Cell Phone Bills Surpassing Land Line

Statistics often show just how much things are changing, and how quickly. Yesterday, a report was released that showed 2007 is likely to be the first calendar year in which U.S. households spend more on cell phone services.

"The most recent government data show that households spent $524, on average, on cell phone bills in 2006, compared with $542 for residential and pay-phone services. By now, though, consumers almost certainly spend more on their cell phone bills," several telecom industry analysts and officials said.

As recently as 2001, U.S. households spent three times as much on residential phone services as they did on cell phones. But the expansion of wireless networks has made cell phones more convenient, and a wider menu of services, including text messaging, video and music, has made it easier for consumers to spend money via their cell phone.

Let's take a minute and look at another statistic. In Q3 2006, smartphones represented a 3.8% share of US mobile phone market (Source: Telephia European Subscriber and Device Report, Q3 2006). In the same quarter this year, 4.2 million smartphones were sold (out of a total of 38 million devices) which is an 11% market share. Various research reports (Gartner, Yankee, IDC, etc.) all suggest that smartphones will have a 20-25% market share by 2010.

So what does all that mean? Well, this helps us understand the imminent need for significant investment in backhaul capabilities that we talked about in yesterday's blog. Even though smartphones do not currently have access to true 3G in the US (which would really let them shine), we're already seeing them utilizing large amounts of data on the existing 2.5G networks. Once 3G, LTE and Mobile WiMAX technologies are deployed, we will see a huge increase as 'any time, any place, any device' creation, collaboration and consumption of content becomes a reality, and the bottleneck then will be how we're going to move around that huge amount of data.

Between 2000 and 2006, internet traffic grew at over 100% per year (source: Nemertes Research) and, assuming that the necessary capital investments in infrastructure are made), look sets to continue to grow at this pace through 2012. Last year, the average internet usage was 350 Megabytes per day, which is equivalent to downloading about an hour of Internet video, or multiple hours of working, emailing, talking, sharing, uploading, downloading and watching video—often at the same time. Highlighting trends such increased multitasking, switching to IP-based versions of non-IP applications (e.g. 'Net radio and IPTV), increasing oil prices, raising the cost of travel, aging baby boomers caring for elderly parents, with college-age children, a far-flung, highly distributed population and rapidly maturing technologies such as Web 2.0 programming and development tools, HD displays, low-cost cameras and recorders, and data storage, Nemertes Research suggests that demand could grow to the average user consuming or generating 26 Gbytes/day by 2012.

Again, for that growth to happen, significant investment is needed in infrastructure and particularly in how to distribute that data, and avoid bottlenecks. It is going to take a combination of wireline and wireless technologies to deliver on the promise of 'any time, any place, any device', and NextPhase Wireless is well positioned (with its licensed spectrum, strong industry partners and rapidly expanding wired and wireless footprints) to take advantage of this opportunity.

Mobile Backhaul Upgrades Deemed Essential

In an interesting research report from ABI Research, Mobile Backhaul Analysis: Global Trends and Opportunities Revenue, CAPEX and OPEX for T1/E1, Microwave, Ethernet over Copper, Ethernet over Fiber, and CATV, they draw attention to the imminent need for significant investment in backhaul capabilities, if carriers are to deliver on the promise of 3G and WiMAX technologies.

Having recently secured licensed spectrum in four key markets (Atlanta, Georgia; Los Angeles, California; Miami/Fort Lauderdale, Florida; Philadelphia, Pennsylvania / Wilmington, Delaware / Trenton, New Jersey) and announced a new range of Ethernet-based high capacity service plans utilizing licensed wireless spectrum, NextPhase Wireless is particularly well positioned to take advantage of this market opportunity.

In order for mobile operators to deliver the expected bandwidth of 3G and newer technologies, backhaul is critical,” says ABI Research senior analyst Nadine Manjaro. “Backhaul is a major contributor to network performance and cost, and operators should design their networks to meet peak traffic demand – not just average usage levels.”

Service provider testing shows that end-user data rates and the number of active subscribers served per sector vary greatly, based on the backhaul technology employed. For example, as T1 reaches near capacity, the network performance degrades by over 40%. But some operators believe that traffic usage is bursty, so a single T1 is sufficient to support a 3G cell site backhaul.

In a recent study, ABI Research forecasts global CAPEX for backhaul to increase from $14 billion in 2007 to $23 billion in 2012. OPEX also is expected to rise from $1 billion to $6 billion during the same period.

“As a result, operators should be focused on solutions that will meet their performance requirements with the minimum CAPEX and OPEX,” Manjaro explains. In 2007, T1/E1 and microwave backhaul became the two largest contributors to CAPEX and OPEX. ABI Research recommends that operators focus more on Ethernet-based solutions, including Ethernet over fiber and Ethernet over copper solutions, to optimize costs.

“In 2012, there will be a more distributed mix of backhaul technologies across the various options,” continues Manjaro. “However, microwave is expected to be the primary backhaul solution in all the regions studied, except Latin America and North America.

“Ethernet over fiber will be a very popular choice for upgrades between now and 2012, primarily due to its lower cost per megabit and high data rate, compared with other backhaul options.”

As operators upgrade their networks to meet growing bandwidth demand, they are upgrading to Ethernet-based solutions in both wired and wireless backhaul. The location of cell sites in existing service-provider infrastructure, bandwidth requirements, alternate carriers, interface requirements, and other factors all play a role.

End to 'will they, won't they?' as Google decide to bid on 700 MHz wireless spectrum.

Well, the waiting is finally over - Google have announced that they will be bidding on the 700 MHz wireless spectrum.

" These radio waves are being returned by broadcasters as they move from analog to digital signals early in 2009. The signals can go long distances and penetrate thick walls. The auction is seen as a last chance for a new wireless player."

In it's core search and advertising businesses, Google has been a great leveler for the little guy, who has been able to reach audiences that would have been traditionally unreachable. They have created incredible value for their shareholders by playing nicely with others, and by not being evil.

It's our belief that if Google were to win this auction for spectrum, they would focus on building out the enabling infrastructure and open up that platform to independent ISPs to deliver service to business and residential customers across the US. Let's not kid ourselves that this would be an altruistic act on their behalf, but they have continually shown by their actions that if they do play nicely with others, everybody wins (especially Google).

Increased video usages consumes excess bandwidth - bottleneck ahead

USA Today had an interesting article today - Video, interactivity could ensnare Web users by 2010 - based on a study by business technology analysts Nemertes Research.

The study assessed both infrastructure investment and current/projected traffic patterns independently, and compared the two. While the findings indicated that "core fiber and switching/routing resources will scale nicely to support virtually any conceivable user demand, Internet access infrastructure, specifically in North America, will likely cease to be adequate for supporting demand within the next three to five years."

While they don't suggest tha the Internet will collapse, "users will experience a slow, subtle degradation, so it's back to the bad old days of dial-up," says Nemertes President Johna Till Johnson.

In looking at how bandwidth is being consumed, Johnson highlights YouTube. "Two years ago, nobody knew what YouTube was. Now, it's generating 27 petabytes (27 million gigabytes) of data per month."

Much of today's traditional telecommunications infrastructure (cable, DSL, FioS, satellite) is architected for asynchronous delivery of content to both business and residential customers. Wireless technologies, being more scalable, flexible and rapid to deploy has an opportunity to be a 'bypass' technology, alleviating the coming bottlenecks to deliver the Internet experience that consumers are looking for.

Different target markets - similar business model

Associate Press put out a good story on our competitor, Towerstream - wireless links give businesses an option

It talks about how they target business customers requiring high-capacity circuits, and describes their strategy as "getting rooftop rights on tall buildings, set up antennas, and start calling all the offices it can see".

While there are similarities between what we do (i.e. targeting high-cap business customers, where higher revenues cover equipment costs), there are also a couple of major differences.

Towerstream focuses on major metropolitan markets (e.g. New York, Chicago, Los Angeles, etc.), whereas NextPhase focuses on secondary and tertiary markets, with our rationale being that there is less competition / more demand in these markets, with lower costs for roof rights, etc. Also, instead of relying on large sales teams to win new customers, our strategy is to identify markets that we wish to enter, acquire traditional wireline B2B ISPs in those markets, and then proceed to overlay a wireless footprint and migrate those customers.

Why am I comfortable talking about a competitor. Because our real competitors are the incumbent telcos, who currently offer business customers few options between a 1.5Mbps T-1 and a 45Mbps DS-3. That is the target market for NextPhase and Towerstream, and right now, it's more than big enough for both of us.

WiMAX Mobile (802.16E): Momentum is building

The recent adoption of WiMAX Mobile (802.16e) by the International Telecommunication Union (ITU) as a global standard for mobile devices is a major milestone in the roll-out of this next-generation communication technology.

As the first new interface to be added since the standards were originally defined almost ten years ago, the decision increases WiMAX’s chances of becoming the preferred system for the next generation of high-speed wireless Internet access, and it is anticipated that it will spur development of the wireless technology, attract new investors and drive down hardware costs.

While WiMAX Mobile’s initial real-world performance will not live up to the some of its hype (certain laws of physics are immutable, and so 70Mbps over a distance of 70 km (approx. 40 miles) and speeds of 70MPH, is probably not going to be with us in the foreseeable future), first-generation products should allow symmetrical speeds of 10 Mbps at 10 km for line-of-sight scenarios, which is a significant advance from the 2G (GSM, iDEN) and 2.5G (GPRS, EDGE, 1x-RTT) networks that are deployed in the US today, and the planned 3G upgrades (UMTS, HSDPA).

Looking to repeat their ‘build it and they will come’ strategy that worked so well for Wi-Fi®, Intel has already invested over $2.5 billion in building WiMAX networks around the world and other WiMAX-related investments. Next year, Intel will introduce integrated, combination Wi-Fi/WiMAX chipsets that will be suitable for laptops, cell phones and mobile Internet devices, and their marketing machine will be stepping up their game.

It is clear that 'any time, any place, any device' broadband connectivity took a step closer to becoming a reality with the adoption of the WiMAX Mobile as a global standard by the ITU. NextPhase’s strategy continues to be building a significant nationwide footprint, deploying current-state pre-WiMAX customer premise equipment (CPE) and preparing to deploy WiMAX Mobile equipment as price/performance and market demand dictates.

Apple May Join Google And Bid On Wireless Spectrum

According to a report from BusinessWeek, Apple may join Google and bid on the 700-MHz wireless spectrum in the upcoming FCC auction.

Two sources tell BusinessWeek that Steve Jobs & Co. have studied the implications of joining the auction, which will be held Jan. 16. The winners will get rights to use the spectrum that analog TV broadcasters are handing back to the government in 2009, given their mandated move to digital television.

Dubbed "beachfront property" by the Federal Communications Commission, it's the last swathe of wireless spectrum likely to become available that would have the attributes necessary for a new mainstream broadband network (BusinessWeek.com, 8/1/07). Signals at the 700-Mhz spectrum, for example, could provide far faster Internet access than today's cellular or even Wi-Fi networks, and the signals can easily pass through buildings and work glitch-free, even in lousy weather.

While it's just a rumor at this point, it does suggest that the fight for true 'open access' isn't over yet, and that the incumbents might not find it as easy this time, to get their way.

FCC Approves Rules for Airwaves Auction

So.. the jury is in, having reached a verdict.

The FCC approved rules Tuesday for the auction of the 700Mhz spectrum, previously used by UHF television and set to be vacated by 2009.

While it does include "open access" rules for approximately 1/3rd of the spectrum that will be available, it is the watered down variety which will allow customers to use whatever phone and software they want on about one-third of the spectrum to be auctioned. While this is a belated step in the right direction, it smacks of compromise, and falls far short of the calls to separate infrastructure build-out from service provision. While various flavors of that model had been debated (particularly after Google declared their interest in bidding), the concept of service providers having wholesale access to the network, with the ability to package, price and deliver differentiated services (much as NextPhase does with DSL and and T1 circuits today, in many markets across the country) is for now, on hold.

As Michael Copps (one of the two Democrats commissioners) said after the vote, the commission "missed an important opportunity to bring a robust and badly needed third broadband pipe into American homes."

A total of 62 megahertz will be auctioned under the plan, with twenty-two megahertz subject to the "open access" rules. Another 10 megahertz will be dedicated to the national public safety network, which will be shared between a commercial operator and public safety agencies.

Tuesday's vote clears the way for the auction, which by law must take place no later than Jan. 28, 2008. It is expected to raise as much as $15 billion.

The pace of change is picking up

For those of you who follow our Press Releases, you'll see that the last couple of weeks has been pretty busy for us. We switched auditors, filed our Annual Report (10-K) and successfully completed the acquisition of Interactive Network Services, Inc. (INS), a New Jersey-based Internet Service Provider (ISP) providing primarily municipalities and more than 40 public schools in the U.S. Mid-Atlantic region with connectivity, web hosting and co-location services.

As you can imagine, that hasn't left a lot of time for blogging, but just like a kettle will boil once it is no longer being watched, the pace of change in the industry went from a jog to a Sprint (every pun intended) while our attentions were elsewhere.

So, to recap the events of the last couple of weeks, it boils down to the following; 700Mhz spectrum auction, Google throwing their ring in the hat, Sprint / Clearwire partnership, and finally today, the announcement of a Sprint / Google partnership.

• 700MHz spectrum auction
  This has seen intense lobbying of the FCC, by established carriers and potential new nationwide players. Previously used for UHF television, it has the potential to raise up to $20BN for the US Treasury (source: Aloha Partners). Where all the intense lobbying is coming from is the level of 'openness' that the different players are pushing for. Several groups want the auction rules to require that a winning bidder cannot offer retail sales of services. Rather, the winner would have to build a wholesale network and sell on a non-discriminatory basis. Other forms of openness include allowing any legal device to connect and allowing any legal use. These are pillars in the network neutrality platform, of course. (The four pillars are often cited as any resale user, any use, any device, and no tiered service.)

• Where does Google fit in?
  All of the top mobile carriers will be bidding on this spectrum, with AT&T being the powerhouse. Google have thrown their hat in the ring, committing to bidding a minimum of $4.6b if the auction proceeds with as much openness as they want. They have asked the FCC to embrace four additional conditions as part of the auction rules: open applications, open devices, open services, and open networks. Sensing a seismic tilt to the playing field, the other big carriers are lobbying hard to have the auction structured in a way that keeps Google out.
  

Here at NextPhase, we very strongly support network neutrality, and are hopeful that the FCC listens and acts wisely. Open networks are good for competition and good for the consumer. It allows resellers to differentiate themselves by service, and keeps them focused on delighting their customers.

• Sprint / Clearwire partnership
  Stating that they want to do for the Internet what cellular networks did for voice calls, Sprint Nextel and Clearwire Corp. confirmed reports last week that they will collaborate to build out a nationwide WiMax network. The companies will not build out the network together in specific locales, but will independently install and light up infrastructure in the territories they've already targeted, enabling roaming between the two networks. They will also "work jointly on product and service evolution, shared infrastructure, branding, marketing and distribution," according to the statement, as well as exchanging selected 2.5 GHz spectrum in certain areas to optimize the network's performance.

I've probably had more investor calls on this topic than anything else, and what I've told everyone is that NextPhase sees this as a very positive move, both for the industry at large, and for our Company. With one big, bold move like this, Sprint Nextel and Clearwire Corp have legitimized the wireless broadband (and specifically, WiMax technologies) industry. To date, much of our time is spent on educating potential customers on the benefits of wireless technologies (e.g. flexibility, scalability, speed to deploy, cost-effectiveness, etc.) and this announcement makes that job a lot easier for us.

• Sprint / Google
  Google Inc. has made its biggest move yet on the U.S. mobile Web market by signing a deal with Sprint Nextel Corp. that positions the Internet company to build services to run on Sprint's planned WiMAX high-speed wireless network. The two companies announced today that Google will provide its Internet search service for a Web portal that Sprint is developing for the new WiMAX network. The press release went on to say that the deal is expected to boost Web access over the new WiMAX network and expand use of Google's search and communications services on mobile devices, with Google confirming that broadband wireless connectivity is key to growth and its strategy of selling Internet advertising.

Again, from NextPhase's perspective, announcements like this one only confirm that we're rapidly moving beyond technologies to rapidly maturing ecosystems. As I mentioned earlier in this post, the key differentiator is going to be service delivery. Here at NextPhase, we've been assembling all of the critical building blocks to be successful in this environment. We continue to build out our national presence in key secondary and tertiary markets through our M&A activity; we continue to expand our customer call center capabilities in Marietta, Georgia; we continue to develop relationships with market-leading partners, to deliver the next level of value-added services that will plug into this rich ecosystem.

A lot is happening very quickly, and it is a very exciting time for a very young industry, and particularly so for NextPhase. Keep watching this space, and we'll continue to try and to set all of these events into context, and sharing our insights into what we think will happen next.

Free telebriefing - WIMAX AND THE MOBILE INTERNET

In my previous life as CIO and CTO of 3 separate DuPont business units, I developed a healthy respect for the abilities of companies such as Gartner and Yankee Group to look into their crystal balls and predict how technological advances would impact the way we work and play.

The latter will be sponsoring a free telebriefing session on July 19th, 11:00 - 11:45 EST to share insights into areas near and dear to our hearts:

WIMAX AND THE MOBILE INTERNET

The Mobile Internet resides at the intersection of the two complementary worlds of Broadband and Mobility. When appropriately combined, technologies like WiMAX and mobile broadband will satisfy consumer and enterprise demand for next generation mobile services, extend the reach of Internet content and allow companies to do business anywhere. High-speed mobile broadband infrastructure and services will enable the always-on Anywhere Internet to develop as an open market for service, content, software companies and application providers to transform business and consumer interaction throughout the 21st century. This session explores what the implications of the mobile internet will be for carriers, enterprises and end-users alike.

Maybe it's because their insights are aligned with ours (the combination of different connectivity technologies to provide hybrid solutions, and the idea of an 'always-on Anywhere Internet'), but I think that this session is not to be missed.

Click here to sign up.

Hybrid solutions aren't just for automobiles

As covered in an entry last week, here at NextPhase, we firmly believe that the future of telecommunications is all about hybrid solutions, leveraging the very best of various wired and wireless technologies to to deliver flexible, scalable, cost-effective services that allow 'any time, any place, any device' creation, consumption and collaboration of content.

It was interesting to read today that Nortel Networks seem to feel the same way, too. They've announced their plans for creating what they're calling the "Unwired Enterprise", and it is all about integrating WiFi technologies into their existing product base.

Just like Moore's law, technological advances are going to keep squeezing ever more bandwidth out of copper, fiber and precious radio spectrum (both licensed and unlicensed), but at the rate that demand for connectivity continues to grow, it is going to take smart integration of all these various technologies to be able to deliver the goods!

Nortel Networks announced its plan for creating the "Unwired Enterprise," which involves integrating WiFi into existing wired infrastructure. Nortel said it will bring to market WiFi products based on the 802.11n draft specification once it's ratified as a standard. The idea is to combine WiFi and mesh systems, switches and routers embedded with wireless capability and a unified network management platform. For instance, Nortel will integrate WiFi functionality directly with the Ethernet switch, as opposed to offering stand-alone equipment like a wireless access point or a router.

Nortel's seriousness in the business can be measured by the fact that the vendor plans to build products in-house by upping its R&D spending. Previously, the company had outsourced its WiFi equipment to OEMs.

Apple & AT&T interview with Wall St Journal

As people start to learn whether the Apple iPhone lives up to all the hype, I was interested to read yesterday's interview with Steve Jobs and Randall Stephenson (AT&T Chairman & CEO).

The whole article is interesting as it talks about some of the compromises that they've had to make (e.g. using EDGE rather than a true 3G network, power requirements, etc.) but what particularly intrigued me was when they started talking about 'any time, any place, any device' networks and services.

Far too many people see the various wired and wireless technologies as competitors locked in a 'winner takes all' battle to the end. The view that we have at NextPhase Wireless (which is being echoed here by both Apple & AT&T) is that the technologies are complimentary, and that hybrid solutions enable richer functions and capabilities. Not all of the pieces are in place yet (seamless, real-time switching between networks & techologies, the underlying micro-payment systems to make sure everyone gets paid), but the iPhone offers a glimpse of what is on the near-horizon.

WSJ: To clarify on your comments about Wi-Fi handsets: Were you saying, Randall, that this phone will eventually evolve into that kind of device that does seamless roaming on Wi-Fi and cellular, or are you just saying there will be many more Wi-Fi devices?

Mr. Stephenson: This phone is the first device that truly kind of breaches that gap. You have a device they gets you true six-megabit broadband speeds on Wi-Fi connectivity. You get the mobility aspects of traditional cellular-type technologies. It begins to let your mind wonder. Once you have those kinds of speeds of a wireless handset … it just opens up a whole new world to what can be done on these wireless devices.

Mr. Jobs: A few years ago, the perception was that the large operators viewed Wi-Fi as potentially an enemy. And I think quite the opposite is now the case. Wi-Fi is viewed as a friend.

Mr. Stephenson: Absolutely -- in fact Wi-Fi is just an enhancement to your existing wireless capability. I have this perspective that the more wireless we become, the more wireline we become. The deeper you push these wireless capabilities the more you're relying on the underlying wired transport which is a much faster, high-capacity transport. And Wi-Fi just takes that to the nth degree. You could not have thought of VoIP on a wireless handset until you start thinking about Wi-Fi capabilities on these handsets. That doesn't intimidate us at all. I think it's a very nice enhancement to an existing service.

Wi-Fi Threatens Cell Phone Business With WiMax To Come

Broadband wireless, whether you're talking at the Personal Area Network (PAN), Local Area Network (LAN) or Wide Area Network (WAN) levels is a disruptive technology. Coined by Clayton M. Christensen, a disruptive technology or disruptive innovation is a technological innovation, product, or service that eventually overturns the existing dominant technology or status quo product in the market.

In trying to predict what sort of impact technologies like Ultra Wide Band (UWB) and WiMax (802.16d, 802.16E, and the similar 802.20 standard) will have on the way we work, play and interact with each other, looking at the impact of other disruptive technologies (and just how quickly they have that impact) gives us some useful insights. This Wikipedia entry on disruptive technologies gives some good examples (digital photography replacing traditional film, iPods replacing CDs which had previously replaced vinyl albums), but what strikes me is that the pace of the disruption is getting ever faster.

Take a look at what the article has to say about business implications, and then think about how the telcos (with the notable exception of Sprint, and even they can be seen to be dithering about their commitment to WiMAX) are responding to the rapid advances in broadband wireless technologies.

Disruptive technologies are not always disruptive to customers, and often take a long time before they are significantly disruptive to established companies. They are often difficult to recognize. Indeed, as Christensen points out and studies have shown, it is often entirely rational for incumbent companies to ignore disruptive innovations, since they compare so badly with existing technologies or products, and the deceptively small market available for a disruptive innovation is often very small compared to the market for the established technology.

Even if a disruptive innovation is recognized, existing businesses are often reluctant to take advantage of it, since it would involve competing with their existing (and more profitable) technological approach. Christensen recommends that existing firms watch for these innovations, invest in small firms that might adopt these innovations, and continue to push technological demands in their core market so that performance stays above what disruptive technologies can achieve.

While broadband wireless enabled cellphones don't have the ubiquitous coverage of traditional cellphones today, they're starting to show us a glimpse into the 'any time, any place, any device' future that these rapidly maturing technologies are opening up for us.

Are the telcos set to be left behind as the 21st century equivalents of carriage manufacturers, when the automobile came along? Probably not, as they have deep enough pockets to go out and acquire the new players as the technologies push things to the tipping point.

One way or another, this is going to be a very interesting space to watch over the next couple of years.

Wi-Fi Threatens Cell Phone Business With WiMax To Come

More and more cell phones can access WiFi, allowing the phones to work in cellular dead zones, and potentially saving consumers money by avoiding using cell networks altogether. The Wall Street Journal writes: "Operators have resisted selling WiFi phones in the past, fearing that such devices would eat into revenue from voice and data plans by allowing customers to cut back on cellular-network usage."

But, that's too bad. Handset manufacturers are making the phones, and consumers are buying them. The cell phone industry can either figure out a way to charge more for these handsets to offset network use, or they can take it on the chin.

The trend begs the question of what will happen if and when Sprint (S) launches its WiMax network. It is due to cover an area with 100 million people by the end of 2008. Other companies, especially Clearwire (CLWR) are building out WiMax systems in large cities. Sprint's WiMax is designed to work with its next generation phones, but, as an open standard, it may be technically possible to build handsets that can take advantage of WiMax while being sold directly to the consumer. It would be yet another way to bypass the cellular infrastructure.

The other business incentive for tapping into WiFi and WiMax is that companies like Motorola (MOT) and Nokia (NOK) are captives of the cell service providers who market their phones. The Apple (AAPL) iPhone is clearly a break from this model, but other handset companies do not have the cache to circumnavigate their largest customers, the network providers.

Unless they can build phones that don't need the network.

Elite Communications Group

Recently I have been asked why NextPhase hired Elite Communications Group to handle our Media and Investor Relations.

NextPhase has been growing at an astronomical rate. The cost to hire an in-house Investor Relation person is over twice the cost of hiring a firm such as Elite. Also, I have had a business relationship with the founders of Elite for the past 10 years. I have found them to be courteous and responsive to the needs of our shareholders.

Although the CEO Robert Ford and I are still available to take calls from our shareholders, we have found that the direct questions from potential investors and institutional investors are better handled by an Investor Relations firm and that the dissemination of material is more effective with the professionals.

With the new regulations and Sarbanes Oxley rules we feel we are more protected from outsiders gaining inside information by a slip or a inquisitive investor.

Thank you
Tom Hemingway
Chairman/COO

Keeping up to date with what we're up to

First of all, thanks for all the kind words of support and encouragement from customers, investors and partners that we've received since launching our blog earlier in the week. It seems that quite a few people are suffering from 'information overload' with the rapid transformation that is taking place in the connectivity space (new technologies, new products and services, new demands) and see value in us attempting to put at least some of those developments into context.

A number of people picked up on an early reference to reading this blog via RSS (for those of you who haven't dabbled with Really Simple Syndication yet, here is a link to a good primer on the topic), and as you'll see over on the right hand side of the blog (yes... look over to the right --->), we now have a couple of options for you to keep up to date with what we're up to.

If you prefer your news delivered to your email inbox, the first option lets you sign up for a daily email that is automatically sent whenever we've added new posts. Simply enter your email address in the box, respond to the validation email that it sends out to you, and that's it!

If you want to use RSS, then the 'Subcribe Now' option is for you. click on the link, and you're given a list of the popular web-based news readers to choose from (My Yahoo, My AOL, Google, etc.), or you can select from a list of the popular news reader clients.

So, please keep up the feedback on how we can further improve this blog. If you see a wireless or connectivity related news item that you'd like to get our perspective on, feel free to drop me a line at rford@npwireless.com, and we'll do our best to respond.

Licensed vs. Unlicensed spectrum

The following comment was posted against yesterday's entry:

you mentioned earlier about moving to licensed spectrum. could you elaborate...specifically, what advantages do you expect to gain? thanks.

First of all, thanks for your question. There are pros and cons to using both licensed & unlicensed spectrum. Here's a link to a pretty good overview on the subject (source: HOGAN & HARTSON L.L.P.), but let me give you a couple of definitions, and then try to cover some of the key similarities and differences:

Licensed use of spectrum = Operation of a wireless transmitter over particular frequencies pursuant to an FCC authorization.

Unlicensed use of spectrum = Operation of a wireless transmitter at particular frequencies without an FCC spectrum authorization on a non-harmful interference and unprotected basis.

The key trade-offs in determining whether to use unlicensed spectrum is swift market access and lower equipment costs on the one hand, and low power and lack of interference protection on the other. So, if you're in a market with little competition (e.g. a rural deployment), it is possible to rapidly deploy a cost-effective network using unlicensed spectrum. If you try to do the same in a more competitive market, you're likely to find yourself up against competitors trying to use the same unlicensed spectrum, and the resulting interference can make it difficult to deliver an appropriate service level.

NextPhase started out using unlicensed spectrum, as most WISPs do, but over the last 6-9 months, we've been systematically upgrading our wireless network backbone to licensed spectrum. A useful analogy to understand what we're doing is to think about road networks. As more and more traffic try to use the same roads, everyone suffers delays and end up taking detours. If you're in an area where there road system isn't overloaded, you do just fine, but if you're trying to get from Orange County to LAX early in the morning, you start wishing for your own private toll lane. Licensed spectrum is pretty much that private toll lane for a WISP, allowing network traffic to be transmitted from one geographic point to another, with protection from interference.

What we're doing by upgrading our backbone to licensed spectrum is ensuring that we have the ability to deliver carrier-class service to our customers. Once we've lit our POPs with licensed spectrum, we then have the choice of using either licensed or unlicensed spectrum for the 'last mile' to our customers, allowing us to deliver up to 200Mbps (the equivalent of 130 T1 connections). From that same licensed backbone, we can also light up hotspots, such as the NextZone(tm) that we operate at John Wayne Airport in Santa Ana (one of the 50 busiest airports in the US).

NextPhase Wireless Adds 'Peace of Mind' Networking Software to Portfolio

Connectivity is increasingly a commodity, and while customers are consuming more and more of it, they're also open to getting it from whichever provider has the lowest price. While this can be a false economy (those bargain prices don't seem so hot when you have an outage and then you find out all the things that the no-frills package doesn't include), it sends a signal to the rest of us that we need to articulate the value that we bring to our customers.

At NextPhase, we've spent a lot of time thinking about this and where we've come out is that above and beyond connectivity, what people are looking for is 'peace of mind'. Think about it. Whether it's our connection at home, in the office, or when we're traveling, we want connectivity to be available when we need it. We don't want to have to wait months to get it (think leased lines .. think fiber); we want to have a range of connectivity options (not one size, and one price, fits all); we want plug and play ease of use; we want flexibility and scalability (so that the service can adjust to our changing needs, and not the other way around).

Over the last couple of months, we've made a couple of announcements regarding new products and services that enhance our core portfolio of connectivity services. Today, we announced that we've added additional 'Peace of Mind' networking software to our portfolio. In surveying a cross-section of our customers, we've learned that security, disaster recovery and network management are increasingly giving them headaches and keeping them awake at night. As traditional boundaries (between work and play; between public and private; between company, supplier, partner, competitor, and customer) continue to get blurred, people are realizing that while this 'always on' world provides a wealth of opportunities (to be able to create, share and collaborate with others, to have 'any place, any time, any device' access, etc.), it also comes with increased risks and challenges.

All too often, technology's answer to these risks and challenges is to throw in more difficult to access features (hands up all those people who have cursed, and not just under their breath, as they've tried to securely share files across multiple PCs on their wireless network at home, or to configure a virtual private network (VPN) at the office?) Here, at NextPhase, we've decided enough is enough, and we're introducing a range of products and services intended to relieve those headaches and bring an end to those sleepless nights.

Whether it is tools to assist SOHO (Small Office / Home Office) business and residential customers with setting up, managing and securing their networks, or security, disaster recovery, network performance and consolidated communication capabilities aimed at small and midsize businesses, we're definitely in the 'peace of mind' business.

Clearwire Partners with DIRECTV and EchoStar

Here's an interesting development, as we see broadband connectivity and content become inextricably linked in the race for the triple-play (TV, phone and Internet). It's a very smart move, as it gives DIRECTV a new high-end Internet offering (Internet via satellite is a niche play - it's good when you've got no other options, but it can never be competitive against other technologies in regular markets) and significantly broadens Clearwire's portfolio, allowing them to compete with incumbent content providers in their footprint.

KIRKLAND, Wash.--(BUSINESS WIRE)----Clearwire Corporation (NASDAQ:CLWR) announced today distribution agreements with DIRECTV (NYSE:DTV) and EchoStar Communications Corporation (NASDAQ:DISH). The distribution agreements enable both satellite companies to offer Clearwire's high-speed Internet service to their customers and contemplate that Clearwire in turn will be able to offer the video services of one or both satellite companies to its customers. This is expected to enable each of the three companies to offer high-speed Internet, video and voice in all current and future Clearwire markets. The launch is planned for later this year. Under the terms of the distribution agreements, DIRECTV and EchoStar will have access to Clearwire's wireless high-speed network,and will be able to market a bundle that includes Clearwire's high-speed Internet services to their residential customers. DIRECTV and EchoStar will also have the ability to sell Clearwire's branded services on a stand-alone basis. Similarly, the agreements call for Clearwire to be able to sell DIRECTV and EchoStar satellite video services. "We're pleased to partner with these two satellite companies as they both share our commitment to offering a superior customer experience by enabling customers to enjoy the benefits of unwired services," said Perry Satterlee, Clearwire president and chief operating officer. "By expanding the reach of our services through DIRECTV and EchoStar, and by incorporating direct-to-home satellite video services in our own distribution channels, we believe we have an opportunity to significantly expand our business opportunity." "Being able to offer services on the Clearwire network will give our customers another high-quality option to subscribe to broadband services with DIRECTV's video offerings," said Bruce Churchill,president of New Enterprises, DIRECTV. "By choosing this bundle option, DIRECTV customers will now be able to enjoy Clearwire's fast,reliable and secure wireless broadband network that works great at home and on the go." "EchoStar is committed to providing the best quality and latest incutting-edge digital programming, and with Clearwire we continue that commitment by offering a next-generation wireless broadband technology," said Nolan Daines, senior vice president, Strategic Initiatives, EchoStar. "Our ability to offer Clearwire's broadband service is a strong competitive alternative that we believe will help increase our subscriber base."

The Wi-Fi Chipset Market: Portable Connectivity Applications Drive Volumes

While I might not be ready to shell out $3,495 for In-Stat's latest report on the Wi-Fi Chipset Market, a closer look at the summary makes for interesting reading.

In 2006, approximately 213 million Wi-Fi chipsets shipped, representing a 32% growth rate over 2005 Wi-Fi chipset shipments. Market segments that drove growth in 2006 included the following:

- Mobile PCs (37% of total Wi-Fi chipset shipments)
- Home/SOHO Wireless Routers, Gateways, APs (18%)
- Portable CE (17%)
- External Clients (12%)
- Stationary CE (10%)
- Dual-mode cellular/Wi-Fi handsets (3%)

Just think about some of those numbers for a minute. That is 79 million new notebook PCs who are potential customers of Wi-Fi hotspots. 38 Million homes and small businesses now have new wireless routers and gateways, which means that they will probably be looking for more bandwidth in the near future.

While dual-mode cellular/Wi-Fi handsets only represented 3% of the market in 2006 (though 6.4 million is still a lot of chipsets), they predict that this will be the breakout category this year and will grow to be 20% by 2009. Even if the market only continues to grow at its current rate (32%), that could be almost 15 million devices.

As I outlined in the previous post, wireless technologies are incredibly well positioned to take advantage of all this growth. We believe that NextPhase Wireless is well positioned, too.

So where do we begin?

These are very interesting times to be an ISP. Advances in technology continue to provide new and improved ways to deliver Internet connectivity to businesses and individuals. Copper (dial-up, cable, DSL, T1s), fiber, wireless (pre-WiMAX, WiMAX, WiFi), BPL (broadband over power lines), satellite, cellular (GPRS, EV-DO, HSDPA) are all doing their bit to make this an 'Any Time, Any Place, Any Device' world, where ubiquitous connectivity gives everyone the power to create, collaborate, distribute and deliver ever-increasing amounts of digital content.

Okay, before we get too excited, let's remember that there still is a 'digital divide' in this country, with many businesses and individuals still not having access to broadband services. Currently, the US is 25th in Broadband Penetration worldwide, and continues to slide down the league table.

At this point, I do have to reveal my hand, and admit to being somewhat biased about certain of those technologies (there is a good reason that we're not called NextPhase Dial-up) . Actually, our company's official position is that we're technology-agnostic, and as of today, we currently include dial-up, ISDN, DSL, T1s, Fiber, pre-WiMAX and WiFi offerings in our portfolio. We believe that connectivity is not a 'one size fits all' issue, and that all of the technologies have their relative strengths and weaknesses. Where we do believe that wireless technologies have an edge, is keeping up with the explosive growth in demand for 'Any Time, Any Place, Any Device' connectivity and consumption.

Whether at work, at play or at home, we increasingly find ourselves in an 'always on' world, where traditional lines are blurred. Early adopters are 'kicking the tires' on multiple ways to have digital movies delivered straight to their TVs (e.g. Apple TV, Amazon's Unbox, NetFlix's new digital streming service, etc.), notebook sales have overtaken desktop sales, and they're all equipped with WiFi chipsets (within a couple of years, it will be WiMAX chipsets), we're carrying around smart phones that come with 'all you can eat' wireless data plans.

While much of the country does have robust telecommunications infrastructure, we still believe that the explosive growth is going to highlight bottlenecks in delivery (imagine everyone choosing to download different HD movies at the same time - think what that will do to your average cable download speed). Where we see wireless playing a major role is two-fold; the wireless 'last mile' and as a 'bypass' technology. Wireless can be deployed quickly and very cost-effectively (it has an 8X advantage over copper and fiber, as trenching cable is both slow and expensive).

Okay, so why are we creating yet another blog to talk about these things? Well, for one, I believe that things are moving so fast, that everyone is suffering from 'information overload' and 'analysis paralysis'. Because we are technology-agnostic and always look for the optimum solution which often is a hybrid of multiple technologies, we believe that we're in an ideal position to help filter out 'noise', and really put what matters into perspective.

So, I hope you're going to come back regularly to hear what we've got to say, or better yet, sign up for our RSS feed. If you do have any questions, or want our opinions on specific areas, please leave comments or drop me an email (rford@npwireless.com), and we'll do our best to answer them.