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.

Updated: Cisco on Friday said in a filing that it planned to close its Broadband Telephony Services unit in the Richardson, Texas, office and will lay off 129 employees between Oct. 8 and Dec. 12. The networking giant filed this information with the Texas Workforce Commission on Oct. 10. In its letter to the commission, the company wrote, “A decision has been made by Cisco Systems Inc. to cease operations in its Broadband Telephony Services operating unit within its facility located at 2200 East President Bush Highway, Richardson, Texas 75082-3550.”

Richardson, near Dallas, is where Cisco opened a new data center in June 2008 as part of the company’s data center consolidation plans, and is also home to several other Cisco business units. For perspective, Cisco employed 66,129 people as of July 28, according to its filings with the SEC, so this is a small number of employees. I’ve asked Cisco for more details on the notice as I’m not sure if this is indicative of weak broadband telephony sales, the macroeconomic climate or simply a consolidation effort. I’ll update with more information once Cisco gets back to me. Updated below

Cisco issued a statement that read:

Cisco continuously evaluates its businesses to align human and capital resources to address key growth opportunities and improve efficiency. As part of our ongoing business processes, Cisco continually prioritizes its resource allocations to properly align those resources with revenue generation, profit growth, and market share opportunities, positioning itself for long-term sustainable growth.

That’s typical corporate speak for something that’s not making much money anymore, but I didn’t get information from Cisco on what the Telephony Broadband Services unit is . They’ve bought a lot of companies in Dallas over the years and my guess is these layoffs were related to one of those buys. Any help readers?

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.

An almost decade-long effort to bring an unknown wireless broadband technology to the U.S. is set to bear fruit next month in Florida after XG Technology Inc. scored a $375 million infrastructure deal backed by a secretive Swiss billionaire. Earlier this week the Financial Times said Sarasota, Fla.-based XG scored a $375 million deal from an investment firm owned by Johan Bohman to start deploying XG’s low-power wireless base stations. So far I’m taking this story with a heaping grain of salt, especially since other reports call this guy a reclusive Swedish billionaire, and there are allegations of fraud regarding a member of the company’s management team, plus uncertainty about the technology.

XG, which is listed on the AIM market in London, is pushing a low-power, long-range wireless technology called wMAX that they’re pitching as a competitor to cellular and WiMAX networks. They already have handsets in the works, and FCC approval. According to the company, its signal range at 900MHz is 7.55 miles, compared with 2.3 miles for GSM, 2.46 miles for WiMAX and 2.53 miles for UMTS (3G), all using equal average power.

The goal is to roll out a VoIP service in South Florida this year and launch data and modem services in 2009, according to the Financial Times.  I’ve called the company to learn more, but have not heard back. If it can deliver a low-power, mobile broadband service that would be a cheaper alternative to cellular and possibly to other wireless broadband efforts, that’s pretty sweet, but it seems a little too good to be true.

Ready for a little Friday humor? Well there’s this British carrier called BT that’s spending £10 billion ($17 billion) to build out an all-IP network that would handle the massive influx of converged data, voice and video traffic coming over the next few years on one network. They’ve been trashed and mocked, as so many visionaries often are, but they’ve kept on building, with the goal of finishing the network by 2011. Only they apparently didn’t build it to talk to the next-generation protocols, which is like spending £10 billion for a machine that translates spoken Latin.

BT told a high-speed broadband provider in the UK that it doesn’t support IPv6, which is a protocol backed by the Internet Engineering Task Force. There are all sorts of dire warnings explaining how as more devices connect to the Internet (like your digital picture frame or thermostat), we’re going to run out of IP addresses to give them. That means we need to upgrade to IPv6 before we’re forced to share IP addresses or take other measures. This requires a big effort from equipment vendors and site owners who have to build and host IPv6 sites. With the doomsday predictions saying IPv6 addresses will run out some time in 2012, it would appear that the BT 21 Century Network will be finished just in time to become obsolete.

Today, Qwest Communications launches an Internet portal that allows users to access and see what’s happening on their home phones. Dubbed qHome, the service allows users to see who’s calling their home phone, listen to voicemail, forward messages, manage their contacts and place a phone call, all from the Internet. Users of Windows Live Messenger can also tweak their settings to get an Instant Message when someone calls their home phone.

For those of you who still have land lines, this is kind of a nifty feature that gives a little more control and access to a home phone without having to dial in for messages. Unfortunately, the service only works right now in Colorado and will be rolled out to the rest of Qwest’s customers later this year. More limits include the need for a customer to have both a Qwest land line with Caller ID and VoiceMail and DSL package as well as Windows Live, q.com, msn.com or hotmail account. This isn’t going to convince people to sign up for a land line, but it might keep those who are considering a rival cable or VoIP service happy with Qwest.

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