TelePacific gets 3,500 profitable fixed wireless broadband business customers in California, Nevada and in suburban Chicago through the all-cash transaction. Megapath recently merged with Covad and Speakeasy and is trying to become a national, independent broadband services provider. It’s sale of Covad Wireless is part of a move to shed non-strategic assets like the fixed wireless business.

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Updated:The FCC Tuesday voted 3:2 to approve an order that will enshrine the policies of network neutrality — the idea that ISPs can’t hinder or discriminate against lawful content flowing through their pipes — as regulations enforced by the commission. While legal challenges remain, and the text of the full order won’t be out for a few days, here’s the gist of what’s in store, as I explained last night: The order contains three sections that set policies around transparency, create a prohibition against blocking lawful content on wireline networks and certain types of content on wireless networks, and set up rules preventing unreasonable discrimination. More analysis will come later. Update: Here’s the release discussing the order, and the full order itself will come in a few days.

As for how we got here, this is a brief recap of the events and decisions leading up to today’s vote:

2004: In February, then-FCC Chairman Michael Powell gives a speech in Colorado called “Preserving Internet Freedom: Guiding Principles for the Industry,” outlining the idea of four Internet Freedoms in response to calls for some type of network neutrality.

2005: In February, Madison River, a telephone company, blocks Vonage VoIP services, creating one of the first cases of an ISP discriminating against IP traffic. The FCC later put a stop to the discrimination, and in August the commission proposed a set of four Open Internet Principles, which can be found here. As a policy statement, they were a start, but they lacked teeth because they weren’t regulations. They said consumers were entitled to access the lawful Internet content of their choice, to run applications and use services of their choice, connect their choice of legal devices that do not harm the network, and they are entitled to competition among network providers, application and service providers, and content providers.

2006: Congress attempts to pass the first of many network neutrality bills. In general, ISPs and hardware makers are against any legislation, while large Internet content providers and engineers are in favor, with eBay’s then-CEO Meg Whitman even sending out an email to eBay’s users asking them to contact their Congressmen in favor of network neutrality. The law didn’t pass.

2007: Another year, another net neutrality bill introduced in Congress. It failed. Meanwhile, users accused Comcast of blocking P2P files on its network — a problem in part because such files often include video that might be considered competitive with Comcast’s own pay TV service. The FCC investigates.

2008: Another net neutrality bill is introduced in Congress. The FCC found Comcast was blocking P2P files on its network as part of its network management practice. The FCC under Chairman Kevin Martin censured Comcast for blocking such files and ordered it to implement and file a new and non-discriminatory network management plan.

2009: Comcast sues the FCC in August, arguing the FCC is not the boss of it. In September, FCC Chairman Julius Genachowski pulled the trigger on creating actual rules to cover network neutrality, with the surprise step of including wireless networks under the plan as well. The rules also added transparency as a principle to the original four.

2010: In April, a court says the FCC doesn’t have the authority to censure Comcast for violating the Open Internet Principles, creating a huge roadblock for Genachowski’s efforts to implement the net neutrality rules. Much floundering occurs throughout the summer with the FCC proposing a Third Way, with Google and Verizon hopping in bed with their own suggested policy framework and Congress attempting a bill.

Today, the FCC revamped its order to provide the three principles described above. The compromise is better than the original framework proposed earlier month, but it still has plenty of loopholes and rests on somewhat uncertain legal authority. That will ensure the FCC is arbitrating network neutrality disputes for years to come and likely fighting for that power in the courts.

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As part of the contract, Sonic.net will “manage operation of the network, provide customer service and support and perform on-site installation and repair,” the company said.  Sonic.net is also building its own FTTH network in Sebastopol, Calif., even though it has been selling DSL-based access for a long time. In addition to the Stanford trial network, Google is still working on selecting a community for its much-awaited Google’s Fiber for Communities project.

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Ed.: This is the second of a two-part post. The first post ran on Saturday.

In yesterday’s post, I outlined arguments from a much lengthier analysis (PDF) regarding recent carrier announcements concerning tiered pricing for broadband services. Not only is such pay-per-use a clear trend, but arguably the natural outcome of rational consumer decision-making, as light users actively choose not to subsidize heavy ones by paying for more capital-intensive resources than they use. However, if pricing plans are no longer “unlimited,” but increasingly granular and usage-sensitive, one can predict massive disruptions in the current ecosystem and reversal of some trends of the last few years. However, as with all such shifts, this will create new opportunities and drive new technology breakthroughs. Here are some thoughts on such a future:

• Fewer Ambient Applications. There will be less live streaming video from coffee pots. In other words, less passive push, more active pull.
• Truth in Labeling. Foods and beverages need to disclose calories from protein, fat, and carbohydrates. Apps and content may need to disclose total data transferred or peak data rates. Drugs need to disclose potential side effects (may cause congestive heart failure), apps and content may need to do the same (may cause congestive network failure).
• Certifications and Guarantees. It’s easy to blame a network provider for high charges, but you don’t blame the electric company when your kids leave the lights on or the water company because a broken faucet ran up your bill. Similar to Energy Star labeling for appliances, programs may be developed to certify “bandwidth-efficient” endpoints. Or, guarantees: “This app will never transfer more than 50 MB per month or double your money back.”
• Real-time and Projected Monitoring and Billing. Taxis provide visibility into the amount owed in real-time. You have electricity, gas, and water meters at your house. Providing ubiquitous access to your current data consumption, rated to provide visibility into your projected bill, is next. You may be calling from the airport to tell the kids to turn down the resolution on their web video.
• Price Caps. The EU has already been active in capping roaming fees and monthly bandwidth charges.
• Network Enhancements and Trade-Offs. The same way that increased gas prices drive fuel efficiency, usage-sensitive pricing will drive enhancements in compression algorithms, less chatty protocols, and less predictive caching. Drivers pay thousands more for hybrids to save on gas, similarly, it may be worth spending processing resources to save on network resources.
• Application Design Changes. Rather than dumping a voluminous amount of data, expect more, well, more buttons, such as at the top of this article, requiring continuous positive acknowledgement. Higher interactivity demands lower latency, therefore greater application dispersion.
• Increased Caching and Premises Appliance Sharing. No matter how many times my kids stream the same movie, our players fetch all of the content anew. Expect more caching, subject to laws and DRM. And, expect players from various manufacturers to query each other.
• Congestion Pricing. A number of cities have instituted dynamic congestion-based pricing for tolls and roads, and it has been proposed to do the same for the Internet. Simplified congestion pricing might mean free nights and weekends. They knew to wait until after 9:00 p.m. to call Aunt Martha, and may learn to have an immersive multi-screen 3-D, high-definition video call with her after 9:00 p.m. as well.
• Security. Letting your neighbor tap into your wireless access point may not seem like such a good idea anymore. Expect more users to turn security on, and more access point vendors to focus on simplicity and usability of security administration.
• Peer-to-peer. If letting your neighbor uncontrollably increase your monthly data bill is unwise, perhaps neither is letting everyone on the planet using your peer-to-peer client do the same. Some telcos are implementing edge optimization for content delivery, using peer-to-peer in the set-top box. Usage-sensitive plans will drive a need to differentiate traffic which a user generates vs. traffic that the provider generates.
• Intelligent, Policy-Based Optimization. Better to cache that movie now or download it tonight, when the forecast is for a twenty percent chance of lower data transfer rates? A predictive optimizer that believes rates will drop but knows you won’t stay awake long enough to watch the movie anyway may make the decision for you.
• End-to-End Open Interoperability and Integration. Some TVs can talk to media players via “HDMI Consumer Electronics Control,” others can’t. Expect device manufacturers to increasingly support interoperable control so that a streaming media player doesn’t rack up charges when no one is watching.
• Conservation Culture. People have learned to turn their thermostats down in the winter, and to wait for sales on Black Friday and Cyber Monday. Lack of concern for usage under flat-rate plans is sometimes referred to as “moral hazard,” but I would just describe it as “rational indifference to consumption at zero marginal cost.” Reduced consumption is a well-known effect of metered pricing.
• Cost-Based Adaptivity. Technologies such as Scalable Video Coding degrade gracefully to smaller screens and lower frame rates and quality due to network congestion. Future technologies may do the same based on real-time network data pricing.
• Return to Ownership. Recent trends have favored on-demand rental over ownership. Shifting breakeven points may cause these trends to moderate or even reverse. Don’t toss that DVD shelving unit yet. If you can rent a house with an option to buy, perhaps similar models will emerge where streaming a movie will entitle you to a discount on purchasing it on physical media.
• Shifting Business Models and Ecosystems. People who drive to the video store for a DVD (as some still do) expect to pay for the data transport costs (e.g., fuel, car wear and tear). People who rent by mail expect that the cost of delivery and return postage is borne by the video service. Expect a variety of customer-pays, provider-pays (i.e., bundled pricing), and advertiser or other third-party supported models to vie to become accepted industry practice, although in any event, the consumer ultimately pays with either eyeballs or hard dollars. Creative partnerships between content providers and network service providers will also materialize. “With connection charges, this movie will cost $1.57 to view. This offer expires in five minutes and prices are not guaranteed until you press ‘Watch Now.’”

The counter-argument to this whole chain of thought is that the cost per bit (stored or transferred) is approaching zero. That sounds compelling, but the inverse of that argument is that the amount of bandwidth per user is approaching infinity, so the real question is which trend outweighs the other. The answer can be found in the fact that carriers’ annual capital expenditures are well north of a hundred billion dollars globally on network infrastructure and they’d like to see a return on that investment.

Many industries have providers offering pay-per-use and/or flat-rate plans. Other industries seem to gravitate to unlimited pricing, and then swing back to usage-based models. The evolution of pricing models for fixed and mobile bandwidth will offer challenges to some businesses, but opportunities for others to differentiate themselves with greater transparency or by developing new features and products that implement some of the ideas above.

Joe Weinman leads Communications, Media, and Entertainment Industry Solutions for Hewlett-Packard. The views expressed herein are his own.

Image courtesy Flickr user mugley.

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Exactly 20 years ago this month, Tim Berners-Lee invented the browser, HTML, and the World Wide Web, but things really took off six years later when America Online switched from pay-by-the minute dial-up to unlimited flat-rate plans, causing usage per sub to more than triple (PDF). Recently, however, wire-line and wireless providers are circling back, either trialing or instituting tiered or pay-per-use pricing, and in the world of cloud computing, pay-per-use is touted as a major benefit. Pricing plans may seem like an arcane topic for marketing professionals, but are driving fundamental questions regarding global capital expenditures and the sustainability of the current content and network ecosystem. If pay-per-use prevails, what are the implications on industry structure and new business opportunities?

For the record, I like unlimited Internet access just as much as anyone else. However, such plans appear to be on their way out, and here’s why. As I’ve explored in ”The Market for Melons” (PDF), pay-per-use is not an evil plot by greedy robber barons, but a natural outcome of independent, rational consumer choice. Consider a town with an all-you-can-eat (flat rate) buffet and an a la carte (pay-per-use) restaurant. Smart shoppers on diets will save money by patronizing the a la carte restaurant, whereas heavy eaters will save money by visiting the buffet. As patrons switch, the average consumption of the buffet will increase, driving price increases for the luncheon special, causing even more users to switch to pay-per-use.

Bottom line: it is not the proprietors driving this dynamic, but the customers themselves acting out of pure, rational self-interest—light users, by deciding not to subsidize the heavy ones, foster the vitality of the pay-per-use model. As the spread in bandwidth consumption increases between frequent digital movie streamers or videoconferencing users and lightweight occasional emailers, rational light users will want to migrate to pay-per-use. Of course, people aren’t always rational, and consumers often prefer to overpay for flat-rate (PDF) rather than save money but risk bill shock.

Under conditions where buyers are coldly rational, active decision-makers, consumption levels are dispersed, prices are a non-trivial portion of income, and the industry is highly competitive, pay-per-use will tend to dominate. When behavioral economics come into play and emotions and cognitive biases are taken into account, switching costs are high, there are no meaningful differences in consumption levels among consumers, and/or there is a single dominant player, flat-rate may prevail. And, there may be a pendulum effect as marketers attempt to differentiate their offers from prevailing practices.

A large number of business models from the “over-the-top” providers of content, applications, and services have been predicated on zero marginal cost to consumers for data usage. It’s not only an access issue; consider the current Comcast / Level 3 disagreement regarding payment for core backbone bandwidth. What might happen if pricing plans, instead of being “unlimited,” become increasingly granular and usage-sensitive? In tomorrow’s post, I’ll predict possible implications, ranging from cultural changes, application and architecture shifts, and industry ecosystem and business model transformation.

Joe Weinman leads Communications, Media, and Entertainment Industry Solutions for Hewlett-Packard. The views expressed herein are his own.

Image courtesy Flickr user mugley.

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So what’s the issue? Level 3 told the world that Comcast had hit it up for more money in order to deliver traffic from Level 3′s customers (such as Netflix) to Comcast’s 17 million broadband subscribers. Level 3 said Comcast’s demand for more dough violated the principles of the Open Internet, which is shorthand for net neutrality. On the other side, Comcast, said Level 3 was trying to sell itself as a CDN while not having to pay fees to Comcast as other CDNs do. In short Level 3, was calling itself a CDN to its customers and a backbone provider to Comcast. This (plus the fact that Level 3 owns one of the largest Internet backbone networks) enabled it to undercut its competitors in the CDN business because it didn’t have to pay the fees that Akamai or Limelight did to get content onto Comcast’s network.

For example, Level 3 even told people back in 2007 that it could deliver CDN services for the same price as Internet access, a feat made possible because it owned its own networks. So when Comcast pointed out the traffic Level 3 was sending to its network would more than double to reach a 5:1 ratio when compared to the Comcast traffic sent over Level 3′s network, it was justifying its decision to act, something covered in Comcast’s peering agreement . (For detailed analysis of Comcast’s peering agreement check out this post from Vijay Gill.)

Peering is the face of this issue — the idea that Internet Service Provider A allow traffic from similarly sized and loaded networks to traverse its own for free because ISP A‘s traffic gets a pass when it’s on networks owned by ISP B or ISP C. However, the soul of this issue is how it exposes how uncompetitive the nation’s broadband networks really are. The very threat that Level 3 alleges Comcast made — essentially that Level 3 could accept the proposed fee or Comcast wouldn’t deliver Level 3′s content — should lead to concern.

This is a problem the Congress and regulators cannot ignore. Just as in the recent retransmission fights in the pay TV world, these rumblings between giant companies leaves consumers in the lurch, even though they’ve actually paid for access to the Internet — that is, the whole Internet, not one approved by Comcast or some other company. The problem, of course, is lack of competition in the broadband markets.

For the consumers who aren’t confused by their inability to access certain content and decide to switch to a provider working with Level 3, there aren’t a lot of choices. Typically, areas have only two ISPs — a cable company and a telco — and many ISPs are now offering service with annual contracts which could lock a consumer in. Plus, what happens if AT&T or Verizon decide to address this imbalance of traffic with Level 3? It is, after all, fairly common for there to be an imbalance of traffic given that consumers tend to request data from Level 3 and backbone providers far more often than they upload content to Level 3′s end customers.

It’s not far-fetched, given that by getting Level 3 to pay more for delivering a CDN service that essentially is the same as its Internet access, but does send more Level 3-specific traffic onto Comcast’s network, Comcast is getting Level 3 to pay for the increase in traffic on its network. One can wonder if Akamai’s CDN fees are calculated on the traffic it sends to an ISP or how much space its servers take up in the ISP’s data center, but with Level 3 and Comcast, there’s no need to wonder. It’s about the traffic. This idea of content providers paying ISPs to deliver the traffic to consumers, while consumers pay ISPs for access to the pipe isn’t a new one.

If that flies, then companies such as Google or Hulu may find themselves paying more for peering. That’s great for the ISPs, but again, it’s not like there are myriad opportunities for a company like Google to exert its market power short of building its own networks. For example, if a large content provider wants its services to reach folks in Rochester, N.Y., it has to work with either Frontier or Time Warner Cable. So while Comcast and Level 3 fight their commercial disagreement over peering in the press and possibly in front of regulators, the real people to suffer will be those who depend on the web. Not because Comcast has decided to call Level 3 on it being a CDN, but because of the lack of real competition in our broadband networks.

Yup, we have a problem!

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You’d think the need for copious amounts of bandwidth would drive up prices for wholesale connectivity. But thankfully (for consumers) the price of Internet bandwidth continues to fall. Of course, you and I don’t see it , mostly because our monthly broadband bill stays pretty much the same. The price of declining bandwidth is felt at the wholesale level, and affects companies such as Level 3 Communications.

Prices for wholesale Internet bandwidth — the kind that is sold to content providers such as Google, Yahoo, Facebook, Netflix and Internet Service Providers — are declining at a steady clip. The service provided is known as IP transit. Data released by research firm Telegeography shows that prices for IP transit are declining even as international traffic volumes are growing at more than 60 percent annually.

Although prices are declining throughout the world, both prices and the rate of decline vary sharply depending on the locale. The median GigE port price in New York City has fallen at a compounded annual rate of 22 percent between the second quarter of 2005 and the second quarter of 2010, to under $8 per Mbps – less than one-third the price of a comparable port in Hong Kong, where it has fallen only 15 percent in past five years, to $28 per Mbps.

A lot of the falling prices have to do with location and competition. In the U.S., the competition is pretty healthy, and that’s why the prices are declining. In Asia, the number of Internet bandwidth providers (and the network capacity) is limited for now, and you can see that reflected in the prices.

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From 2008 through the early part of the year, the demand for new broadband connections softened, in tandem with the softening economy, job losses and the housing crisis. While the overall economy remains in dire straits, there’s an upswing in demand for broadband. So far this year, top broadband providers in the U.S. have added over 2.55 million broadband connections, bringing the total U.S. broadband subscribers to about 25 million.  In comparison, nearly 3.2 million broadband subscribers were added during the first three quarters of 2009.

Comcast has about 16.7 million subscribers and added 249,000 new customers to its roster. AT&T is the largest phone company with 16.1 million broadband subscribers, and it added 148,000 new broadband subscribers during the most recent quarter.

From the Leichtman Research Group press release:

• The top cable companies added over 525,000 subscribers, representing 64 percent of the net broadband additions for the quarter versus the top telephone companies
• The top cable broadband providers have a 55-percent share of the overall market, with a 7.8 million subscriber advantage over the top telephone companies  – compared to 6.6 million a year ago

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According to the study, the average broadband connection is now generating 14.9 GB of Internet traffic per month, up 31 percent from last year when it was 11.4 GB per month. And while a majority of this traffic is coming from online video –- streaming not P2P -– the trends show that we are using the Internet for more than just that. Give us more speed and we will use it all. And then we’ll want more of it.

Communication services such as Skype only increase the daily usage of the Internet. Add to the mix addictive sites like Facebook, Zynga and Groupon, and you can see that the Internet is becoming deeply embedded in our lives.

There is an interesting dynamic of the web –- the peak traffic -– that is equivalent of prime time on television. Peak-hour Internet traffic is 72 percent higher than Internet traffic during an average hour. In an average day, Internet “prime time” ranges from approximately 9 p.m. to 1 a.m. (for the local time zone) around the world.

Here are some of the key findings from the study.

• Peer-to-peer (P2P) file sharing is now 25 percent of global broadband traffic, down from 38 percent last year.
• Video — which includes streaming video, Flash, and Internet TV — represents 26 percent, compared to 25 percent for P2P.
• Over one-third of the top 50 sites by volume are video sites.
• Contrary to popular belief, none of the top 50 global web sites (by traffic volume) featured explicit adult content.
• Ten of the top 50 sites were associated with software updates and downloads (security and application enhancements).
• The top 1 percent of broadband connections is responsible for more than 20 percent of total Internet traffic.
• The top 10 percent of connections is responsible for over 60 percent of broadband Internet traffic, worldwide.

Earlier this morning I wrote about the rapid growth of VoIP –- 112 million broadband connections with VoIP attached to them. Today, voice and video communications traffic (such as voice over IP [VoIP] and voice and video over instant messaging) has reached 2 percent of all traffic, up from less than 1 percent last year. Here are some interesting voice & video communication-related data points:

• Skype accounts for 0.57 percent of total traffic.
• Other VoIP accounts for 0.64 percent of the traffic.
• In comparison, email accounts for 0.23 percent of the traffic.

Cisco is predicting that video calling will exceed 1 percent of consumer internet traffic by end of 2010. I bet Apple’s FaceTime is only going to help achieve that goal. In summary, I think all these numbers can be tied to my initial assertion: Broadband is the magical driver of all things on the Internet. Thanks to broadband, everything, including the web, changes.

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Amazon, with its $139 Kindle, has essentially made the e-book a mass-market device. The company, of course, has already become the dominant platform for self-publishing, which allows unpublished and mid-list authors to increase their income and audience. Since Amazon already uses behavioral targeting to provide merchandise suggestions — including book titles — to each customer, the company could promote e-book authors in ways that will prove difficult for traditional publishers to match. This could have effects beyond the Kindle. Others are introducing lower-priced devices and we believe it likely that a major player will be in the market with a $99 reader by Christmas or soon thereafter.

Troubles at the most iconic name in terrestrial book retailing culminated in yet another milestone signifying the pending triumph of e-books. In August, Barnes & Noble announced it was evaluating strategic business alternatives, including a potential sale of the company. Indeed, we expect that most of the remaining brick-and-mortar bookstores will follow the same path. Print books will never go away, but the industry will follow the trends of the music and film industries, which were reshaped by digital distribution. Traditional retailers and publishers weighed down with legacy cost structures that cannot be rapidly adapted will ultimately sink.

The FCC, meanwhile, made a unanimous vote during the third quarter to approve 20 MHz of TV-band white spaces for unlicensed use. This is the largest block of spectrum released for open access in 25 years and promises an alternate route for consumers who wish to bypass metered rates on wireless Internet access as more and more connected devices come to market.

The unanimous approval by all five FCC commissioners is significant. It signals that the Commission could be entering a new era characterized by more competition and open access to provide for innovative services. FCC chairman Julius Genachowski quoted one analyst who concluded that TV white space use could generate $7 billion annually in new equipment sales and services. Despite a number of challenges faced with building out this unused spectrum — including the challenge of ensuring noninterference between unlicensed devices — the ruling would encourage entrepreneurs and innovators to develop new technologies that can be exported around the world.

Read the full report here.

Image source: flickr user jurvetson.

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These recent upgrades in the DSL speeds are coming at a handy time – DSL has started to lose market momentum, and carriers are looking for ways to balance their exploding capital expenditure requirements. While fiber networks are better in the long run, most phone companies need to squeeze out more from their copper networks without losing too much ground to cable broadband rivals. Why? Because they have to shift their capital expenditure dollars to beefing up wireless networks, which themselves are growing through an explosive growth.

Ikanos, a maker of broadband chips today introduced a new technology, NodeScale Vectoring, DSL access technology that allows connections at 100 Mbps and higher, something which has not been possible on many of the phone company networks. According to the chipmaker, the cost of deploying this technology is about a tenth of the cost of building a fiber to the home network.

The NodeScale technology allows carriers to eliminate the crosstalk that occurs on copper pairs when offering very high-speed Internet. The cross talk introduces noise in the network, which in turn limits the line quality and thus reduces the performance of the network. Typically, to handle crosstalk issues, one needs gigabytes of memory. There are two ways of handling cross talk. NodeScale essentially tames cross talk at the DSLAM level as opposed to line card vectoring which treats every line card as a separate crosstalk domain.

Ikanos claims its NodeScale Vectoring technology cancels noise efficiently, and ZTE Corporation will demonstrate the first DSLAM employing the technology.  The technology was developed in-house, but Ikanos also licensed the dynamic DSL technology developed by DSL pioneer John Cioffi’s ASSIA.

Back in 2006, Professor Cioffi (of Stanford University) told me that it would be possible to hit Gigabit speeds over DSL. We are inching pretty close to that. We have written about many experiments which have pushed DSL speeds to over 300 Mbps in lab conditions. Huawei, the Chinese telecom equipment maker recently announced that it has tested speeds of up to 700 Mbps.

Today, Nokia Siemens Networks took that even further, announcing that it has tested a technology that could boost the data-carrying capacity of standard copper wires to 825 Mbps over a distance of 400 meters of bonded copper lines and 750 Mbps over a distance of 500 meters. If it is made commercial, it would allow the carriers to eek out more from their copper infrastructure.

NSN does this by the creation of phantom (or virtual) channels that “supplement the two physical wires that are the standard configuration for copper transmission lines.” The approach is called Phantom DSL and can boost bandwidth by between 50 percent to 75 percent over the existing bonded copper lines. NSN hopes to make it part of its DSLAM products. Alcatel-Lucent’s Bell Labs came up with the Phantom DSL technology and announced it back in April 2010.

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To be clear, this trial is completely separate from our community selection process for Google Fiber, which is still ongoing. As we’ve said, our ultimate goal is to build to at least 50,000 and potentially up to 500,000 people, and we still plan to announce our selected community or communities by the end of the year.

Stanford’s Residential Subdivision—our first “beta” deployment to real customers—will be a key step towards that goal. The layout of the residential neighborhoods and small number of homes make it a good fit for a beta deployment. (Google Blog)

Well, lucky for the residents of this community. I am fairly happy with my 100 Mbps connection!

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In 1999, it was the rapid growth of wired web services that was the top story. Fast-forward to today, and it’s the massive and seemingly unstoppable growth of the mobile Internet that’s all the rage. The demand for mobile Internet (and its subset, mobile web) is upending all expectations and predictions. Between Apple and Google, about 500,000 new portable Internet devices are getting connected to the Internet.

Planet Mobile

In its State of the Internet Report for the second quarter of 2010, Cambridge, Mass.-based content distribution network Akamai notes there are 19 mobile carriers around the world offering connections with average real world speeds of over 6.1 Mbps, while 29 carriers have an average speeds of 1 Mbps.

Here are some interesting tidbits about mobile from the report, which is likely to be released tomorrow:

• Five providers in Canada, Puerto Rico, Slovakia, Germany, and Austria have users, who on average, consumed more than one gigabyte (1 GB) of content from Akamai per month during the second quarter. Speeds of these services vary, but the higher the speeds, higher the data consumption.
• An additional 80 mobile providers around the world had more than 100 MB of data downloaded from Akamai per unique IP address per month during the second quarter of 2010.
• A wireless carrier from United Kingdom was fastest in terms of peak average speeds during the quarter – 36.6 Mbps. A Slovakian carrier came in second with 20.20 Mbps, and a Russian mobile phone company clocked about 19 Mbps on their wireless networks. Russia was one of the first countries to launch WiMAX and LTE-based networks.
• In the U.S., the top peak speed was about 3 Mbps and top average speed was 0.98 mbps.

Speeding It Up

On the wired Internet side, the continuous deployment of fiber-based broadband networks and new DOCSIS 3.0-based cable broadband networks is causing a sharp increase in broadband speeds in some parts of the world.  According to Akamai data, the average connection speed on a global basis was around 1.8 Mbps; up 6.1 percent from the second quarter of 2009, and up 3.8 percent from the second quarter of 2010. Here are some key observations about global broadband trends:

• South Korea is the fastest country in the world with 17 Mbps as an average broadband speed, up 47 percent form second quarter of 2009. Hong Kong was second with 8.6 Mbps, while Japan came in at 8.0 Mbps.
• The peak connection in South Korea was 38 Mbps versus 16 Mbps peak connection speeds in the U.S.
• The United States had an average speed of 4.6 Mbps, up 1.8 percent from the second quarter of 2009 but down 1.8 percent from the first quarter of 2010.

Fastest Cities in The World

• Masan, South Korea is still the fastest city in the world, and it did so by boosting its average speed to over 20 Mbps during the second quarter of 2010.
• There are 20 cities across the planet which have average speeds in excess of 10 Mbps.
• Asia dominates the top 100 cities list with 62 cities in Japan, 12 in South Korea and Hong Kong.
• Europe accounted for 15 cities across eight countries, with Romania ranking highest with five cities in the top 100.
• North America accounted for the final ten, with two in Canada and the remaining eight in the U.S. San Francisco, Los Angeles and New York are not on the list.

The American Broadband Story

• The average broadband speed in the U.S. was around 4.6 Mbps, with Monterey Park, Calif. having the top average broadband speed of around 6.9 Mbps.
• The peak speeds in the U.S. on an average were around 16 Mbps during second quarter 2010.
• Delaware is inching toward nearly 100 percent broadband adoption mark.
• Six other U.S. states have broadband adoption of 80 percent or higher.
• The biggest growth was seen in West Virginia and Rhode Island, gaining 11 percent and 10 percent adoption respectively.
• The biggest losses were seen in Iowa and Arizona, which declined 11 percent and 10 percent respectively.
• Year-over-year changes were more significant, with 11 states posting double-digit increases, led by Alaska’s yearly growth of 44 percent.

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For FCC Chairman Julius Genachowski, it’s been a rough summer. He’s come under fire from all sides over his and the FCC’s stance on net neutrality. We haven’t been shy in unloading on the man either, expecting him to do more than he has and he can. But if there’s one bright spot for the FCC Chairman, it’s been the recent order to free up under-utilized TV spectrum and use it for broadband and other open wireless transmission purposes.

This is the first time in 25 years that the FCC has passed an order that frees up wireless spectrum and makes it available unlicensed for innovation. “Wireless in general is very central to our economic growth,” Chairman Genachowski told me in a phone conversation earlier this month. He believes that wireless and wireless broadband will have a wide-ranging impact on everything from health to entertainment to education. (Related Post: All You Need to Know About White Spaces Broadband.)

“A year ago, no one was talking about the spectrum shortage in this country, and now we are moving toward solving that problem,” said the FCC chairman. According to some estimates, the demand for mobile broadband means that in three years, the current amount of spectrum won’t be enough. The FCC, in its national broadband plan, has asked for 500 Megahertz of new wireless spectrum, of which 300 MHz it wants freed up in the next five years.

The FCC is working on ways to make more licensed spectrum available, he said, but he wants to make a big push on the unlicensed spectrum. “A full spectrum strategy needs both licensed and unlicensed spectrum, and I am really happy with this order,” he said. “Twenty-five years ago, when the FCC released spectrum, we didn’t know Wi-Fi [would] happen.” Today, it’s hard to find devices that don’t have Wi-Fi capabilities.

With this superior spectrum, he believes a whole wave of new applications are going to emerge for what some have labeled (for lack of a better word) “Super Wi-Fi.” “This will be a big boost for M2M wireless networks,” Genachowski predicts. “We are hoping that companies will make routers for this ‘Super Wi-Fi’ and get to market fast,” he said.

“M2M will not only have a big impact, but it also has the most potential.” The FCC Chairman pointed to a North Carolina trial using wireless networks for monitoring water resources. We agree; as we saw at Mobilize 2010, the world is gearing up for an era when most devices will have connectivity built into them.

Data from research firm Telegeography shows that Internet traffic has grown 62 percent in 2010, after logging a handsome 74 percent growth in 2009. The growth in traffic is coming from non-mature markets likes Eastern Europe and India, where traffic growth between mid-2009 and mid-2010 was in excess of 100 percent. Telegeography notes:

The regions experiencing the fastest growth in international Internet traffic between mid-year 2009 and mid-year 2010 were Eastern Europe and India/South Asia, where average traffic growth exceeded 100 percent, and the Middle East, where traffic rose just under 100 percent. Even relatively “mature” markets are still growing rapidly: western European international Internet traffic increased 66 percent, and the U.S. and Canada’s international Internet traffic climbed 54 percent.

This means the carriers, who added about 13.2 Tbps of new Internet capacity in 2010, will have to keep beefing up their networks. In comparison, carriers added 9.4 Tbps of capacity in 2009 and 6 Tbps in 2008. Compare that to 2002; we have indeed come a long way! (The chart below is from our archives.)

That said, the networks are not evenly divided. The capacity is still in abundance in larger, more mature markets, but less so in newer markets such as Africa. This will be changing soon, especially as we see deployment of new cables in those regions.

This new capacity in non-mature markets, when married to growth in wireless networks and easy availability of cheap smartphones, is going to turn the Internet on its head. A good indication of this shift can be foreseen in the growth of mobile social networking in India. As Telegeography notes:

The number of mobile social network users in India is expected to reach around 72 million by 2014, driven by the reduced cost of smartphones and the launch of 3G services, according to the latest research from Analysys Mason. The number of online social network users in India has grown by 43% to approximately 33 million unique users as of July 2010, with India emerging as the seventh largest market globally. According to the report, the increased number of social network users is driving the number of mobile social network users (around 10 million in 2009), representing around 2.2% of the total number of mobile subscribers.

This has to factor into Facebook’s future plans. Now imagine a repeat of this in Africa! You get the gist.

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The FCC is scheduled to vote tomorrow morning on a set of rules that will set the release of this so-called “white spaces broadband” into motion, giving device makers and others the guidelines on how they can use the spectrum. This could inject new competition in the wireless broadband space and provide a boost to technology companies hoping to connect more consumers. Just as Wi-Fi tapped unlicensed spectrum and untethered millions of consumers, white spaces could have a similar effect on a broader scale.

White spaces refers to the unused television spectrum that traditionally existed between channels as buffers or empty spectrum left over or vacated by TV stations through the transition from analog to digital TV. The FCC voted two years ago to approve the unlicensed use of whites spaces. Here’s what you need to know about white spaces:

Why White Spaces Are Hot.

• Because of its lower frequency, white spaces can offer much broader reach and better penetration through walls than the current spectrum used for Wi-Fi. For example, a Super Wi-Fi network could cover 16 times more area than a traditional Wi-Fi hot spot.
• White spaces also offer the promise of faster speeds, up to 100 megabits per second. That can be used for end users or to connect local Wi-Fi hotspots.
• The added range and performance could help connect rural communities, allow schools to light up entire campuses, help service providers relieve burdened cellular networks and could help with things like in-home video streaming and smart meter monitoring.
• White spaces could trigger a new wave of innovation for device makers and application developers. A white spaces study commissioned by Microsoft found that the use of white spaces could add $3.9 to $7.3 billion in economic activity a year.

So What’s the Problem?

• Since white spaces would remain unlicensed, the use of it could interfere with local broadcasters.
• The use of wireless of microphones could also be compromised by interference from Super Wi-Fi devices.

Who Cares About This Anyway?

• Technology heavyweights like Google, Dell, Microsoft and others have rallied on behalf of white spaces.
• The National Association of Broadcasters has filed a lawsuit to halt the use of white spaces because of fears of interference.
• Theatrical groups and sports franchises have also raised concerns about interference for wireless microphones.
• Consumer groups such as Free Press, Public Knowledge, Consumers Union and others have pushed for the use of white spaces.

The Devil is in the Details:

• In order to minimize interference, the FCC is establishing a database of existing channels so that new devices must steer clear of those bands. The question is how often will devices need to consult the database to avoid interference. Too often, and it can be burdensome on device makers. Too infrequently, and it could lead to interference if devices stray into protected areas.
• The FCC will name a private company or companies, perhaps as early as tomorrow, to serve as the database administrator. Google and others have applied for the job. The entity that administers the database could play an important role in how white spaces are used.
• The FCC could also set larger buffers around existing channels or set aside whole channels for wireless microphone users, which could eat into the available spectrum for unlicensed use.
• It’s unclear at what power device makers can operate at, which could also limit the range of Super Wi-Fi devices.

Where You Can Find White Spaces Networks.

There have been been several tests of white spaces including: connecting a rural school in Claudeville, Va., a low-cost broadband and water sensing project in Wilmington, N.C. and a test at Rice University where researchers are building devices that can switch between white spaces and traditional Wi-Fi.

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Post and thumbnail photos courtesy of Flickr user herdeirodocaos33.