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Telecom

Article

Telecom

November 1, 2008

The ability to be connected wirelessly with speed and reliability is revolutionizing the way we do business, and the way we live. At this year’s telecom roundtable, Utah Business brought together a varied group of industry players to discuss the most pertinent issues facing the industry, including corporate mergers, Internet Service Provider trends and regulatory issues. The group also discussed the overall health of the telecom industry and up-and-coming products. We’d like to give a special thank you to Ted Smith, partner at Stoel Rives LLP, for moderating the discussion and Holland & Hart for hosting the event. Participants: Spencer Cox, Wetern Fiber Net; Ted Smith, Stoel Rives LLP; Jason Ellis, Spring Communications; Joe Staples, Interactive Intelligence; Steven McGhie, Metrobridge; Steve Proper, Comcast; Ray Child, Comcast; Pete Ashdown, XMission; Gary Younger, Qwest; Lance Pearson, Mountain West Telecom; Layne Sisk, Serverplus; Todd Marriott, UTOPIA; Martin Lewis, Utah Business; Gary Nieboer, Integra Telecom. What are some of the trends in telecom that you see both locally and nationally? YOUNGER: Broadband is king right now. There is so much need for broadband and Qwest is meeting that with fiber-to-the-node technology that gets up to 20 megabits per second in some areas. McGHIE: It seems broadband is becoming more of a commodity. The demand for speed is starting to increase, costs are coming down. I think another trend is mobile broadband. I have my Blackberry here and when I go on a fly fishing trip, I just plug this into my laptop and away I go. So I think there’s a big shift towards mobile broadband. CHILD: I would add from Comcast’s perspective, really the sky is the limit. We haven’t seen anything yet. We are deploying [DOCSIS 3.0] in late 2009 into 2010, which is going to offer speeds of a hundred megabits a second. And that’s not even the limit. Our technology as it exists today will take us up to 160. So the speeds are going to need to increase with applications on the Internet, and we are pretty excited because we are poised to take advantage of that. MARRIOTT: From UTOPIA’s stand-point, we are already seeing 100 megabits, and have been for three or four years. In fact, the sky is the limit for UTOPIA as it opens up unlimited broadband capabilities. I think when we talk about speed, everybody represents the download, but it’s the upload speeds that now are going to be required to be significant. In terms of broadband, anything less than 30 right now is becoming an insignificant technology. I think you have to be 30 to 50 now, and of course getting to 100 here shortly. Part of the trend is that Webcasting and video are requiring those types of bandwidth. Forty years ago, we were talking about the light bill. Really it was our electric bill, but they called it the light bill because that’s what it did, it lit lights. Today it does everything. So in terms of broadband, what will it do to have 30, 50, 100 plus megabits, up and down, symmetrical? Those types of technologies are critical for the infrastructure of our communities. COX: We are seeing some of the same trends in rural Utah. We are seeing those demands even in rural areas. I think there are a lot who would love the lifestyle of being able to live in a rural community, but still have what everybody else has. And that’s something that we have been able to offer almost ubiquitously throughout rural Utah: the same speeds as Comcast and Qwest at the same prices. You don’t hear a lot about it, but if you want to move to Birdseye, Utah, you can get 5 mg for 30 bucks, and people are really excited about that. McGHIE: My sense is that the customers don’t really know what’s available or what’s coming. There’s probably a gap in the education right now. If you ask are they demanding speed? I would say no. At least, that’s not what we see. However, when they are shopping competitively, they are wanting to get the same speed and the same price as company X is offering. So I think there is definitely a trend upward. And as customers become more educated, the demands will be greater on providers to provide those speeds. PROPER: I think it comes down to reliability and support and features, and the other stuff that you can add on top of speed. And I know we have taken great pains and efforts to make sure that there’s value seen in those ancillary features, as well. NIEBOER: I’ll couple off Steve’s [Proper] comment. In some of the analysis and research we have done with outside partners, reliability is the number one reason that people select their services. Although we all agree we need to continue providing more bandwidth to these consumers, if we do it in a way that doesn’t provide a reliable level of service, we won’t gain. McGHIE: As a provider, if you promise speeds but they are not reliable, customers will switch. I’m sure all of us have gained and lost customers based on reliability. COX: The consumers aren’t driving the speeds; the applications are driving the speeds. And as applications continue to develop, I think we will see the need for those speeds. Video is also really driving the speeds of the Internet right now, with YouTube and other applications. How are advances in speed and reliability being manifested in your businesses? SISK: We have a lot of employees who four or five years ago thought telecommuting was going to be the big thing, but it didn’t happen as quick. Now we have a lot of employees who work or do a significant amount of their work from home. Some of those employees are on Comcast, some are on UTOPIA and some are on Qwest. We are sort of agnostic as to who they are using. But now we are seeing a whole higher level of productivity, because the employees have the ability to be able to work from home. And as far as an employer, to me that is the great advantage of having that bandwidth—all the sudden I’ve got a much more productive workforce. STAPLES: On top of that, our customers are making a fairly big shift to work-at-home employees. And it’s not just a casual, “I think I’m going to work from home today.” They are actually setting up at-home offices. Employers are more protected from things like disasters if they have work-at-home agents that are located in another state or another part of the state. SISK: We are headquartered in Orem and we have employees who live in Murray or Eagle Mountain. With gas prices now, employees don’t want to drive to work for a four-hour shift. But if they can telecommute, they are willing to work a four-hour shift. It’s great and it provides a lot of flexibility for us. STAPLES: We have some customers that are 100 percent at-home employees. Besides people not wanting to drive, the other thing that telecommuting provides is real flexibility in adding staff to a contact center. So prior to having at-home agents, you had to staff for the peaks. And the peak may be an hour and a half in the middle of the day. This way, contact centers will actually have people who are at home who hit “pause” on the TiVo, log in, take calls, reduce the queue at their contact center. The employer will pay them for one or two hours worth of work, but their costs will go down and employee productivity goes up. It’s a nice deal. What are the latest consumer trends in telecom? ELLIS: We are seeing a big trend in our wireless retail stores of consumers requesting Smartphone products. I would say those products represent probably 25 to 30 percent of everything that we are selling now. We have also seen our AirCard sales double, which are the AirCards that go in the laptops. Consumers are just generally interested in being mobile and having access to their information when they are on the go. And the trend is in both personal and business use. One in five households will be completely wireless by the end of this year. People are attaching to a wireless lifestyle. Wireless carriers are also building data speeds as fast as they can. They are clearly not competing at the rates that broadband is today, but as those get faster and faster more consumers will switch to wireless. SISK: I went on a trip to St. George a couple weeks ago and every place we go I always look for a place that has wireless Internet. I didn’t care this time because I have it in my phone—I didn’t have to have a wireless Internet because I could use my phone and get the access I need. McGHIE: Even better than that is that you can have your laptop and have it roaming just like you would on a phone. So in the wireless broadband space, that’s kind of the direction we are headed. So you don’t have to plug your phone in; if you have a laptop. You pull up your laptop and away you go. Hopefully the speeds will be sufficient to do what you need to do. STAPLES: Which is what you get with the AirCard, right? McGHIE: Yeah. I’m just saying you don’t have an AirCard, you don’t have a data plan, you don’t have any of that. You just go. STAPLES: It’s integrated inside. McGHIE: Yeah. So in the wireless space, when you talk about trends, that’s kind of where that industry is going. CHILD: Consumers and business people want simplicity. They want products bundled together—bundle the video, bundle the Internet and bundle the phone together. People want the ease and simplicity of being able to have any one of those communication services and at any time call the same number, talk to the same people, talk to the employees of the company and say, “I’m not quite sure. I’ve got a new wireless card. I’m not quite sure how it works, tell me how it works.” They want to be able to have that kind of support. And along with being mobile and being able to access that any time, anywhere, they want it 24/7, as well. SISK: I would say for us on the call center side, we do a lot of support. And while everyone sitting around this table in this room is very well versed in this industry and understands how it works, the average consumer just wants it to work. And our experience is that the average consumer is a little frustrated sometimes by technology. And if we can simplify that process for them and make it work—and not only that, but if they feel like when they pick up the phone, the person on the other end is happy to talk to them and help them, it makes a big difference. PROPER: It’s finding the balance between the cutting edge and the bleeding edge. Just because you can do it doesn’t mean there’s a market. NIEBOER: Still ties back to reliability. I have an AirCard, I’ve got a Blackberry and my phone service. But when I drop a call on my way home, there’s nothing more irritating. And it ties back to that base application that, really, it was all built on being able to have a phone conversation, and when the call drops, it’s just not acceptable. As new technologies come out, it’s our job to make sure we roll them out when they can be reliable. How reliable are wireless products? If you are driving from Salt Lake to St. George, how reliable are wireless products throughout the drive, for example? COX: I think it’s getting better all the time and that’s the important thing. I think people tend to tolerate less—there’s a balance between convenience and service. And it is getting better in the rural areas. A lot of the major carriers are starting to invest in Utah. T-Mobile is building out towers in rural Utah now. Verizon has some fairly good coverage in different areas and Verizon is acquiring Alltel. So it’s getting better all the time. ELLIS: I’ll just echo that sentiment that the wireless carriers have put hundreds of millions into building a network that provides mobile phone service almost anywhere that you are. It’s frustrating for consumers when they drop a call, but you can imagine the difficulty in trying to throw up a wireless network and service the number of customers that we are servicing with the applications and the different things that everybody is using. PEARSON: I picked up the phone in Honduras. I got to pay for it, but I could pick up the phone in Honduras and make the call. ELLIS: It’s expensive, but it’s possible. NIEBOER: Now when you want to go on vacation, it’s harder to find a place you can really unplug and not get a hold of somebody. You have to go four miles off shore up in Canada to go salmon fishing in order to unplug and play. PEARSON: The services are definitely getting better on the mobile landscape. One of the hottest things that we sell and upgrade right now are people requesting the ability to twin their desk phone to their mobile phone. And these aren’t just agencies requesting the services, they are business leaders, as well. So either the services are getting better or maybe the tolerance for the dropped calls is getting better—I think the service is getting better. STAPLES: I think that better service is driving people towards wanting a single device. And we are seeing quite a bit of push there where consumers want a single device that is going to work when they’re in the office and will switch over to the mobile network when they’re out of the office, and allow them to do simultaneous voice and data to where they can have data applications that will drive it relative to voice. Our customers are asking for a single device versus multiple devices. What trends are you seeing in the ISP space? ASHDOWN: It is looking like UTOPIA is going to be the final landscape for XMission because Qwest is ending our partnership and other third party ISPs, so we can’t provide service over the new DSL product. The top speeds that we can provide service over Qwest with right now is about 7 megabit. And Qwest is actively promoting people to their new product, the DSL 2 with the fiber-to-the-node. We are looking at Web applications that we can serve the entire Internet and hoping for the best on UTOPIA and on municipal fiber. MARRIOTT: We actually provide service to all services providers. XMission has used the municipal fiber system the way it is supposed to be provided. For example, this last week, up in Tremonton, at a family history center, we met with 40 people who each spend about 27 minutes on an old network to get their computers downloaded to do their work. The speeds just aren’t good enough and these people can’t do their work. So we provided a road up there, XMission came and provided the services for that family history center to be able to do all 27 computers at one time. UTOPIA has spent a lot of money to get to that place, and we will have to spend a lot more, but UTOPIA provides those avenues for all service providers to do like Pete [Ashdown] has done to provide services that consumers are demanding. The invitation has always been open to Qwest and Comcast who have their own networks, and others. And we are proud to do that for those municipalities. YOUNGER: We are finding one thing in that space, also, is that companies and communities are latching onto metro optical ethernet. Qwest also sells a product it calls QMO. And as employees are moving from office to office or out to communities, we’ve got this product that is higher speeds to multiple locations at lower cost that is scalable. And what that does is in addition to being able to provide for the businesses, it gives us a backbone to provide services to communities. And that is enhancing the abilities for libraries, schools, community centers. So this is like a product that is really driving community conveniences. ASHDOWN: XMission has sold a lot of QMO to business customers, as well. It’s the differentiation between fiber in a downtown area versus fiber to your house. The residential access is where we are entering our partnership with Qwest. COX: One of the important things, talking about ethernet and broadband, are business customers. There’s a big drive for more bandwidth, and especially where there are satellite offices in rural Utah. One of the important things that has happened just the last few months is the formation of a company called Western Fibernet, which is made up of five rural telecoms in the state that have put all their fiber together to provide a rural fiber optic network that covers almost the entire state. It runs from Boise through Kamas and out to the Uinta Basin, Roosevelt, Vernal, down to Price, Green River out to Denver, and then a loop that runs to St. George and down to Las Vegas and out to Wendover. This fiber optic network is going to allow for some real incredible economic development in rural Utah. MARRIOTT: Western Fibernet represents the largest fiber in the state, even past UTOPIA. And when Western Fibernet and UTOPIA match up the systems, you can see at some point call centers along the metro area. They will use XMission services across UTOPIA to deliver fiber across Western Fibernet and rural areas down there, where we have people that can be working from their homes and making a great living with great jobs for companies that are here. CHILD: Comcast’s philosophy related to reliability is multi-faceted. We serve from Logan to Nephi and from Heber to the Tooele/Grantsville area. And over the last 10 years we have invested more than a billion dollars in our network with a very simple philosophy. The philosophy is that we can offer cutting-edge services that are going to meet people’s needs now and in the future, and we are going to continue to enhance those services based on DOCSIS 3.0 and the other innovations that we have both in HDTV and digital voice service which is IP enabled. But the reason that we do that, the reason that we invest in our own network and the reason that we are keen on using our own network, is that we can manage that network and we know the network. We can enhance the reliability because we run it, we manage it, it is ours and it’s really vital to us as a company. So our philosophy is we build our network, we manage it, we own it, we run it and we will achieve great things for both our residential customers and the business customers. Have there been any consolidations in the industry that happened during the past year or other kind of merger activity that have affected you? McGHIE: The wireless space is probably a lot like the early formative years of the cellular and cable industries. For the past several years there have been a lot of mom and pop-type businesses around. Over the past year and a half, there’s been a tremendous amount of consolidation, and that consolidation is actually probably still in its early stages. I foresee a lot of consolidation yet to happen in the wireless industry. I think there’s a lot of good technologies that are coming out that smaller organizations can’t take advantage of. Consolidation allows for the wireless ISPs to build stronger networks, larger networks, bigger footprint, more reliability, higher speeds, etc. But I’m speaking specifically of the fixed wireless space. Right now there’s a lot of consolidation within its own industry. I see the first level being a consolidation within our own industry and then maybe our industry getting gobbled up by some larger players. NIEBOER: In June of last year, Integra announced we were acquiring Echelon. That closed in September of last year. That was a pretty major acquisition for us and it just about doubled our size. The interesting thing was we were really seeing a lot of consolidation up until that point, and because of the credit crisis and what’s happening with the economy, I think we are seeing a slowdown of that activity. I think when things get a little more solid again we will see a speedup. Now if you see any mergers and acquisitions, it is going to be mergers, stock swaps because the cash isn’t available for folks to go out and get their hands on the cash to make an acquisition. MARRIOTT: I think you have to point out it’s a huge political issue right now. The 1996 Telecommunications Act isn’t going as planned. I think that large monopolistic ILECs are trying to take advantage of Section 10 of that and the forbearance issues that relate to that. I think a lot will happen in terms of mergers and acquisitions and how that comes to play in terms of the next administration, the FCC and other counterparts and how they work with the 1996 Telecommunications Act. STAPLES: Just a trend that we have seen inside of the space that we play—two of our biggest competitors, both who have a big footprint here in Utah, Via and Aspect, were taken by private equity firms. And it’s recent enough that we are still kind of watching to see if they behave differently and will it cause their competitiveness to either increase or decrease. I think we certainly could see more go private, as it is quite expensive to stay as a public company. COX: As far as mergers and acquisitions go, I think in rural Utah and nationwide we are still seeing, even with the credit crunch, some consolidation, especially between telecom and cable in rural areas. The importance of the triple play is being felt everywhere. And one way to immediately offer the triple play is to acquire your competitor. We have been very aggressive. We have acquired several cable properties over the past five years and are continuing to look for those opportunities. We acquired all of Sevier County, all of Sanpete County and other small parts of Utah where Comcast isn’t, basically, from two companies: Precis Communications and Mallard Communications. SISK: We watch the voiceover IP market and we do a lot of support for companies that do voiceover IP, and I think, personally, that voiceover IP has accomplished what the breakup of the Bells never did and that is to allow a lot of other people into that industry. There are now so many voiceover IP providers who are able to provide services over the Internet that maybe could never have met the criteria initially to provide that service with the breakup of Bell. So I think to some degree we are seeing more new companies start which down the road may be acquired. But there are a lot more new companies being launched in that particular industry. PROPER: I think Delphi was probably the last major Comcast deal, and prior to that what brought us aboard here in Utah was the AT&T broadband acquisition. It’s been a few years since we have been involved in acquisitions, but we have had to respond from a competitive standpoint across the country to the mergers and acquisitions that we have seen. I mean, just to put things in perspective, AT&T with their last merger is twice the size of the entire cable industry. So that’s obviously a formidable competitor to have to compete with. And while AT&T isn’t the ILEC here in this community or in this state, nonetheless, from a company perspective, it drives capital in terms of the direction of where it is going to be spent. So even though you may not be a part of a merger or acquisition, I’m guessing in some way, shape or form you have been affected by a merger or acquisition that’s taken place over the last course of the year. So VoIP, from what I’m hearing, is a combination of the big players moving and then smaller players getting in. What trends are going on with VoIP companies? Beyond Vonage and Skype, what are other VoIP companies doing? SISK: We support probably 50 or 60 wireless ISPs all over the country. All of these wireless ISPs are now interested in getting into that VoIP market and marketing their own VoIP product to their customers, and it has created a new industry and a whole new revenue source for these smaller ISPs. CHILD: Vonage calls go over the Internet. Our technology for our voice calls is based on Internet protocol but it goes over our network, not over the Internet. So while some argue that Internet calls aren’t great, our technology actually goes over our network, so it is really using a technology to enable it, rather than the existing switch circuit technology. NIEBOER: I don’t think Comcast advertises that their product is VoIP, but I’m guessing you’re using the VoIP technology to process some of your calls or all your calls. CHILD: No. We’re using IP technology. Because VoIP is more Vonage. But to use that technology to carry it over our network so we can control the call. NIEBOER: It depends on how you define it, but it’s essentially a voice application. We are all doing voice applications. We are all using technology to put that over the different networks that we manage, that we own, that we lease. We’ve got services going over wire line and we’ve got services where we are using IP technology. And at the end of the day, it’s about whether you can provide a good, reliable voice service over your network. It’s not just about voice. STAPLES: A lot of applications get enabled based on the fact that you are driving voice over an IP network or applications over an IP network that you couldn’t do before. We talked about work-at-home agents. To use the old circuit switch network and try and set up supervisory monitoring and all those kinds of things was a nightmare. Now it’s greatly simplified. So if you call it IP telephony or driving voice over an IP network or VoIP, from the business side, we don’t deal with consumers, but from the business side that is the driver to grow for equipment manufacturers and voice software application providers today. Prior to the introduction of IP telephony, our entire industry was growing at four and five percent, and now it is growing in the 20 percent. Where does the Federal Communications Commission (FCC) fit into the telecom industry? SISK: One of the challenges that a lot of the smaller ISPs are concerned about is the term “network neutrality” and they are very concerned that on the networks, someone who owns a network is going to block certain services. Because, for example, they have the network, so they don’t want anybody to use the voice over IP other than their voice over IP. So they will block that, the ports or whatever is necessary to keep people from using those networks. MARRIOTT: From a regulatory stand-point, there were networks that used to be monopolistic that have been broken up in the 1996 Telecommunications Act and we all benefited from that as we provided services over each other’s networks. Whether it was Electric Light Wave, Integra, Level 3. Now with some of these new technologies, the FCC doesn’t know what to do because, for example, Qwest will take fiber-to-the-node and say that doesn’t apply to the 1996 Telecommunications Act because it is now fiber. ASHDOWN: There has been one case where an ISP was blocking Vonage from selling services to the customers and the FCC did step in. So on the issue of network neutrality, I’m more of a fan of the retroactive response rather than the proactive response. If somebody is not behaving in a competitive fashion on a fair basis, the FCC has the right to come in and correct that. But trying to predict all the anticompetitive behaviors is extremely difficult on a regulatory basis, especially if there are reasons for me blocking my network that are very valid. I don’t want spammers sending e-mail to my customers. I don’t want somebody sending denial of service techs to my network and disabling the entire network for everybody else. I have to react to those situations without being shackled by regulatory demands. PROPER: Just to dovetail on that, I think with regards to the network neutrality argument, that’s just the problem. How do you define that? Everybody has a different definition. As an Internet service provider with a network, shouldn’t customers expect certain management of that network? But there are those that would say no, that’s infringement upon the network neutrality. So to some degree it’s a solution and a problem. ASHDOWN: The consumer has a broad choice of Internet service providers. If they don’t have that, they are at the mercy of whomever they can get service from. What role do municipal networks have in the industry? Do you see municipal networks expanding in the state? ASHDOWN: I see the smaller mom and pops, the independent ISPs, being locked out of the larger network, not being able to provide service. And that’s where I think municipal networks offer an opportunity for fair play and competition, because they are open to everyone who wants to come and compete with them. So if we don’t have municipal networks throughout the country and there’s not an initiative to increase our infrastructure nationwide like South Korea does or Finland or Sweden or some of the other countries, we are going to be at the mercy of the larger network providers. MARRIOTT: Municipal networks simply have to expand. You have to compare it to our road system. If we only allow the post office to deliver the mail, we are at the mercy of those regulations by one entity. What UTOPIA represents is infrastructure. We don’t provide services to the customers. We provide roads so you can choose to have Federal Express, DHL, U.P.S. deliver your packages or you can have R. C. Willey bring your furniture. We talked before about how we used to call it “the light bill” because it simply lit the lights. But broadband now will be so much more than just telecommunications. It will provide infrastructure to a whole lot more, from securities to telecommuting. So today several people in the room that could benefit, and do benefit, from the municipalities bringing those roads into their communities to allow water to flow and allow choice. And that’s what UTOPIA is about and that’s what the communities want—choice. Anywhere that UTOPIA has gone, it has not only been the choice on the municipal broadband of UTOPIA that has driven down prices, but everywhere we have gone Qwest and Comcast have competed and provided better service and more bandwidth. So if you don’t have the municipal-driven systems, then Utah will not have the broadband it is going to need. YOUNGER: Qwest has embarked on a $300 million network infrastructure upgrade to bring fiber-to-the-node technology to hundreds of neighborhoods across our 14-state residential service. While a significant investment is being made here in Utah, most of that money is being spent in states and communities UTOPIA does not serve. Further, customers are accepting this technology at a rate that is ahead of projections. PROPER: Just for the record, we have the same pricing and network in non-UTOPIA communities as we do UTOPIA. MARRIOTT: UTOPIA has a huge task ahead of it. We have a lot of influences that prohibit its growth. But eventually, UTOPIA will expand into other cities and provide to those areas. The interesting thing about UTOPIA is it’s seen as a government-run system, but in fact, it is the most open market, competition-driven system, outside of maybe Comcast, in the state. It’s driven by demand and it provides open network architecture for people to provide competition on board. SISK: The specific situation in Provo is a challenge because most of the municipal fibers or municipal networks are driven on a four-year term. It is very politically driven. And if Provo had been able to take the long-term outlook that Comcast or UTOPIA or Qwest or any of the other companies can take and look at it and say, “When I build this out, how long will it take me to get a return on investment?” If they had been able to take that look it would have been different. But their decision was politically driven. And they don’t have the ability to say, “I’m looking at a 20 year return on investment.” They can’t do that. COX: That’s the problem with municipal networks and it’s why we take the opposite view; we think the peak of municipal networks has passed and is on the downside for those very reasons. I also am a mayor, so I have a fairly unique view on this. In talking to other mayors and city councils, there are a lot of UTOPIA cities that wish they could un-ring the bell. But the problem is this is such a volatile industry that politically it’s almost suicide to get involved in something because we are all squeezing. And, the return on investment, you may get it in 20 years or you might not, and that’s a very, very difficult thing as a municipality. We frankly take the position that it is just not a good thing. It’s not a business. It’s not like the roads. It’s not like the power department. This is much, much more competitive. SISK: I speak at ISP conventions pretty regularly and people ask me, “You’re from Utah. That’s where UTOPIA is.” They know about it and they ask about it. But the difference is UTOPIA is not a single city. And from my perspective, that allows them that little bit of a long-term outlook as opposed to the short-term four year cycle of an election that most cities have to look at. MARRIOTT: I think it must be pointed out, too, that the municipalities doing this are on the rise. We get calls on a regular basis from communities across the nation that are looking to do this. It’s been very successful, but you do have to have that long-term outlook. The infrastructure is very expensive. We are road builders. To build a road from here to Provo, how would you measure that success and its value? What is going on in the enterprise space? ASHDOWN: I think a lot of large companies are realizing that it’s a loss to try and devote manpower towards fighting spam and managing e-mail systems and web servers. Outsourcing that as much as possible is a trend, even to the point where people want to outsource their hardware rather than put it in a collocation center. They want managed hardware and they want virtual hardware they can expand as they need it. NIEBOER: We are seeing a significant increase on the bandwidth needed from some of the service providers that provide special applications, whether data backup or data center hosting facilities. The bandwidth that those folks need connected to the main Internet network is growing leaps and bounds. And then you talk to the enterprise customers and they are increasing how much bandwidth they are having from all of their branch locations and the corporate locations back to those types of sites, whether over the Internet or on private networks. So I think that shows that folks are outsourcing to a more hosted type environment rather than having all the expertise for all the applications they want on their own. And then the bandwidth is just going up for that connectivity. YOUNGER: Data storage is a huge business for Qwest. And not only are businesses looking at that, they are looking at disaster recovery. We have 15 cyber centers around the country. Being able to get back up and running after a disaster is imperative and the cyber centers are a very huge part of that. McGHIE: I think redundancy is another piece that dovetails into that. But just redundancy from the standpoint of if a fiber gets cut in the wireless space is something we push, so if the streets are getting chopped up and something goes down, companies’ data applications are not affected. It’s so crucial that it’s imperative that there’s virtually 100 percent uptime. So another application that people are looking for is just simply redundancy. STAPLES: I think from a premise-based equipment perspective, by far the biggest trend is the migration to IP telephony based products. If you go into the switch closet and look at the PBX that is in there or the ACD that’s in there, they are IP based products. They are running the traffic over a converged network inside of the business over an IP network, so they are running voice and data over that network. There’s cost savings around it and there’s certainly additional applications and richer applications that they can run. But if you go back probably four or five years ago it was still in its early adopter phase and now it has crossed. There’s new lines and new equipment being sold, there’s more IT based equipment than there is the traditional TDM based equipment. What are the new whiz-bang services that consumers and business customers are going to start seeing that are going to change everything again? ASHDOWN: I think we are seeing a lot more of the video on demand straight from the networks. NBC, CBS, ABC offering up their catalog of shows so people can download them on the Internet, cutting out the middleman completely. It will get to the point where the only thing you want to watch live is news and sports events. Everything else is going to be orderable and on demand. If you go to the network and watch the shows, you will get a commercial you can’t skip past. They are realizing people skip commercials, but they are seeing other revenue sources by doing it straight off the Internet. PROPER: From a Comcast perspective, we are ever increasing our “on demand” both from a national and a local perspective. One of the other pieces we are finding is, yes, there’s lot of whiz-bang technology, but we are going back and trying to educate our customers on what they already have. We find a host of features that we have in our various services that people aren’t comfortable with. There’s a huge gap between what our consumers are taking and what they know they can already do with what they have. YOUNGER: “Prime time” is now be-coming “my time.” And you’ve got to be able to get access to what it is you are looking for when you want it, so the broadband that Qwest is investing in is backing that up. But it’s also kind of changing some of the ways that we are marketing some of these products, too. You can walk in to one of our Solutions Centers and you see the cell phones, you see the various products that we offer. And that’s great. But now what we are doing is we are starting to look at the experience, “What is everything going to do for me? I don’t know what the pieces are, don’t know what the individual things do, but this is what I want to happen.” That is changing how we retail, also; how we meet the needs of our customers, by being able to provide them with that information the way that they need it and want it. ELLIS: To piggyback that, we represent the wireless retailing space and we are seeing a huge interest from consumers in having access to that information on the go. And so we are seeing handset manufacturers build products with bigger screens. I think the next whiz-bang product offering is going to be a TV over the air via your mobile device so you will be able to sit in the airport and watch the Superbowl if you want. COX: We are seeing two trends. One is a drive for local content that we haven’t seen in the past, especially in rural Utah. I mean, it’s great to know what the weather is going to be in St. George and Salt Lake, but there’s 90 percent of the state that resides outside of the Wasatch Front, so they want to see their local sports and see local news, and know what’s happening in the rural areas. The second is this generational gap. I saw a report that said that actual minutes of phone use went down for the first time among the wireless carriers because they don’t talk on the phone anymore. They are texting. You can convert voice into text and text back into voice, which sounds like a telephone conversation. And that’s where we’re headed. Getting a handle on this generation that has more resources at their disposal than ever before and doesn’t care as much about quality, but cares about mobility more than anything, is going to be really interesting for a lot of telecom providers.
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