint is highly leveraged, and so will be limited in its ability to accommodate adverse results. This despite the fact that the examiner's report mentions that the price of the transaction is "considerably less than the price of other recent transactions".

Do you think that this is reasonable regulation, or is this micromanagement by a governmental agency? If this transaction is not approved, would the citizens of Maine be better off with an operator who (apparently) does not want this business (since they are selling it for a low price), or with one who wants to be there and isn't financially as solid as regulators would like them to be?

Update (2007-12-27): According to this article in Forbes, Vermont regulators have rejected the Fairpoint bid. Quoting the article:

The ruling by the Vermont Public Service Board cited FairPoint's financial viability.

"The Board found that FairPoint had not demonstrated that it would be financially sound as it seeks to operate the newly-acquired territories in Vermont, Maine and New Hampshire -- a service territory that has five times the number of access lines as Fairpoint presently has," the board said in a prepared statement.

FairPoint, based in Charlotte, N.C., would have to borrow $2.5 billion to complete the transaction, the debt service on which could exert "significant financial pressure" when combined with operating costs and revenue projections, the board said.

State regulators, however, left the door open to a revised bid.

The article mentions that the union representing some of the employees was opposed to the sale. This also comes through in the papers from Maine. I wonder if they were shareholders ...

AT&T network upgrades

Stories like this one in Forbes don't get a lot of press attention, but I think that they are worth tracking anyway. Since Forbes doesn't do permalinks, here are some key excerpts from the article:

AT&T Inc. said on Monday it has switched on its high-speed backbone network, which is designed to ferry data traffic across the U.S. four times faster.

AT&T has begun placing traffic on its so-called "ultra-long haul" network, which boasts a capacity of 40 gigabits per second, meaning consumers will be able to download large files quicker and more easily stream online videos to their computers. Carriers have been upgrading the backbone network - the underlying pipes needed to move data across extremely long distances - to meet the increasing demand in bandwidth-intensive programs and videos.

[...snip...]

The company, which is deploying routing equipment supplied by Cisco Systems Inc., has upgraded 50,000 miles of its network and plans to connect 25 major metropolitan areas in the next several months. ... In addition to a faster connection for consumers, the upgrades will help ease the capacity requirements for the company's U-Verse Internet-based TV system.

[...snip...]

While the network is the first in the U.S., Verizon Communications Inc. said that this month it would begin building a 2,000-mile backbone network connecting major cities in Europe.

Both companies plan to push the 40-gigabit standard in the U.S. and eventually upgrade to 100 Gbps.

The article doesn't mention it, but I think it is safe to assume that the "40 Gigabit" standard is, in fact, OC-768 (this article in Network World confirms this). NW also reports that this is AT&T's MPLS network. I'm not sure what the "100 Gbps" is ... OC-1536 comes in at approximately 80Gbps. Wikipedia reports that the OC-3072 standard is a "work in progress".

Could the 100Gbps bit rate be referring to 100 Gbps Ethernet (as this article in Wikipedia suggests)? That would be quite a departure ... and would suggest an explicit strategy to integrate local and long distance network standards. Ethernet has truly come a long way (pun intended)!

In light of the Comcast "network management" discussion, this is an interesting development. Do you think AT&T would be credible if they employed similar techniques on this new network?

Wireless network openings

AT&T, of course, could not be left out of the limelight that has surrounded Verizon's recent announcement. As TechDirt reports, they now claim to have "opened" their network as well. As a GSM-based operator, it has always been possible for users to purchase an unlocked phone and put in AT&T's SIM card. This is basically what AT&T is announcing to the world.

It is clear that this misses the point a bit. In its announcement, Verizon suggested an "unbundled" pricing scheme for these new devices. AT&T makes no such offer ... as a user of an unlocked phone, purchased separately, I received no break on AT&T's monthly service, so I didn't benefit from an handset subsidy, yet I pay the same amount. Go Figure.

On a related note, you might find Om Malik's analysis interesting. He writes:

The wireless unit of Verizon (VZ) reported year-over-year subscriber growth of 12 percent, but a mere 5 percent rise in voice revenues. Data revenue saved the day, surging 63 percent and lifting the company to 15 percent revenue growth overall. Data revenue per user increased 43 percent, while voice revenue per user declined 5 percent — pushing data to 20 percent of revenues from 14 percent. The same report revealed a 10 percent decline in residential access lines. The voice business of Verizon Wireless, in other words, seems to have entered the same cycle of contraction suffered by Verizon’s wireline business in recent years.

Joining the open access bandwagon promises to keep data revenues growing strongly, but CEO Lowell McAdam faces some mighty difficult choices as the 80:20 ratio of voice to data revenues reverses. The legacy pricing model incorporates price discrimination that will prove awkward to preserve.

Consider the lucrative SMS business of shipping 160 character messages for 10 cents each, or roughly $1,000 per megabyte. What happens when all devices cleanly incorporate instant messaging? “Any app, any device” means VoIP-capable devices that transparently support voice and web browsing via data plans. Why would someone pay Verizon an extra $40 per month for voice services? Any data plan that makes video affordable makes voice essentially free.

Articles like this one in BusinessWeek lend some credence to this argument. While AT&T suggest that its networks are already "open", they are only open to unlocked GSM devices. Amazon's Kindle is a different kind of device that uses a different business model. If the history of the telephone industry is a useful lesson, we will not be able to predict the kinds of innovation in devices and device/service combinations that might emerge.

Do you agree with Om Malik's assessment? Assuming you do, does Verizon's network opening make more sense?

Asset swaps

It is not unusual for carriers to swap assets with each other for a variety of reasons. Sometimes swaps allow carriers to rebalance their regional portfolios to gain economies or to align their assets with their strategic objectives and other times it is to comply with regulatory requirements (there may be additional reasons as well). This news release (the quote below is from http://www.forbes.com/feeds/ap/2007/12/04/ap4402372.html?partner=alerts in Forbes) is an example of the latter:

AT&T Inc. said Tuesday it has reached an agreement with Verizon Wireless to swap wireless assets, satisfying regulatory requirements from the company's acquisition of rural cellular telephone carrier Dobson Communications Corp. In mid-November the Federal Communications Commission approved AT&T's $2.8 billion purchase of Dobson but required one of the companies to divest assets in Kentucky, Oklahoma and Texas. Under the terms of the agreement, after Verizon's acquisition of Rural Cellular Corp., AT&T will acquire some former Rural Cellular properties. The properties include licenses, network assets and subscribers in the Burlington, Vt., area and in rural service areas in New York, Vermont and Washington. AT&T will also acquire a cellular license from Verizon in Kentucky. In addition, Verizon will acquire from AT&T some former Dobson properties, including licenses, network assets and subscribers, in some rural service areas in Kentucky.

So, while these companies are fierce competitors in the retail market space, they are also business partners in other circumstances.

Sprint could spin off WiMAX division

This has been quite a month for the wireless industry. Between Verizon's recent announcements (see this and this) and the earlier news regarding Sprint and WiMax. In this article, Sprint interim CEO Saleh said:

... that Sprint was currently examining its plans for widespread WiMAX deployment in 2008 and deciding “if it’s the right course for us.” He then said that in the future, Sprint’s WiMAX division could take “multiple forms,” including one scenario where Sprint would “contribute our [WiMAX] asset to some kind of entity and find investors who are willing to fund the deployment of WiMAX.” Sprint would then buy services from that entity and resell them are on the market, he said.

I find the wholesale scenario most interesting (especially given my interest and work in secondary use and secondary markets for spectrum). This amounts to the creation of a wholesale WiMAX infrastructure from which Sprint would lease capacity for a potential retail operation. This is not unheard of in this industry. Note that Sprint is the carrier for MVNOs (Mobile Virtual Network Operator) like Virgin Mobile. Also, many of the carriers have sold or outsourced their towers to companies such as Crown Castle and American Tower. So, I am wondering a couple of things as a result of this announcement:

• Is the Sprint retail brand going to separate from its carriage services in its 2G and 3G (i.e., CDMA) operations as well? If they do, then Sprint (retail) will be just another MVNO on the Sprint (carrier) network. If they don't I wonder what spinning off WiMAX really buys them. This is roughly akin to the functional/structural separation that is being discussed (and in some cases implemented) in the wireline industry.
• Is the Verizon annoucement a signal that the industry is in the process of restructuring itself into separate handset, retail and wholesale services components? If this is the case, it suggests that the economic and strategic benefit of integrated package delivery is coming to an end; that the transaction costs that have driven this integration have decreased significantly so that a new industry organization can become feasible.

It is clear that it could take a few years for this scenario to play out ... we have yet to see what AT&T has in mind in this regard, as well as the carriers in other countries that have a highly sophisiticated mobile industry.

Broadband in Australia

You might find this item of interest ... there will be a cabinet level Minister for Broadband, Communications and the Digital Economy. One of the goals of this Minister is to implement the AU$4.7 Billion fiber to the node plan that was one of the promises of the recent election in Australia. So, following up on the point I was arguing here, how would one account for this in the OECD's price of service report? In other words, is it right to compare Verizon's retail price for FiOS (which did not receive a subsidy that I know about) with future services from Telstra and other Australian ISPs (which benefitted from this subsidy)?