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Bandwidth hogs – iPhone and other smartphones

The way consumers use Apple's mobile phone (i.e., constantly) means big headaches for carrier AT&T. And more smartphones are on the way.

Randall Stephenson, chairman, CEO, and president of AT&T,  holds up his Apple iPhone

Randall Stephenson, chairman, CEO, and president of AT&T, holds up his Apple iPhone

At the South by Southwest music, film, and interactive fest in Texas earlier this year, the iPhone was all the rage — and not in a good way.

The device proved so popular with Internet-addicted attendees that AT&T's wireless network in the city of Austin buckled under the strain, all but shutting down both voice and data service for many customers.

iPhone users bashed the phone company on Twitter and in blogs, and AT&T (T) had to haul in extra network equipment just to ease the gridlock.

As it turns out, smartphones are double-edged swords for phone operators. They attract big-spending customers who purchase highly profitable text-messaging and unlimited-data plans.

But they also tax networks designed for simpler times. Now the wireless providers hawking those Internet-enabled mobile devices are experiencing the digital equivalent of being proprietors of an all-you-can-eat buffet: It seems like the perfect business until the sumo wrestlers show up.

No carrier is feeling the pressure more than AT&T, the exclusive U.S. provider of the iPhone. Users of Apple's device are the hungriest mobile Internet consumers of all: Not only do they send e-mail messages and access the web, they also view maps and YouTube videos and download iTunes purchases.

Independent telecom analyst Chetan Sharma estimates that the typical wireless subscriber consumes 120 megabytes each month; typical iPhone owners use four times that.

Accommodating all that data is one challenge for operators such as AT&T, but the real issue with smartphones is that their users are always moving from one location to another, tapping into the network constantly, sometimes for a few seconds, other times for hours on end. And when a big group gathers — the lunch crowd in Manhattan, say, or South by Southwest revelers — the effect can be total gridlock.

"3G networks were not designed effectively for this kind of usage," says John Donovan, AT&T's chief technology officer, referring to the current generation of broadband wireless. "We fight the day-to-day guerrilla warfare as the customers move around." Not that AT&T is complaining. "The iPhone," adds spokesman Mark Siegel, "is a problem that other carriers would love to have."

chart_att_mobileNew data guzzlers
And they soon will — sort of. AT&T is in the hot seat now, but an influx of Internet-savvy phones could easily strain other carriers' networks in the near future. By 2010, global mobile data traffic is expected to exceed 200 terabytes per month, six times last year's levels, according to Cisco Systems.

Why? One reason is that other phonemakers are catching on to the touchscreen craze that made the iPhone a hit. Users of phones with Google's Android operating system spend roughly as much time online as iPhone users, according to mobile advertising company AdMob.

To date, only two devices use the Android platform, including the HTC myTouch 3G launched by T-Mobile (DT) last month. But Android phones from Samsung, LG, and Motorola (MOT) are due in stores by early 2010. The data-oriented Palm Pre, which operates on Palm's (PALM) WebOS platform, is already on Sprint (S) and should be in Verizon stores early next year.

With all the money AT&T and other carriers are making from smartphones, why don't they simply upgrade their existing systems to handle more traffic? Because increasing wireless capacity is like adding lanes to a road; it takes months or years to get local permission to build new transmission towers.

Ultimately all carriers will move to faster next-generation networks that are designed for data traffic. But those so-called 4G systems won't be available nationwide for years.

In the meantime, carriers are likely to get pickier about the applications they'll allow on their networks. When Apple (AAPL) unveiled the latest iPhone software in June, developers collectively groaned after the company revealed that AT&T wouldn't immediately support two of the most exciting (and bandwidth-hungry) new features: MMS, which uses the text-messaging system to send media such as photos and video, and tethering, which allows a phone to share its Internet connection with a nearby computer. (AT&T says MMS will arrive at summer's end, when the network is deemed ready.)

Some carriers may try to offload data traffic. PCCW, the Hong Kong operator, has started using Wi-Fi hot spots to ease the load from smartphones and its digital TV service.

Pricing will probably change too. In private meetings, AT&T CEO Randall Stephenson has said that the most active 5% or so of data users are causing problems for the other 95%. AT&T is working on a revamped data plan whereby light data users would pay less, and heavy users would pay a premium rate — or leave.

A few carriers in Europe already have moved away from unlimited-use data plans. And once one U.S. operator makes the move, it is likely the others will follow suit — and the sumo wrestlers of wireless might have to do without the buffet.

Yahoo to acquire Maktoob | Yahoo and Maktoob| Yahoo | Maktoob



Yahoo! has agreed to acquire Maktoob.com, the Arab world’s largest online community, marking the first major investment by a U.S. technology company in a region where internet penetration is still in its infancy.

The global internet giant said on Tuesday it has entered into a definitive agreement with Jordan-based Maktoob Group to acquire Maktoob.com for an undisclosed fee. Maktoob Business is a part of Maktoob.com.

Yahoo! said it expects the acquisition to be completed in the fourth quarter.

Following completion of the deal, Maktoob.com will become a wholly-owned subsidiary of Yahoo!, while the remaining products under the Maktoob Group will operate under a new entity called the Jabbar Internet Group.

Jabbar will retain products such as online auction site Souq.com, online payment platform cashU.com and Arabic search engine Araby.com.

The acquisition will allow Yahoo! to offer Arabic-language content for the first time as well as Arabic versions of its products and services, such as instant messaging and email.

"With the acquisition of Maktoob.com and our investment commitment to the region, the Arab world will soon get the entire Yahoo! experience in Arabic with relevant local language content, programming and services," Yahoo! CEO Carol Bartz said in a statement.

The deal will also boost Yahoo!’s already considerable market share in a region where rival Google, which began Arabising products and content in 2006, holds the number one spot in most countries.

Maktoob.com, founded in 2000, is among the top 10 internet sites in almost all Arabic-speaking countries, according to U.S.-based research firm Alexa.

"With the combination of the Yahoo and the Maktoob brands … and the breadth of content and services that we have, we expect to be one of the strongest players in the region," Keith Nilsson, Senior Vice President, Emerging Markets, Yahoo!, told Maktoob Business.

GLOBAL BATTLE

Yahoo! and Google are currently embroiled in a global battle for internet domination and facing fresh competition from the likes of Facebook and Twitter.

Competition has become increasingly fierce amid the global financial crisis, with advertising revenues in developed markets declining dramatically as clients cut budgets.

In an effort to bolster revenues, the pair have been expanding into emerging markets, where internet penetration and technology take-up are relatively low compared to the West and advertising is still witnessing double-digit growth.

Internet penetration across the Middle East stands at around 23.3 percent, compared to more than 70 percent in the UK and U.S., according to InternetWorldStats.com.

In Egypt, the Arab world’s most populous country, internet penetration stands at just 12.9 percent, while in the oil-rich kingdom of Saudi Arabia penetration is only 22.7 percent.

Ahmed Nassef, General Manager, Maktoob.com, said: "In most part of the Arab world we are just at the start of internet penetration.

"Yahoo! Maktoob will create the products to bring the Arab world online, and then offer Middle East businesses the opportunity to talk to that audience."

For Maktoob.com the takeover will likely bring significant investment and access to Yahoo !technology with which to optimise its current offering.

The deal will also boost the English-language side of Maktoob.com as Yahoo! is already the number two website in many Arab countries without Arabic support or a regionally-focused content.

INTEGRATION TIMELINE

The specifics of the deal and timeframe for integration of the two companies’ products and content have yet to be finalised, but Arabised email, instant messenger and search are likely to be a high priority.

"Our product road map will be put together over the next few months. Today we are announcing the deal. It will take a few more weeks for the deal to be completed and during this time we will be working on the product road map," said Nassef.

"However, it is clear Arabic Yahoo! Mail, Arabic Messenger and Arabic Search are all key pieces that will come up first."

Users will not see noticeable changes to Maktoob.com until the first half of 2010, Nilsson said.

"After the deal closes there will be small changes, you may see the Yahoo! brand on the homepages and a few other changes to the experience, but there will not be substantive changes with introducing Yahoo! products until the first half of next year," he said.

There is also no word yet on whether the acquisition will lead to job cuts.

"We will be looking for synergies - and opportunities," said Nassef.

"There will inevitably be a change in where we focus our resources. We will have a clearer idea of this over the next few weeks."

One hurdle both companies will face is concerns over freedom of speech.

Arab countries are well known for their censorship and many in the region will be looking to see how Yahoo! reacts when governments challenge it over content.

Maktoob users, meanwhile, are concerned the acquisition could lead to censorship of content critical of the U.S. Nilsson said this would be an "unfounded fear".

He added: "We don’t plan to change Maktoob’s approach to content on the Matkoob site. We think Maktoob has taken a healthy, balanced approach to the content."