AT&T reported a slight boost in profits this morning, and the carrier has quite a bit to boast about, especially on the wireless side. iPhone activations reached 2.4 million during the third quarter, and 40 percent of those iPhones were sold to new subscribers who activated on the AT&T network. And despite what analysts say, AT&T also seems on track to reach 1 million U-verse subscribers by the end of the year, gaining 232,000 subscribers this quarter for a total of 781,000 signed up at the end of September.

Total revenue for the carrier was $31.34 billion, up from $30.13 billion the same period last year. That led to profits of $3.23 billion for the quarter, up from $3.06 billion from the third quarter of 2007. AT&T should retain its wireless lead with 74.9 million subscribers after gaining 2 million during the quarter. We’ll have to see how many Verizon added to the 68.7 million it had at the close of June, when it reports earnings on Oct. 27.

For the first time, AT&T also broke out the total number of wireless and wireline broadband subscriptions, signaling the growing importance of wireless broadband data. Total broadband-capable connections increased by 2.9 million in the third quarter to reach 20.7 million. Since the iPhone data plans count as a broadband subscription, many of those adds look to be iPhone related. Wireless data revenue was up by 50 percent from the third quarter of last year at $2.7 billion and accounted for 24 percent of total wireless services revenue. Postpaid annual revenue per user (ARPU) on the wireless side was $58.99.

AT&T earlier this month reorganized its business into consumer and business related segments as opposed to wireline and wireless, but still reported wireless and wireline sales separately for the quarter. The carrier is watching its landlines and DSL lines erode further, but U-verse subscriptions are taking up some of the slack on the wireline side. IP traffic is continuing to increase as part of the wireline business, with 44 percent of AT&T’s sales coming from IP services such as broadband, rather than analog phones. AT&T should welcome the digital — and data driven — future.

Today on the Verizon Policy blog Link Hoewing writes about the results of an academic research paper that looks at the effectiveness of “shaming” corporations into behaving properly. The research examines how companies respond to social pressure related to environmental causes, and shows that companies tend to improve their behavior after receiving poor rankings from independent social ratings agencies.

Hoewing uses that research to argue that self-regulation works, because it is in the best interest of the company to listen to its customers. He brings up the current issues of online privacy, where ISPs have turned to firms such as Phorm or NebuAd to profit by selling advertisements served up based on where a customer surfs:

Interestingly, a couple of years back during the debate on net neutrality, I made the argument that industry leadership through some form of oversight/self-regulatory model, coupled with competition and the extensive oversight provided by literally hundreds of thousands of sophisticated online users would help ensure effective enforcement of good practices and protect consumers.

So far that really hasn’t worked out. There are two problems with this argument for ISP self regulation. The first is that there’s little competition, meaning customers can’t vote with their feet if an ISP is abusing their privacy. Second, there’s no real transparency into who’s using such services, unless an independent agency is able to find out about it.

So, as the ISPs want to offer up their own regulations for handling your privacy online, beware of this line of thinking that says industry self-regulation will work. If carriers could be shamed into doing the right thing, AT&T wouldn’t be helping the government listen in on our phone calls.

AT&T plans to sell its triple-play U-verse services through more than 600 Circuit City and  Wal-Mart retail stores beginning this month. There are a few things about this plan that just don’t make sense. First, the choice of stores, namely the floundering Circuit City, is perplexing. Why not a more successful electronics retailer such as Best Buy, which already is stocking the iPhone and working to sell other services contracts?

The other odd thing about this announcement is the idea that consumers will go to a retail location to learn about their broadband, voice and video services rather than through a traditional television, mailing or online ad campaign. Essentially this is another, potentially more interactive form of advertising, which could be a good thing given the current cable attack ads around HD channel delivery and what qualifies as a fiber network. However, the strategy looks expensive, and it seems to indicate that AT&T is having a hard time signing up the 1 million U-verse subscribers it says it will have by the end of the year.

AT&T’s move to reorganize itself into four business units is likely a precursor to layoffs, according to sources within the company who asked not to be named. The reorg comes as AT&T tries to adjust to the realities of the credit crunch, a diminishing access line and DSL business, and increased headcount caused by two large mergers in the last three years.

News of the reorg, which will see the creation of consumer, business, infrastructure and diversified products business units, trickled out yesterday. John Stankey, the former president of AT&T’s telecom operations, will head the infrastructure division; Ray Wilkins will remain CEO of the diversified businesses unit; and Ronald Spears will head the business unit. Ralph de la Vega, currently the CEO of AT&T’s wireless business, will head up the consumer business, which will contain wireless, broadband and video services. AT&T subsequently confirmed the moves, saying it wants to make consumer products work better across its portfolio of devices.

The reorganization will better align the company as it competes against the cable carriers. Just yesterday we noted how the phone companies have a hard time attracting customers to their triple-play bundles because of speed issues on DSL lines. Once those broadband connections are upgraded, the ability to combine data, voice, video and wireless for a quadruple play could put the carriers ahead of cable. But in order for that to work, the old division between wireline services, such as U-verse, and wireless needed to come down.

However, as the company streamlines, it’s also likely to find redundancies. Managers inside AT&T expect that they’ll soon get targets for headcount reductions ranging anywhere from 5 percent all the way to 20 percent in some areas of the company (I bet DSL and wireline will be hardest hit). When asked about layoffs via email, AT&T spokesman Marc Bien said, “Regarding headcount, at this time, we have no specific plans for workforce changes related to this new organizational structure.”

Employees believe it’s only a matter of time. News of rising costs related to AT&T struggling to sell its short-term debt, and the recognition that costs still need to be trimmed in the wake of its acquisition by SBC Communications (which then took the AT&T brand) in 2005 and BellSouth in 2006, have many concerned. Earlier this year the carrier announced a workforce reduction of 1.5 percent (about 4,650 workers) in its local phone business, but it still employed 307,550 people as of June 30. I expect that number will drop again soon.

Cable providers rate poorly on both customer service and pricing, but thanks to their speedy broadband service, they have so far managed to score more customers than the phone companies, according to a survey out today from research firm CFI Group. The survey, which quizzed 1,318 households online at the end of June, measured consumer satisfaction with telecommunications providers.

The research showed that while cable providers were getting more customers for the time being, telecommunications firms have a chance to win subscribers back as they roll out faster broadband services, IPTV and even wireless bundles. The research also underlined the demise of landlines (1.6 million gone for AT&T and Verizon in the last year), and customer dissatisfaction with slower DSL offerings from telecommunications carriers (nearly 70 percent of net broadband additions went to cable in the second quarter of 2008).

The phone guys even lose out on bundled services. Of the 60 percent of users surveyed who had a bundled service plan (usually a combination of voice, video and data), only 31 percent purchased their bundles from a telecommunications firm. The remaining 69 percent bought their bundles from a cable provider, but that doesn’t mean they like it; twice as many consumers would actually prefer to bundle communications services with a phone company as with a cable company.

This could be a case of the grass being greener, but I do think IP services built on faster fiber-to-the-home networks like Verizon’s FiOS service, could beat cable. I’m less convinced that AT&T’s fiber-to-the-node strategy will be as compelling, since the speeds are more comparable to today’s cable speeds.

source: CFI Group

Last week, when the FCC published an order aimed at halting the collection of and reporting on the quality of telephone service on a nationwide basis, we were pretty disappointed, as it came off like the agency was just throwing in the towel on real regulation and reform. Since one of the reasons behind the FCC decision is that the data is available at state utility commissions, I surfed and called around to the commissions at the five most populous states to see how difficult it is to compile and compare quality of service data.

My conclusion? It’s no picnic. Beginning with my home state of Texas, it took a phone call to get a basic report faxed over (they can’t email it). The report offers the total complaints registered against telecommunications companies vs. those lodged against electrical companies and lists the top offenders in each category. More details require a Freedom of Information Act request and a wait of up to 10 business days. California required a phone call and some back and forth to get some information, which includes data on the number of repairs and the amount of time a customer waits for refunds. A week later, I’m still waiting to hear back from the commission in New York.

Illinois publishes its quarterly quality reports on its web site, and tracks information ranging from length of time services were out and whether credits were issued for no service to the amount of time it took to get an operator on the line. Florida also published the reports on its web site, but the most recent one for AT&T (the company I was trying to track) is from 2007. Florida tracks a lot of stuff (their reports are about 24 pages compared to one in other states) from the timeliness of repairs and to how long it takes to get a number listed in directory assistance.

So compiling and comparing these reports to get a measure of how network quality and customer service complaints are settled is not all that easy and may not even be doable, since the information might be old and may not match across all states. At the least, it would at least take multiple FOIA requests and weeks rather than days. My research covered five states where about 36 percent of the population lives, but an apples-to-apples comparison on a nationwide basis seems to be impossible.

Another FCC objection to collecting this data is that it only covers access lines, the wireline telephone service rapidly going out of style in many households. I agree with the FCC that this data is bordering on obsolete, but instead of ditching it, the federal government should really expand the regulatory oversight of other voice services, from wireless to cable VoIP.

The difference between regulation of various broadband delivered services from video to voice should be eliminated, and it should be done at the federal level. Cable companies and telecommunications firms should not be held to different standards when it comes to reporting quality data, getting local franchise agreements for deploying television services or even requirements to serve rural areas. There will be plenty of fights over which questions to ask given how different the cable and telco networks are, but at the end of the day both types of companies are offering video, voice and data over broadband. They should play by the same rules.

The economic downturn, in particular the housing market slump, that has been pressuring U.S. telecom operators now seems to be extending to cable operators as well. After enjoying nearly eight quarters of solid growth, it looks like the U.S. cable telephony business is slowing down.

The proverbial canary in the coal mine sounded the alarm yesterday. ARRIS, which makes hardware for cable operators, lowered its second-quarter forecast for both profits and revenues. Management blamed maturing cable telephony deployments and a slow housing market on the reduced demand for cable telephony services.

I think both are valid points. First, cable voice has become pervasive. You can now call your cable operator and get a fixed line connection without worrying if they actually offer voice service in your market. (Whether you’re happy with them, however, is a different story altogether.) So it’s hardly a surprise that the demand for equipment would slow down.

As we’ve previously noted, cable VoIP has been on a tear. At the end of the first quarter, Comcast had 5.1 million customers, while Time Warner Cable had 3.17 million, followed by Cox’s 2.46 million, Cablevision’s 1.68 million and Charter’s 1.08 million. Many of these subscribers came at the expense of telephone companies. Telegeography estimated that there were about 16.3 million VoIP households at the end of the first quarter of this year.

The cable companies benefited from the previous surge in new housing starts, which led to spectacular growth in their broadband and voice telephony businesses and in turn, made it easier for people to switch away from telephone companies. A slowdown in this business is only natural. In fact, I wouldn’t be surprised if large cable companies saw a sharp slowdown in broadband growth as well.

The real question is, just how big will the slowdown be? With the second-quarter earnings season just getting underway, it won’t take long to find out.

AT&T, long before it merged with SBC had made a half-hearted attempt at getting into consumer VoIP by selling a service called, CallVantage. It was surprisingly good, especially its call quality. Unfortunately, the company never quite made the commitment to it. And when SBC merger happened, well it fell victim of save-your-mentality that comes with it. Today, there is word that AT&T has stopped pushing the service through its affiliate channels - a sure sign that the company is backing away even further and would shut it down soon enough. Some believe that shut down is going to come next year, though I thought it was already killed, since the former AT&T Callvantage boss is now running AT&T’s CDN business, and we have not heard a single pitch from the company in over a year. I guess this is one less thing Vonage has to worry about!

AT&T has decided not to renew its contract to resell television services provided by Dish Networks. The announcement, made last night in a filing from Dish with the SEC, have sent shares of the satellite company tumbling and analysts rushing to point out that this may not be the end for Dish and AT&T. My question is, why not? Where the heck is AT&T’s belated IPTV service?

Several analysts said that AT&T’s refusal to automatically renew the five-year-old contract means the telco will try to negotiate a better deal by bringing Dish rival DirectTV to the table. Others say this kills any hope that AT&T might buy Dish. But Dish has been a stopgap measure to give AT&T a triple play of voice, data and video as the cable guys encroached on the voice business. AT&T has always wanted to offer its own video service.

Six years ago I sat through demos of AT&T’s Project Lightspeed (now Homezone) and marveled at the coming television service options ahead. By that measure I’ve spent a fifth of my life waiting for U-verse as it worked through technical hurdles and issues with the Microsoft platform. And only now is the service getting widely rolled out. Dare I hope that AT&T is actually getting close to owning its own triple play?

Right now, according to an emailed response from an AT&T spokesman, “U-verse TV is our primary offering in the areas where it is available, but AT&T | DISH is available across our footprint.” As U-verse expands, losing the AT&T contract may not be such a blow.

Like all the other geeks in attendance, I couldn’t help myself from letting out an audible “whooo” when Google showed off an Android phone demo Wednesday that linked Street View to a compass (see video below). Sure it was just a demo, but watching the virtual-reality performance of photo-maps linked to hand motions shows how cool new applications could be when they start by running on a high-end mobile phone.

Delivering lots of cool new apps is the promise of Android, the open source mobile OS project from Google. With a much-improved iPhone-ish look and feel, the base Android platform seems ready for prime time and on schedule to launch somewhere, sometime, later this year. But I still see three big problems for Android apps that could keep the add-on market small for the foreseeable future.

Specifically the problems are:

– how many carriers are really going to offer Android phones?
– how will users find Android applications?
– how will developers convince users to take a chance and download their app?

Until Google can help answer those questions, Android apps are probably going to lag far behind those provided by big carriers on their captive hardware/software offerings, especially those designed for the already popular iPhone.

With a big crowd overall and packed rooms at Android-specific discussions, the Google I/O conference Wednesday showed there is great interest from the developer community for the idea of an open-source platform for the development of mobile apps. And the list of early winners in Google’s Android app development contest shows a wide range of creative thinking, with developers using the features of mobility and base apps like maps to build new, rich and sometimes quirky programs that would likely never get past the first gatekeeper at AT&T Wireless or Verizon.

But getting back to the problems — without a committed list of service providers, Google doesn’t have much of a market to offer developers yet. Similarly, the company’s silence on any kind of an apps marketplace means developers might be on their own when it comes to marketing their one-off ideas, adding a huge degree of difficulty, especially for smaller shops.

And the lack of an application certification process (Google said Wednesday that users will be asked to certify an app themselves at install) means another big hurdle for developers to cross, namely convincing users to trust that their app is safe, won’t break their phone or transmit personal info to undisclosed locations.

Seems like a lot to ask from users, especially those in the U.S., who historically haven’t been able to do much with their phones other than download new ringtones. Add education to the list of above problems and you see why I think this market is going to stay small for some time.

Paul Kapustka, former managing editor for GigaOM, now has his own blog at Sidecut Reports.

AT&T, in conjunction with some 10-15 incumbent telecom carriers — British Telecom, Deutsche Telecom and NTT among them — is plotting to launch a Skype competitor, according to a research report issued this morning by ThinkEquity analyst Anton Wahlman.

This is Wahlman’s theory for now, but his track record is full of theories that have eventually been proven right. For instance, he once issued a report that outlined 16 reasons why Cisco should buy Scientific Atlanta — which the networking giant went on to do, for $6.9 billion. For that reason alone, I put in a call to AT&T to get the lowdown, but all they would offer was the boilerplate phrase, “We can’t comment on this type of speculation.”

Anyway, back to the Skype competitor! Essentially what Wahlman is saying is that incumbents are going to offer a VoIP client that will work on the incumbent broadband/3G wireless pipe, and will use a backend platform that will allow folks to make free voice calls to anyone who’s logged into it.

Much the same way as Skype-to-Skype calls are free, incumbents could use their platform to keep calls from each other’s network free. The plan could help them avoid the termination charges and still make money when the calls go off the network to, say, a rival’s phone service or wireless network. “We believe that they will have to use a common client and common software platform in order to make this work,” Wahlman said.

Isn’t it too little, too late? Realistically speaking, there’s a slim chance of anyone catching up with Skype, which keeps adding subscribers and which, despite being mismanaged by its acquirer, has a momentum all its own. “Better late than never,” was Wahlman’s take.

Here are some key points about this yet-unnamed proposed Skype killer:

* To be launched in 2009.
* The concept will be extended to mobile phones eventually.
* The service would run on the carrier broadband connection, and also on top of the 3G/4G wireless broadband pipe.
* The service will be used as a lure for selling other services such as video.
* The incumbent consortium partners can brand this service any way they want.

Big shifts in the telecom landscape are forcing the carriers to think along these lines, Wahlman said in a chat earlier this morning. First, carriers are reluctantly facing up to the fact that voice has become a losing proposition. Thanks to competition from folks like Skype, voice is becoming essentially free. Second, they are losing fixed-line customers with an alarming rapidity.

As I have noted previously on several occasions, the carriers are in a race against time — these line losses basically make their plans to sell other services such as broadband and video impossible, thereby risking their future plans all together. The cost of winning back the customer who switches to, say, cable, VoIP, or a rival’s wireless service is just too high.

In the past, carriers have merely taken half-measures to address the voice-for-free problem. So this is radical new thinking: If voice is a losing business, why shouldn’t the carriers cannibalize it themselves, then sell other services, including video? As Wahlman noted, “Robust data connection is the most valuable service the carriers sell.”

Amen to that. I just find it hard to believe that the dinosaurs are finally getting jiggy with this new way of thinking.

About two months ago, I wrote about my decision to get rid of my land line and rely strictly on my cell phone — with its unlimited plan — for my voice needs. It was a mistake. My social network (namely in the form of my mother-in-law) couldn’t take it, so my husband and I capitulated and returned to AT&T for a basic land line with no frills for about $20 a month.

I should note that when we lost the land line, neither my husband nor I really noticed. There was one awkward moment when I had to send a fax and realized I couldn’t unless I went down the street to the grocery store, but other than that, I never missed the cord. My mother-in-law, on the other hand, a wonderful woman who still carries around a copy of the Yellow Pages in her car for when she needs to look up a number or an address, was very uncomfortable with the idea.

Since she regularly comes over to watch our daughter, and never charges her cell-phone battery, I saw her logic. And it got me to thinking about babysitters in general, and the possibility that we may one day hire one who didn’t have a cell phone (hey I suppose it could happen). More likely would be a case of bad reception, but if that coincided with any sort of emergency, they’d essentially be left incommunicado. It just seemed safer and easier to keep a cheap, dedicated land line.

To me it’s an important reminder that technology is essentially about linking us to one another (and being able to carry 10,000 songs in a gadget smaller than a cigarette case). To really make it work, your friends and family have to participate as well. That’s obvious on a social networking site, but less so when it comes to hardware and networking. For when I tried to cut the cord, my family wouldn’t let me

photo from wikiHow