Global Telecom Service Provider Investment

Infonetics Research released the second edition of its 2009 telecom Service Provider Capex, Opex, ARPU, and Subscribers report, which features analysis on how current economic conditions are impacting telecommunications markets -- by region and equipment segment.

"Global telecom service provider capital expenditures hit a plateau in 2008, marking the end of a 5-year investment cycle and the beginning of a 3-year disinvestment cycle, albeit a less dramatic one than what followed the great telecom crash of 2000," predicts Stephane Teral, principal analyst at Infonetics.

Capex will bottom down in 2010 and a new investment cycle will start in 2011, driven by 3G rollouts in India and Central and Latin America, the start of 3G rollouts in Africa, and a ramp-up in LTE deployments in Australia, Brazil, Western Europe, Japan, and North America.

Highlights of the Infonetics market study include:

- Worldwide, service providers spent $305 billion in 2008 on capital expenditure projects, such as network infrastructure upgrades.

- Global capex is forecast to decline at most 6 percent in 2009, mainly due to a significant capex shakeout in the Middle East and Africa, a weakening U.S. dollar, expected declines in the Brazilian real and Mexican peso, and delays in U.S. broadband stimulus funding.

- Infonetics anticipates a year-end bump up in capex, which could bring the overall capex decline in 2009 to less than 6 percent.

- Optical network hardware is a bright spot in today's tightened capex environment, with decent single-digit percent spending growth expected in 2009, despite currency devaluations.

- Mainly due to currency effects, worldwide service provider revenue is forecast to decline only very slightly in 2009, to $1.67 trillion, driven by mobile communication services, as consumers continue to hold on to their mobile services during tough economic times.

- Mobile infrastructure will continue to dominate total global telecom and datacom spending, followed by voice equipment.

- The world's 10 largest service providers (ranked in order by 2008 revenue) are AT&T, NTT, Verizon, Deutsche Telekom, France Telecom, Vodafone, China Mobile, Telefonica, BT, and Sprint.

Exploring TV 2.0 with the IP Video Curator

Internet Television or TV 2.0 -- also known as Internet TV, Catch-up TV and Online TV -- is an IP-based Video service distributed via the public Internet.

Not to be confused with IPTV offerings from broadband service providers, this video content is typically delivered on an as-is basis with no quality-of-service guarantees.

I've shared several market research report summaries recently that highlight key market developments and associated growth forecasts. Questions have been raised about the ongoing availability of digital video content, in light of reports that the big-media companies will likely soon limit access to their TV programs on the Web.

Given this news, I've been somewhat surprised to learn that some people believe that no-fee and advertiser-supported video content could therefore disappear from the Internet -- if and when websites such as Hulu.com decide to charge for access to some or all of their video content.

In reality, there truly is an abundance of video content available, and most of it won't be subject to the shifting policies of a few legacy media conglomerates -- who may decide to cut-back or retreat from the online digital media marketplace, due to their profitability concerns.

So, how do you find the remaining wealth of popular and eclectic video content that's scattered across the Web?

Today, I've launched a new research project called the IP Video Curator -- to help a person discover, watch and share the broad spectrum of what's available online, mostly at no cost.

I welcome your suggestions of links to other resources, as I continue to explore this rapidly evolving phenomenon of over-the-top (OTT) IP-based video free-market distribution and consumption.

Direct-connect Internet-enabled TV Bombshell

According to eMarketer, the Consumer Electronics Association (CEA) now forecasts a slight growth uptick (0.6 percent) in 2010 to $166 billion in overall industry revenues. What has changed?

Internet-Enabled Televisions, which connect directly to the Internet via Ethernet or Wi-Fi, are one of the hot new products that Americans will be buying -- along with continued adoption of various online video streaming and DVR services.

Americans are watching more TV than ever, and also more online video, according to Nielsen. Increasingly, however, they will be watching Internet video on their big HDTV screen.

"Marketers must start planning for the convergence of TV and the Web, as it gathers steam into 2010 and beyond," said Lisa E. Phillips, eMarketer senior analyst.

Over the past decade, consumers have upgraded their home networks from data-centric to multimedia-centric, to better accommodate their desire for digital entertainment. iSuppli predicts worldwide shipments of devices with Internet capability will nearly quintuple by 2013.

"Convenient technologies such as smartphones and wireless home networks make such convergence mainstream, and inevitable," Ms. Phillips added. "The generalizations of lean-back and lean-forward interaction still fit today, but as TVs and PCs converge viewer behaviors may change."

Total time spent watching online videos ranges between 1 and 2 percent of Internet user's overall monthly video consumption, according to various estimates, while TV gets 98.5 percent of all video viewer time, according to Nielsen.

Regardless, online and mobile video viewership, along with time spent on the Internet in general, are growing quickly. The trend is now apparent, and somewhat easier to predict.

"For marketers thinking about advertising to two audiences at once -- those watching online video on their TV sets and consumers streaming TV shows and movies on their PCs -- the solutions are more nuanced," noted Ms. Phillips.

Moreover, as legacy big-media companies contemplate transitioning their advertiser-supported offerings (such as Hulu.com) to fee-based video services, this will further fragment the marketplace and accelerate the shift in consumer behavior to discover other Internet video content sources.

The continued disruption of the traditional mass-media broadcast television business model, and the rise of TV 2.0, is inevitable. Ironically, it will be the short-sighted actions of legacy industry players, not new competition, that perpetuate the continued democratization of digital content distribution.

How OTT is Forcing Legacy Media to Evolve

The highly efficient approach that Google applies to storing and serving digital video content is apparently influencing the legacy video distribution value-chain to evolve.

Proving once again, that necessity is the mother of invention -- particularly when meaningful new competition forces an industry to change.

According to In-Stat, traditional Video-on-Demand (VoD) services, and their typical siloed video services currently use a great deal of proprietary -- or industry-specific (i.e. very expensive) -- equipment. They see traditional and pay-TV service providers migrating to more efficient Content Delivery Networks (CDNs) and data center models based on server virtualization.

In-Stat believes that this migration enables content portability and will have a direct impact on equipment vendors, service providers and content owners. Meaning, this will be disruptive to the legacy status-quo.

"Increasing usage of over-the-top (OTT) Internet video is driving traditional TV service providers to launch TV Everywhere initiatives," says Gerry Kaufhold, In-Stat analyst. "The data center approach promises more flexibility to manage content for delivery to multiple device types, enabling service providers to offer any content, on any platform, in any location."

In-Stat believes next-generation on-demand approaches increase content owner influence, and greatly expand the delivery options. Among other impacts, content owners and service providers will need to re-negotiate licensing agreements that will reflect more flexibility and responsiveness to consumer demands.

The CDN trend will also drive a shift in the type of equipment and features that manufacturers provide to service providers to handle video delivery.

In-Stat's market study found the following:

- Over the next five years, the worldwide value of Content Delivery Network (CDN) services will pass $2 billion annually by 2011 and continue growing thereafter.

- Barriers, such as digital rights management, competing encoding formats and standards, and restricted bandwidth remain a challenge to meet new demands for flexibility in content use.

- Adaptive Bit Rate Video approaches will permit IP-networks to deliver a quality User Experience at lower bit rates.

Rise of Hulu and Decline of Network TV Ads

More than 167 million U.S. Internet users watched online video during the month of October 2009, according to a market study by comScore. Online video viewing continued to reach record levels in October -- with nearly 28 billion videos viewed during the month.

Google websites continued to rank as the top U.S. video property in October as it delivered 10.5 billion videos viewed. YouTube.com accounted for nearly 99 percent of all videos viewed at the Google properties.

Hulu ranked second with 856 million videos viewed (3.1 percent) followed by Microsoft websites with 451 million (1.6 percent) and Fox Interactive Media with 446 million (1.6 percent).

More than 167 million viewers watched an average of 160+ videos per viewer during the month of October. Google websites attracted 126 million unique viewers during the month (83.5 videos per viewer), followed by Fox Interactive Media with more than 53 million viewers (8.4 videos per viewer) and Yahoo! websites with 50 million viewers (6.8 videos per viewer).

The average Hulu viewer watched 20.1 videos during the month, representing another all-time high for the property.

In October, Tremor Media ranked as the #1 video ad network with a potential reach of 75 million viewers, or 45.0 percent of the total viewing audience. YuMe Video Network ranked second with a potential reach of 68 million viewers (40.4 percent penetration) followed by Broadband Enterprises (BBE) with 67 million viewers (40.0 percent).

Clearly, Hulu's success contributes to the cannibalization of TV network advertising revenue. The trend from linear TV program viewing to on-demand video viewing is already solidified -- in both advertisers and consumers minds.

Even if Hulu were to shift to a pay-per-view or subscription model tomorrow, this would not alter the behavior pattern that's been established.

Some of those who refuse to pay Hulu will merely watch readily available video content on one of the multitude of other advertiser-supported websites. Others will simply download the blocked TV show videos, once again, from the P2P Darknet. Industry analysts describe what appears to be a no-win situation for the big-media companies.

Other findings from the comScore study include:

- 84.4 percent of the total U.S. Internet audience viewed online video.

- The average online video viewer watched 10.8 hours of video.

- 125.3 million viewers watched nearly 10.4 billion videos on YouTube.com (83.1 videos per viewer).

- 41.1 million viewers watched 313.5 million videos on MySpace.com (7.6 videos per viewer).

No Slowdown in Sight for Online Video Use

Internet video viewing shows no sign of reaching a plateau. Time spent viewing video on social networking sites increased 98 percent year-over-year, from 503.8 million minutes in October 2008 to 999.4 million minutes in October 2009, according to the latest study by Nielsen.

In conjunction, the number of online video streams viewed on social networking and blog sites increased 45 percent year-over-year, from 240.8 million streams in October 2008 to 349.5 million in October 2009.

"During the past year, online video viewing has become central to the Web experience. In conjunction with this increase, we are seeing remarkable growth in video viewing on social networking sites and it is only natural that these two trends would converge in consumer's minds, making sites like Facebook and Myspace.com, increasingly important distribution points for both consumer and professionally generated video," said Jon Gibs, vice president, media analytics at Nielsen.

Facebook was the top online social networking and blog destination in October 2009, with 217.8 million total video streams viewed during the month. Myspace.com and Stickam were #2 and #3, with 85.2 million and 26.3 million video streams, respectively.

During the last year, Facebook's online video viewing audience has experienced tremendous growth. Year-over-year, total time spent viewing video on Facebook increased 1,840 percent, from 34.9 million minutes in October 2008 to 677.0 million in October 2009.

The number of unique viewers of video increased 548 percent and total streams grew 987 percent during the same time period.

"Facebook's rapid growth in online video during the last year illustrates the site's evolution from simply a communications focused tool to a media portal," remarked Gibs. "Social networking sites are evolving from a venue for catching up with friends to a platform for personal expression, allowing consumers to share their experiences in the full variety of content formats available online."

PC Microprocessor Shipments are Recovering

Worldwide PC microprocessor shipments in the third quarter of 2009 increased substantially and to all-time record levels for a single quarter, according to the latest market study by IDC.

The data indicates that PC processor unit shipments in 3Q09 rose 23 percent compared to 2Q09 -- growth that is approximately double the normal growth in unit shipments for the same period. In terms of revenue, the PC processor market grew more than 14 percent quarter over quarter to $7.4 billion.

Looking at market performance by PC form factor, mobile PC processors continue to drive growth.

Mobile PC processors, which include Intel's Atom processors designed for netbook PCs, increased 35.7 percent in 3Q09 compared to 2Q09. Desktop PC processors grew 11.4 percent quarter over quarter and x86 server processors grew 12.2 percent quarter over quarter.

"The story about 3Q09 leads with Atom processors being sold in netbooks manufactured and sold in China," said Shane Rau, director at IDC. "While Atom processors led the PC processor market to reach record unit shipments, on the revenue side, their low average selling price led to notable price erosion, more than 7 percent."

As a result, while market shipments rose 23.0 percent compared to 2Q09, market revenue grew less, 14.1 percent compared to 2Q09. Most meaningful about 3Q09 is that, since PC processor shipments overall just slightly exceeded shipments in 3Q08, IDC believes that the processor market is recovering.

Upside for Internet-Connected Mobile Devices

Broadband service providers are becoming a significant channel for all Internet-connected mobile devices, including netbooks and mobile PCs, because of the revenue potential of the associated services.

In-Stat anticipates that the number of devices sold through the carriers will continue to increase as services are bundled for multiple devices and service prices decrease due to increased bandwidth from new communications technologies and increased competition between carriers.

By 2013, In-Stat anticipates that over 60 percent of all the Internet-connected mobile devices sold will be through carrier channels.

"In the U.S., carriers are charging up to $60 per month for a two year contract with the subsidized purchase of a netbook," says Jim McGregor In-Stat analyst. "While the subsidy costs the carrier $50–$100, it generates $1,440 or more in service fees over the life of the contract."

Carriers in the EU and Asia are also offering netbooks with a data contract, but typically at lower prices than in the U.S. market. As a result of the recent success of selling netbooks, carriers are now venturing into offering notebook PCs. Carriers in Asia have been offering MIDs and UMPCs for some time.

In-Stat's market study found the following:

- The total available market (TAM) for Internet-connected devices is projected to grow at a 22.3 percent compound annual growth rate (CAGR) through 2013.

- 78 percent of Internet-connected devices will be using processors with integrated multimedia acceleration, including 85 percenet of mobile PCs, by 2013.

- In-Stat projects that nearly 31 percent of notebooks will be sold through carriers in 2013.

- The innovation of the mobile market is being driven by four key factors: richer content, network access for communications and content, increased bandwidth to enable this access, and new technologies.

Buyer Influence and Social Media Marketing

According to the latest eMarketer assessment, consumer packaged goods (CPG) companies and social media marketing are not a logical mix. CPG companies tend to focus on attempting to reach a passive "mass audience" of docile consumers -- while social media is more focused on actively engaging independent-thinking people.

"By looking at social media as a way to listen to consumers, respond to their needs and create ongoing dialogue -- instead of as another way to advertise to them -- CPG companies can reinvigorate their marketing and create new bonds with consumers," said Debra Aho Williamson, eMarketer senior analyst.

The CPG industry is turning its attention toward online advertising, but remains firmly committed to traditional media. Spending on social network advertising represents only a small fraction of the total investment going to that channel, according to Nielsen AdRelevance.

Still, the Nielsen figures represent only image-based ad spending, and do not include any other social marketing outlays. Some CPG companies wisely consider social media engagement to be something that's earned, rather than something you buy. They invest in promotional interactions and blogger relations -- rather than CPM-based display advertising.

Measuring the link between social media engagement and sales is made more difficult by the fact that many CPG products, such as cake mix and soda, are not typically purchased online. But, that doesn't mean that online engagement can't influence off-line buyer behavior.

So, why don't more companies attempt to influence purchases with meaningful information and guidance? Clearly, the decisive content that's missing from most marketing communications is substantive "how-to" insight that aids people to select a product from all the other alternatives.

Outlook for U.S. Enterprise Data Services

Most traditional wireline data services spending by U.S. businesses has been consistently falling in 2009, according to the latest market study by In-Stat. However, there are a few exceptions to this trend.

Overall, In-Stat expects a nearly 2 percent decline in U.S. business spending on wireline data services -- which represents the first time this market has declined in the 10 plus years In-Stat has been tracking it.

Wireline data services include expenditures on wide area network (WAN) data transport services, as well as, dedicated Internet access (which includes cable and DSL), network-based IP VPN, private line, frame relay, ATM, and Ethernet services.

Note, the category does not include managed services, such as, hosted IP telephony, LAN infrastructure, security, and other managed service solutions, which are tracked separately by In-Stat.

"Ethernet Services and IP VPN services are among the lone bright spots in the market," says David Lemelin, In-Stat analyst.

Spending on ATM, Frame Relay and Private Line services is particularly weak, declining about nearly 10 percent from 2008. Among the vertical business markets, the professional services and healthcare segments are faring best, but even these are only flat year to year.

In-Stat's market study found the following:

- Spending on wireline data services by U.S. Enterprises (1000+ employees) is on track to decline from $23 billion in 2008 to $22.4 billion in 2009. Spending will stabilize in 2010 before returning to growth reaching $25 billion by 2012.

- Spending on IP VPN services by U.S. Small Businesses (5-99 employees) is projected to grow from about $100 million in 2008 to over $250 million in 2012.

- Among vertical segments of U.S. Enterprises, government represents the largest segment.

- Spending on Ethernet Services among healthcare firms will see some of the strongest growth, nearly tripling from 2008 to 2012.

Brits Share Digital Media with Friends-Family

With personal video sharing and photo sharing gaining interest, Futuresource Consulting has carried out a UK market study to gain greater insight into the media that are being used, the decision-making process and the level of reliance on the available platforms.

"An astounding 92 percent of survey respondents told us they are sharing their images with friends and family, either electronically or as hard copies," says Simon Bryant, Principal Consultant at Futuresource Consulting.

The survey found that on-camera and via email are the most popular methods of sharing pictures. However, nearly half of all respondents are still sharing physical prints with friends and family -- though this behavior varies widely depending on the age of the respondent.

Females are also more likely to share physical prints than males.

The vast majority of people surveyed -- 85 percent in all -- also upload personal photos and/or videos to websites, with 16-34 year-olds leading the way. However, the survey also shows that two out of every three people over the age of 55 have uploaded content at some time.

When focusing solely on video, the study found that 70 percent of all respondents are sharing personal videos with friends and family, with 16-34 year-olds most likely to share footage.

This age group favors websites as the main method of sharing -- whereas other age groups use a PC or laptop as the primary sharing tool.

The Futuresource consumer research study was carried out online with a UK sample size of more than 1,000 respondents aged 16 and over.

Top 5 Mobile Smartphone Vendors for 2009

The worldwide mobile smartphone market reached a new record for shipments during a single quarter. According to an IDC market study, vendors shipped a total of 43.3 million units during the third quarter of 2009 (3Q09) -- up 4.2 percent from the 41.5 million units shipped in 3Q08, and up 3.2 percent from shipments of 41.9 million units in 2Q09.

"Demand for converged mobile devices has remained strong all year," said Ramon Llamas, senior research analyst with IDC.

"These devices provide more utility and entertainment than traditional mobile phones. Moreover, users have plenty of devices from which to choose, whether it be a multimedia powerhouse, a messaging machine, or a social networking tool. As users expect greater functionality from their devices beyond telephony, we believe the converged mobile device market to grow faster than the overall mobile phone market."

Top Five Mobile Smartphone Vendors

Nokia maintained its position as the overall leader in the converged mobile device market. Driving shipments forward were its popular flagship device, the N97, and an improving enterprise-focused portfolio led by the E71. Nokia also announced its first Maemo-powered device, the N900, targeting high-end users. While its worldwide leadership position is clear, Nokia still struggles in North America.

Research In Motion continued on its upward path with BlackBerry devices available for first-time users and returning users alike. Although most of its volumes remained within its home region of North America, the company also posted significant improvement internationally, with some regions recording triple digit growth year over year. Research In Motion launched two new devices during the quarter; the BlackBerry Tour for CDMA networks and the BlackBerry Curve 8520 for GSM networks.

Apple reached its highest volume yet in a single quarter. The nearly global availability of the iPhone 3G S sparked another round of annual replacements for Apple loyalists, while the lower price on the iPhone 3G put the device well within reach of customers wary of the price. Although the iPhone has struggled within emerging markets, its arrival at China Unicom this year could foreshadow greater shipment volumes.

HTC finished the quarter in fourth place (with HTC shipment data excluding phones sold under another company's brand). HTC remains the largest provider of Windows Mobile-powered devices, with several new devices shipping the new Windows 6.5 operating system. These include the HD2, Imagio, Tilt2, Pure, and Touch2. Not to be overlooked is its quickly growing Android-powered volumes with the Dream, Hero, and Magic.

Samsung returned to the top five vendors during 3Q09. Although volumes were flat from a year ago, the company saw marked improvement in Asia-Pacific, Latin America, and EMEA. The company has been a big supporter of Windows Mobile on its devices, and features Windows 6.5 on its Intrepid device. Samsung also plans to launch its Android-powered offering with the Moment and Behold II.

Wireline Telcos Have Tough Choices to Make

Infonetics Research released its new fixed and mobile communications subscribers market forecast report, and it's now apparent that the continued decline of legacy "phone service" will change the face of the industry, forever.

The global recession did not prevent people from using communication services, but it clearly accelerated the pace of wireline-to-mobile substitution.

China, which had half a billion mobile subscribers in 2008, and India together make Asia Pacific the world's largest mobile subscriber region -- now and into the future. The EMEA region is next, with strong growth driven by Africa.

"Mobile subscriptions will continue to grow strongly over at least the next five years, driven mainly by basic voice service needs in these regions, particularly in BRIC countries (Brazil, Russia, India, and China)," projects Stephane Teral, Infonetics Research's principal analyst for mobile and FMC infrastructure.

How can wireline telcos in developed markets replace the lost revenue and higher profit margins from their legacy services? They're often slow to innovate, and they enter markets with significant new infrastructure investment when the potential has already peaked -- think traditional pay-TV services, and their me-too IPTV offerings.

Highlights of the Infonetics market study include:

- There were nearly 4 times more mobile subscribers than access line subscribers worldwide in 2008 (3.9 billion vs. 1 billion).

- The number of mobile subscribers grew 17.4 percent in 2008 over 2007, while access line subscribers declined 5.5 percent.

- Access lines are disappearing fastest in North America and China, due to the move to fixed-to-mobile substitutions, the switch from copper to fiber lines, and the recession, during which many people ditch their landlines and keep only their mobile or smartphone.

- The number of worldwide mobile subscribers will reach 5.9 billion by 2013.

- The number of fiber access (PON FTTH) subscribers worldwide is expected to soar at a compound annual growth rate of 32 percent from 2008 to 2013.

Global Demand Increases for Wi-Fi Hotspots

The Wi-Fi wireless hotspot market is entering a revival period marked by renewed interest from communication providers and increased usage among both business and leisure users, according to the latest market study by In-Stat.

In-Stat estimates that wireless hotspot usage will increase in 2009 by 47 percent, bringing total worldwide connects to 1.2 billion.

"A market that appeared to be languishing due to revenue shortcomings has found a renewed life force," says Frank Dickson, In-Stat analyst.

Mobile operators have become increasingly involved in the hotspot market globally as they assess the potential of hotspots to offload wireless data traffic from overburdened 3G networks. Also, mass market adoption of Wi-Fi-enabled smartphones has significantly altered hotspot usage, with these devices accounting for the majority of access sessions in some locations.

Wi-fi usage at home and the increased availability of free (to the end-user) Wi-Fi access in coffee shops, hotels and other public places, has stimulated demand for wireless Internet access.

In-Stat's market study found the following:

- Total worldwide hotspot venues will reach 245,000 locations in 2009.

- AT&T is on course to experience 500 percent usage growth for 2008 vs. 2009.

- Asia-Pacific will experience the greatest growth in venue deployments over the next few years, largely driven by large-scale deployments in China.

- Survey results seem to suggest that security concerns by individuals, not corporate users, are one of the few issues that are potentially limiting hotspot usage.

Social Networking Market for Mobile Users

Social networking activity is growing among mobile Internet users around the world. As one of the primary ways mobile users communicate with one another, it is proving a significant driver of Internet usage on wireless communication devices.

eMarketer predicts that the number of mobile users accessing social networks from their mobile devices will reach 607.5 million worldwide by 2013 -- representing 43 percent of global mobile Internet users. In the U.S. market, mobile social net users will total 56.2 million by 2013 -- accounting for 45 percent of the mobile Internet user population.

"Combining two much-hyped, but still-emerging channels -- mobile Internet access services and social networks -- results in a developing opportunity for marketers," said Noah Elkin, eMarketer senior analyst.

The big three social network destinations of Facebook, MySpace and Twitter dominate the U.S. mobile space, as they do the desktop PC world.

Location-based networks have not yet reached critical mass, but are worth monitoring as they work to link people, places and interests. In addition, location-based services can also be used in other contexts to help marketers target social network users with relevant information and offers.

But, the combination of two emerging channels means that estimating the market for mobile social advertising and marketing is premature, despite the apparent promise of targeting this user base.

Marketers are preparing to incorporate both environments into their marketing mix. But since both channels are still evolving, combining mobile and social nets together puts many marketers into a gray area from both a budgetary and oversight perspective, and investments remain small and experimental.

Mobile Internet Device Market Diversification

According to the latest market study by ABI Research, almost 35 million netbook PCs will be shipped by manufacturers in 2009 -- a forecast the firm first made in February. ASUS dominated the netbook category in 2007 when it debuted the Eee PC, and Acer made a big push in the forth quarter of 2008 to lead the second year.

"74 percent of 2008 netbook shipments bore the brands of just three vendors: Acer, ASUS, and Samsung," says senior analyst Jeff Orr. "However, the rapid growth of netbooks as a second computer in developed markets will be eclipsed in coming years by vendors targeting developing nations and first Internet PCs at home."

The netbook and nascent mobile Internet device (MID) markets are not locked up. While several of the leading netbook vendors are recognizable brands from the laptop and desktop computing markets, new vendors -- including handset maker Nokia -- have introduced netbooks and MIDs in an effort to participate in the growth of these segments.

ABI Research forecasts UMDs (Ultra-mobile Devices: the combination of Netbooks, MIDs and UMPCs) to top 124 million systems shipped in 2011.

As netbook markets thrive, the mobile consumer electronics category, which is expected to account for only about two million device shipments this year, is forecast to top 50 million in 2014.

This market is currently led by connected Personal Navigation Devices (PNDs) and eBook readers. Every major navigation company is in the running, offering turn-by-turn navigation, overlays, weather, traffic, and real-time traffic updates. Amazon's Kindle has lots of competition coming from the Barnes & Noble Nook, Sony Daily Edition, iRex, Plastic Logic Que and others.

Finally, Orr believes, laptop vendors may soon reinvent the UMPC, bringing down the low-end laptop price to $500 through ultra-low voltage machines. That could affect some netbook sales in developed markets, especially the business users.

Over-the-Top Video Viewing Doubles in 2009

The TV 2.0 adoption process is in full motion, and announcements planned for the upcoming CES will further accelerate this phenomenon. We're moving beyond the early-adopter stage of market development, as the connection options and user interface for viewing Internet Video on new TV sets is further simplified.

Meanwhile, the U.S. broadband households that are viewing premium online content -- including movies and TV shows via the public Internet -- doubled in the last year, according to the latest market study by Parks Associates.

Currently, it's estimated that over 25 million U.S. broadband households regularly watch full-length TV shows online, while over 20 million watch movies online.

Parks reports that the growing popularity of online portals -- such as Hulu.com -- shows rapid growth in the number of viewers who use the Internet to watch long-tail and premium content. This shift highlights the opportunity for service providers to extend their current pay-TV and video-on-demand services to include online and mobile video offerings.

In fact, Parks believes that providers will have to embrace online video services, including the ability to deliver content across multiple platforms -- if they are to remain competitive and attract new subscribers.

"Consumer interest in time-shifting content through online portals has increased significantly," said Jayant Dasari, Research Analyst, Parks Associates. "Close to 40 percent of broadband households today watch full-length television shows over the Internet. Enabling access to content anytime through any broadband-enabled device will be a significant challenge for the service providers."

The next step, according to Dasari, is for content owners and distributors to come to a consensus on business models so they can monetize consumer interest in online media.

Searching and finding the best online video content is now much easier, since Clicker opened their complete guide to Internet Television to everyone -- their platform came out of beta this week. Clicker is one part directory, one part search engine, one part wiki, one part entertainment guide, and one part DVR.

Touch-screen Mobile Phones Gain Adoption

A comScore market study of touchscreen mobile phone adoption in the U.S. uncovered a 159 percent growth rate during the past year -- to 23.8 million users in August 2009.

The growth in touchscreen device adoption substantially outpaced the already strong 63 percent growth in the adoption of smartphones.

"Touchscreen phones have quickly gained adoption as new devices have flooded the mobile marketplace," said Mark Donovan, comScore senior vice president of Mobile.

The Apple iPhone ranked as the top touchscreen device family with 32.9 percent of touchscreen device users age 13 and older, nearly four times larger than the market share of the next most popular device family -- the LG Dare (8.7 percent). LG Voyager ranked third with 7.8 percent of the market, followed by the Blackberry Storm (7.0 percent) and Palm Treo (6.5 percent).

Smartphones in general and touchscreen devices specifically tend to be more popular among younger users. While 38.8 percent of all mobile subscribers (age 13+) are under the age of 35, 51.4 percent of smartphone users are in this age cohort, as are 57.7 percent of touchscreen device users.

In fact, a significant 20.6 percent of touchscreen users are in the narrow age range of 18-24. Meanwhile, less than 5 percent of smartphone and touchscreen device users are age 65 and older, compared to 13 percent of the total U.S. mobile subscriber marketplace.

"The iPhone clearly set the trend in the industry for touchscreen devices, so it’s no surprise that it has the largest share of the market," added Donovan. "But as other players have entered the touchscreen market with compelling devices, competition is clearly heating up."

Networked Digital Home Audio Marketplace

Traditional broadcast analog radio is being overshadowed, as listeners abandon the limited format for a multitude of digital audio entertainment options. The rise of connected devices and Internet radio are laying the foundations for multi-room networked audio, according to the latest market study by Futuresource Consulting.

The digital music market in the USA now accounts for 35 percent of the country's music revenues, with a subscription market worth nearly $3 billion (85 percent derived from satellite radio).

The UK is also a significant market, where consumers spend almost twice as much on music per capita than the U.S. and European average. Combine this with a rapid adoption of consumer laptops, notebooks and wifi-enabled broadband, and the market is shaping up for a networked audio revolution.

There are many potential applications for networked audio, including connecting a laptop to a music system's speakers without the need for wiring; a home theatre in a living room playing out music from a remote PC or media server; an AV receiver delivering music streams to wireless devices in other rooms; or a wifi enabled in-wall amplifier piping Internet radio to a speaker system housed within the ceiling.

"Networking solutions are on the brink of revitalizing markets for home audio products," says David Watkins, Senior Market Analyst, Futuresource Consulting. "Consumers already own devices which can access Internet music - PCs, personal media players and smartphones -- though the unique selling point for embedded Internet radio is convenience and immediacy."

Standalone Internet radio manufacture is currently being driven by innovators like Grace, Roberts, Revo and Magic Box, with the market primarily focused within the U.S. and UK.

Hardware is bundled with navigation portals, such as Reciva, so the product is ready to play straight from the box, though online registration allows access to more intuitive station search functionality and an extended number of station presets.

Futuresource forecasts show that the market for Internet radios will grow from a small niche in 2008 -- less than 500,000 units worldwide -- to close to five million units by 2013.

Server-to-audio networking combined with wireless multi-room audio systems is just the beginning. Several vendors are already developing networked solutions which allow remote control of your iPod and other handheld devices across a home network, effectively turning handheld devices into servers. Add the iPhone's capability to act as both a music source and a wireless remote controller and the outlook starts to look very enticing.

However, there are challenges to overcome. The majority of consumers are currently unwilling to pay for streamed Internet radio services, so the search is on for sustainable business models, particularly with the technology being embedded within an increasing number of devices.

Ease of use, seamless user interfaces and robust wireless operation are an essential next step to move the market from niche to high volume. From a slow start, by 2013 networked features on medium range audio devices will be standard, and consumers will increasingly become dependent on the Internet for their music and other audio entertainment.

Are you Ready for Ultra-High Definition TV?

While the market for High-Definition TV (HDTV) has apparently reached the mainstream user, the consumer electronics industry has already started speculating about the commercialization of Ultra-High Definition (UHD) television.

Perhaps we'll learn more at the upcoming CES in January. One question that I have, when will there be enough 4k and 8k resolution cameras in the hands of filmmakers and TV producers to create the required UHD video content for this format?

In-Stat believes there will be a lengthy time period before the UHD market reaches a critical mass of 5 percent household penetration.

However, as the initial market debuts over the next five to ten years, there will be ample opportunities for technology companies, manufacturers, service providers and media companies to experiment with business models and strategies to make UHD a strong business in the long term.

"UHD formats provide between four and sixteen times the resolution of Blu-ray or 1080p high definition as well as 22.2 multichannel three-dimensional sound," says Michelle Abraham, In-Stat analyst. "This is a vast improvement over the currently available end user viewing experience in the home."

As originally proposed, UHD is available in two levels of resolution -- 7680 x 4320 pixels (i.e., 8K resolution), and 3840 x 2160 (i.e., 4K resolution).

In-Stat's market study found the following:

- The rising popularity of high resolution digital cinema will expose consumers to high resolution content. Then, early UHDTVs will be made available to provide a digital cinema high resolution viewing experience in the home.

- Ultimately, broadcasters will start offering UHD content to an addressable market of UHDTVs, between 2017 and 2022.

- In-Stat expects the total installed base of UHDTVs Europe to approach 5 percent household penetration until 2021, and increase to over 28.2 percent penetration by 2025.

- Once again, Japan will likely be among the early-adopter countries.

Local Advertising Gaining Mobile Momentum

eMarketer reports that beginning this year, Piper Jaffray anticipates that local online advertising spending will outpace the national spend within the U.S. marketplace.

In 2008, national and local ad spending levels were equal. But while the research firm projects a drop in national online ad spending for 2009, local is expected to increase by 5 percent.

Over the next five years, Piper Jaffray predicts a compound annual growth rate (CAGR) of 9 percent for local online ad dollars, compared with 4 percent for national Internet spending.

Borrell Associates, on the other hand, forecasts only a 2.9 percent CAGR for local online ad spending over the next five years. Borrell puts spending at $16.4 billion in 2013, compared with $19.18 billion for Piper Jaffray.

While Borrell believes the local online ad market is approaching saturation, Piper Jaffray indicates in its report that small businesses will begin to catch up with consumers online, bringing significant growth to the local online sector and moving local dollars from offline to the Web.

Piper Jaffray considers lead generation the primary goal of local advertising, and suggests that mobile device use presents a major opportunity for savvy marketers.

With online search the preferred method to find local business infornation, and consumers highly connected to their mobile phones, especially during the weekends, they predict huge growth in mobile search spending through 2012.

Local-centric digital marketing companies will play a key role in bringing small businesses into mobile advertising, according to the report. Small businesses need to understand that mobile phones and public Wi-Fi hotspots can be an effective source of new sales leads -- similar to utilizing traditional online promotions.

Top 3 Consumer Desires for Broadband CPE

The top three important factors U.S. consumers cited in their purchasing decisions of Broadband Customer Premise Equipment (CPE) were speed, security, and Wi-Fi wireless range, according to the latest market study by In-Stat.

The least important features were product brand, followed by "green" environmental friendliness. Meaning, it's a typical commodity consumer electronics product category.

"While companies are marketing their "green" equipment features, the message doesn't appear to be resonating with consumers," says Joyce Putscher, In-Stat analyst. "Consumers want performance and security."

It's not clear from the survey result if In-Stat asked about ease-of-use preferences, since poor device configuration design is often cited in prior consumer surveys of broadband CPE.

The research also reveals that while 2008 was the slowest total global broadband (CPE) market growth of the decade, 2009 will be even slower. Fortunately, select segments of the market are performing better in 2009 than the overall market.

These include VoIP-enabled routers and DSL CPE, cable gateways, and Fiber-to-the-Home (FTTH) gateways and Optical Network Terminals (ONTs), and Fixed Wireless Broadband CPE.

In-Stat's market study found the following:

- The FTTH CPE segment, which includes ONTs and FTTH Gateways, will see a nearly 20 percent Compound Annual Growth Rate (CAGR) through 2013.

- In-Stat expects global installed PC-based home networks to grow by a little more than 19 percent in 2009, driven by the continued, but slower, rise in the number of residential broadband subscribers, the desire to share that bandwidth, sometimes free network equipment, and the desire to share content.

- The majority of global FWB subscribers are WiMAX. Asia-Pacific has the lead in FWB subscribers and CPE shipments, followed by Europe. In 2011, Asia-Pacific should capture over 50 percent share of the annual FWB CPE shipments.

Server Virtualization Reinvents the Datacenter

According to the latest study by IDC, 16.5 percent of all new servers shipped in the second quarter of 2009 (2Q09) were virtualized -- an increase from 14.5 percent in 2Q08.

However, actual shipments decreased 21.0 percent year over year to 246,000 physical servers in 2Q09 as customers continue to limit spending on new server hardware relative to last year.

Similarly, worldwide virtualization software revenue declined 18.7 percent year over year in 2Q09 to $344 million. Virtualization licenses did grow quarter over quarter in 2Q09. The server virtualization market continues to shift towards the use of paid hypervisors, with paid virtualization software now running on 60.8 percent of all new server hardware shipments virtualized in 2Q09, an increase over 57.2 percent in 2Q08.

Does this also mean that more enterprise CIOs are out-tasking applications to managed cloud service providers? It's unclear at this time. But, the accelerated move to virtual servers is a significant IT infrastructure trend.

"In the second quarter, IDC observed a number of signs indicating that stability is beginning to take hold in the worldwide server market," said Matt Eastwood, group vice president of Enterprise Platforms at IDC. "The worldwide server installed base has aged significantly and virtual machine densities on these systems have increased sharply over the past year."

As a result, the market is poised for the beginning of a significant infrastructure refresh cycle in the months ahead. IDC believes that virtualization will be a cornerstone technology as medium and large enterprise organizations around the globe accelerate the need for more dynamic and converged infrastructure designed to support the business needs of the next economic cycle.

"Server virtualization has forever changed how customers manage their datacenters," said Michelle Bailey, research vice president of Datacenter Trends at IDC. "Virtualization First is now the default approach for new server deployments at most enterprise IT organizations and is quickly becoming the foundational platform for cloud computing initiatives among service providers."

Additionally, growth in emerging regions is accelerating as the economic downturn limits the ability of organizations to raise capital. The next phase in virtualization will require a reinvention of IT policies and procedures and continued adoption of automation tools will be key as virtual machine densities rise and IT managers find themselves facing virtual server sprawl issues.

Upside for Wireless Broadband USB Modem

The majority of cellular broadband modems purchased as add-ons to portable and mobile wireless computing devices have traditionally been bought by businesses -- to equip their mobile workforces.

However, according to a new market study by ABI Research, in 2010 51 percent of these modems -- mostly in the USB adapter form factor -- will ship into the consumer segment. By 2014 that percentage is expected to rise to 63 percent.

"The decline in mobile broadband modem sales to business and the rapid growth of the consumer segment have several causes," says senior analyst Jeff Orr.

The overall economic climate has put a crimp in business spending and lengthened equipment replacement cycles. At the same time the explosion in consumer demand for mobility, fueled in large part by the popularity of netbooks, has pushed up consumer interest.

The popularity of the USB form factor, which has all but eclipsed the older PCMCIA and CardBus formats, has also influenced consumer adoption with its compact size and ease of installation. In some markets, declining modem prices have also boosted sales.

Although new mobile computing products will increasingly feature embedded modem modules, penetration will remain slow in the near-term.

ABI believes that in 2009 less than 5 percent of laptops and netbooks have embedded modems. However over the long-term, the attachment rates will reach significant levels. In 2014, 48 percent of laptops and netbooks shipping will include 3G or 4G data connectivity.

Another factor will shape the market in the mid-term, says Orr. "In 2011 and 2012 we will see the first significant nationwide access to mobile WiMAX and LTE networks in multiple geographic regions. That will create demand to upgrade to compatible modems, breathing new life into the market."

European Digital Terrestrial TV STB Demand

While the global recession has dampened growth in new digital set top box (STB) deployments in 2009, the market potential still remains a tremendous opportunity for STB equipment vendors, according the the latest study by In-Stat.

From 2001 to 2008, the overall digital set top box market grew from 37 million units in 2001 to nearly 190 million units in 2008. Growth turned mixed across STB markets in 2009, with cable set top box shipments declining, while satellite, IP and digital terrestrial segments continued to see some unit growth.

"Looking forward, the transition from Standard Definition (SD) to High Definition (HD) set top boxes will continue to provide STB vendors a solid growth opportunity," says Mike Paxton, In-Stat analyst. "The integration of Personal Video Recording (PVR) capability is also creating growth opportunities."

The big unknown factor is still the growth of over-the-top (OTT) Internet video service adoption and the effect on hybrid STB demand, combined with the further integration of wired and wireless broadband interfaces directly into consumer digital television sets.

In-Stat's market study found the following:

- Worldwide digital set top box product revenue was $18 billion in 2008.

- IP STB shipments to Telco TV service providers are slowing down as Telco TV subscriber growth matures and moderates.

- 2009 is a year of transition for digital terrestrial (DTT) set top boxes. The completion of the analog switch-off in the U.S. occurred in June, 2009. This created a substantial bubble of DTT shipments in 2008 and early 2009, but U.S. DTT STB shipments will likely plummet in 2010.

- It's anticipated that the growth in DTT shipments to Europe will partially offset the declining U.S. STB sales.

China, India Capture Mobile Handset Growth

Emerging markets now account for over two thirds of all mobile phone handset shipments -- with China and India leading the growth -- according to the latest market study by Futuresource Consulting.

"The global handset market will decline by around 3 percent in 2009, with consumers and businesses alike keeping hold of their handsets for longer," says David Sidebottom, Digital Media Consultant at Futuresource Consulting.

"However, China and India continue to buck the global trend, and our forecasts show year-end growth in both these countries, giving them a combined share of almost 30 percent of the total global handset market by the end of the year, compared to just 20 percent in 2006.

The USA has also performed better than anticipated, bolstered by strong smartphone and pre-pay sales. Conversely, Japan has been severely hit this year, largely due to new pricing regulations. The UK market has been one of the hardest hit, with the mid-range sector taking the greatest decline.

However, despite the poor start to the year, many markets across the globe are now seeing signs of recovery, which will help alleviate the extent of this year's decline.

The U.S. and the UK have seen a groundswell of smartphone sales this year, accounting for around 30 percent of handsets sold and the iPhone has been instrumental in changing consumer perceptions of the market, not only in terms of its business models, design, simplicity and content, but also through promoting a software-based solution rather than one based purely upon the hardware.