An Ignoble Experiment

eBook | Profiting from Over the Top Video

Sprint (NYSE: S) reported that its wireline revenues were $770 million, down sequentially and year-over-year from $859 million in the fourth quarter of 2013 and $893 million in the same period a year ago.

The decline is largely due to wider declines in voice, data and Internet service revenues, a reversal of the trend that took place in the fourth quarter of 2013, when it reported gains in all of these segments.

During the quarter, voice and data revenues declined sequentially to $352 million and $62 million from $386 million and $81 million, respectively. Likewise, Internet revenues were $345 million, down sequentially from $374 million in the previous quarter.

Despite these losses, the service provider continues to expand its cloud and managed services portfolio by adding Microsoft Lync to its cloud-based unified communications (UC) solution, for example.

From an overall financial perspective, Sprint reported consolidated operating income of $420 million, which it said was its best performance in over seven years.

Shares of Sprint were listed at $7.65, up 22 cents or 2.96 percent, on the New York Stock Exchange (NYSE).

For more:
- see the earnings release

Special report: Wireline telecom earnings in the first quarter of 2014

Read more about: Microsoft, Internet Service Revenues
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2. Netflix, Verizon reach interconnection pact

By Sean Buckley

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Netflix (NASDAQ: NFLX) has signed a new interconnection agreement with Verizon (NYSE: VZ) in an effort to improve the experience it can provide to users that leverage the service provider's fiber to the home (FTTH) network for access to the streaming video service.

Similar to the interconnection agreement it signed with Comcast in February, Netflix will pay Verizon to ensure it has faster network access. Neither company would reveal the financial terms of the agreement.

"We have reached an interconnect arrangement with Verizon that we hope will improve performance for our joint customers over the coming months," said a Netflix spokesperson.

Despite reaching an agreement with Comcast (NASDAQ: CMCSA), Netflix has called the fee it has to pay to the cable MSO an unfair toll on over the top (OTT) providers that want to use the Internet to deliver video and related content to consumers on televisions or their mobile devices. The streaming video provider has also been an outspoken critic of Comcast's proposed acquisition of Time Warner Cable.

Ken Florance, vice president of content delivery for Netflix, claimed in a blog post that Comcast was forcing Netflix to pay for better access.

In addition to its agreements with Comcast and Verizon, Netflix has been making an effort to improve the streaming experience for its customers with its Open Connect program, which lets ISPs connect to them at Internet exchanges or even install its own servers within the ISPs' networks. Perhaps not surprisingly, Comcast and Verizon don't participate in the program.

Comcast is only one service provider that Netflix has an issue with. In a recent letter to shareholders, Netflix's CEO Reed Hastings said AT&T's (NYSE: T) fiber-based U-verse service "has lower performance than many DSL ISPs such as Frontier, CenturyLink and Windstream."

Interestingly, Netflix's latest agreement with Verizon emerges amidst the FCC's proposal to allow content providers like Netflix to pay service providers access to consumers. A number of open Internet advocates railed against the proposal, saying that it will allow large ISPs to create toll stops.

For more:
- Bloomberg has this article

Read more about: Verizon, Over the top delivery, Netflix
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3. Level 3, Digital Realty provide direct connection to Amazon, Microsoft cloud services

By Sean Buckley

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Level 3 Communications has established a new partnership with Digital Realty Trust where it will provide the data center provider's customers in 14 U.S. and European markets access to its growing base of cloud service partners including Amazon Web Services (AWS Direct Connect) (NASDAQ: AMZN) and Microsoft Azure (NASDAQ: MSFT) (ExpressRoute).

Through this relationship, the Digital Realty customers will have a new route to migrate and operate their applications to a hybrid cloud environment with the backing of Level 3's deep network presence.

While Level 3 is hardly alone in providing a direct access route to AWS and Microsoft Azure, Anthony Christie, chief marketing officer for Level 3, told FierceTelecom what sets it apart is the global nature of the offering.

"One of the things that you'll see from us that is different than what you'll see from some of the other network service providers is we continue to leverage the global nature of our network," he said. "With Amazon, Level 3 will be listed as the most connected player to Amazon's hosting and data centers around the world."

Another potential benefit of this pact for enterprise customers is they can adjust network bandwidth and storage levels as needed. During a holiday shopping season, a retailer could dynamically scale their bandwidth and only pay for what they consume as demand for computing capacity ramps.

In addition to scaling bandwidth, Digital Realty customers will gain the flexibility to choose the cloud model and cloud provider that best meet their needs, access bandwidth dynamically and pay only for what they use.

Level 3 is also providing connectivity under its Cloud Connect Solutions program, including Layer 1, Layer 2 and Layer 3 connectivity.

"On a global scale, we can guarantee latency for connectivity for public and hybrid cloud environments at Layer 1," Christie said. "We're working on Layer 2 and Layer 3, but because of the switched nature of those products, it's a bit tricky."

Christie added that "with our Layer 3 MPLS offer, what we're enabling is instantaneous consumption by pre-provisioning ports into Amazon and into Azure so they can burst through and consume Amazon Web Services in the future."

For more:
- see the release

Read more about: Microsoft, Digital Realty
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4. Frontier says FCC's CAF II 10 Mbps proposal isn't realistic

By Sean Buckley

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Frontier may be a supporter of the FCC's Connect America Fund phase II, but like others, it's concerned that the regulator's proposal to raise the broadband speed obligations from 4 to 10 Mbps is not a realistic proposition unless it alters the funding model.

"Any proposal to raise the CAF Phase II minimum speed obligations of broadband used for CAF Phase II from 4 Mbps download/1 Mbps upload (4/1/) to 10 Mbps download without any increase in funding or other change in terms is not economically feasible," wrote Kathleen Abernathy, executive vice president of External Affairs for Frontier, in a recent FCC filing. "The FCC's own USF budget does not provide adequate funding for a 10 Mbps ubiquitous deployment."

Instead of requiring 10 Mbps, Frontier said the FCC could enable service providers to extend broadband services to rural markets without having to deliver 10 Mbps to every location. It added that while a large percentage could get 10 Mbps, others could get at least 6 Mbps, and the most remote customers could get up to 4 Mbps.

However, if the FCC insists on the 10 Mbps requirement, Frontier added that it should increase the length of the funding program.

"If the FCC is committed to 10 Mbps for even the most rural locations it should extend the funding term to 10 years for the ROFR to ensure funding support to justify this kind of expense," wrote Abernathy. "A 10 year term would provide parity with the competitive process."

Despite the issues it raised, Frontier is relatively upbeat about the prospects of the CAF-II program. By using these funds it said would be able to triple what it has already built by being able to deploy broadband to an additional 593,000 customers.

Frontier is hardly alone in citing concerns of the 10 Mbps requirement. CenturyLink (NYSE: CTL) cited similar concerns when the FCC issued its proposal last week.

While it is not opposed to offer faster speeds, providing them in remote areas is an expensive proposition.

"Our core point is higher speeds are great but they're going to require other commensurate changes to get broadband to consumers in high cost areas where the market would not provide broadband otherwise," said Jeff Lanning, VP of federal regulatory affairs for CenturyLink, in an interview with FierceTelecom. "What some of those changes are is a longer funding period because 10 Meg instead of 4 Meg costs more. The other point is that the people that don't have 10 Meg need and are in these high cost areas identified by the FCC and need to be supported, but we can't jump over people and fund other people."

For more:
- see this FCC filing

5. Comcast, AT&T, beef up personalized TV service offerings

By Jim Barthold

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