Helio, the high flyer of 5 years ago looks to be on life support now. A soft economy has taken the glitz out of high priced bling.

Just a month and a half after Virgin Mobile USA Inc.’s announcement to acquire Helio L.L.C., all but one of Helio’s five retail stores have already closed. The New York location remains open, for now, while stores in San Diego, Santa Monica and Palo Alto, Calif., and Denver have closed, confirmed Helio spokesperson Rick Heineman.

The stores closed within the past month or so. As for the New York store, Heineman said nothing is definite.

“We do not have a time table other than for it to be open right now,” Heineman said. “When the deal closes, [it’s] up to Virgin Mobile.”

As for the employees at the shuttered stores, Heineman said some were let go and some stayed on to work with Virgin Mobile USA. The move aligns with Virgin Mobile USA’s plan to cut down Helio’s staff from 570 to 200 employees.

Bling is out, return on investment is in.

Linky.

Using WiMax to offer competitive T-1 and up service levels to business, virtually on demand and at a big discount, Towerstream’s revenues grew by 53% in the last quarter. WiMax enables Towerstream to bypass the telco last mile infrastructure (and the need to lease access), giving the firm a ultimate pricing flexibility and instant deliverability.

CEO Jeff Thompson said: “These strong results reflect the continued maturation of both our newer markets and our sales force.  Over the past 12 months, we have significantly increased the number of account executives and the customer pipelines developed by our expanded sales force is beginning to yield results.  Our Internet-based marketing initiatives, and the success of our mid-range product offering of 8 mbps at $999 per month, are also driving sales growth.” (Firece Broadband Wireless)

Commercial access is one of the telecom guy’s biggest profit makers, with operating margins in excess og 90%. If Towerstream and  others like them continue to make inroads into the commercial access business, the T-1 jackpot will be over.

The telcos have been very slow to upgrade broadband networks. The few enhanced speed offerings have been in very limited areas or as an adjunct to a pay TV system. Consumers are now leaving for higher speeds where they have a choice. Verizon and Qwest are facing potentiual strikes, and AT&T’s pay TV take rates has been abyssmal. Does this sound bad? There’s more:

The second-quarter 2008 financial reports are in –- and the tea leaves aren’t showing a sunny future for phone companies. While their financials today look bearable, economic and demographic trends are acting as gale-force headwinds for the future. Here are some of the major issues they’re facing:

• A slowing economy means people are choosing wireless phones over landlines, resulting in increased access line losses. That, in turn, is reducing the number of people the phone companies can convince to switch to their higher-speed networks and video services.
• Cable’s triple-play bundles, which include higher speeds and voice, are starting to resonate with the residential customers, leading to further landline losses.
• Phone companies’ own higher-speed services are starting to cannibalize their installed base instead of luring customers away from cable companies. (GigaOM)

To the Telco suits: we told you this was coming, time and time again. The world wants a big dumb pipe. Time to invest in that. It will require fewer resources and fewer people to operate. Flat rate billing will provide dramatic decreases in both cost of billing and customer service. Your high gross margin with lower operating costs, and growth of market share will reverse the negatives. If you get a clue and get with the program, and your companies still have a chance to survive.

Here’s a very clear indication that the US broadband market is so dysfunctional that it’s time to go back to the drawing board. The telcos, who with the single exception of Verizon’s FIOS, have allowed their service levels to stagnate while investing in the flat lining pay TV business. At the same time, their subscribers are leaving. In a flat market, it’s a battle for market share, and the cable guy is currently winning by taking the telco’s broadband subscribers. How can a Comcast steal subscribers with customer care that is something akin to resident care in Stalin’s gulags ? In most cases, it’s all about speed. While the cable guys haven’t done much upgrading either, in most markets they still are the speed leader. Yes, that’s the very same speed that AT&T’s Randall Stevenson has repeatedly told us we don’t need. Admin to Randall: we can get our reruns of The A Team online any time we want them. We don’t need no stinkin’ Pay TV. We want more speed in a big dumb pipe!

Contrast the second-quarter results at Verizon and AT&T with the numbers reported last week by Comcast (CMCSA) and Cablevision (CVC). Comcast had a remarkably solid quarter, given both economic headwinds and the aggressive push by the telcos into the video business. In the quarter, Comcast added a net 499,000 new phone customers, 278,000 high-speed Internet accounts and 320,000 digital cable lines. (It did lose 138,000 basic cable subs.) It provides broadband to 29% of homes in its area and phone service to 12.5%; it is putting up big numbers in both categories, and they will get even bigger.

Cablevision, meanwhile, showed a similar pattern: growth in every category. It added 120,000 digital video subs, 52,000 broadband lines and 81,000 voice lines; it even added 7,000 basic video subscribers. That’s particularly impressive, given that Verizon offers video service on more than 30% of Cablevision’s turf. (Barron’s)

Ottawa, Canada may be the new model for breaking the last mile bottleneck. We’ve heard endlessly about how the telcos who were paid to run fiber to every home by the year 2000 just can’t manage it because it will cost too much. It may be time to take the matter into our own hands.

This may all sound rather abstract, but a trial experiment in Ottawa, Canada is trying out the consumer-owned model for a downtown neighborhood of about 400 homes. A specialized construction company is already rolling out fiber to every home, and it will recoup its investment from individual homeowners who will pay to own fiber strands outright, as well as to maintain the fiber over time. The fiber terminates at a service provider neutral facility, meaning that any ISP can pay a fee to put its networking equipment there and offer to provide users with Internet access. Notably, the project is entirely privately funded. (Although some schools and government departments are lined up to buy their own strands of fiber, just like homeowners.)

The main challenges with this model are economic, rather than technical. Most importantly, ownership has to be made appealing and affordable to consumers. The construction company is using conservative estimates that only 10% of homeowners will sign up and there will be a per-customer cost of $2700. If you assume 50% take-up, then the per-customer cost drops to $1100. Both figures might seem like a lot, but people pay for a variety of improvements to their home — like remodeled kitchens, or a deck — that also cost large sums. (Google)

Here’s what I find most interesting: On the scale of 400 potential connections, deployment cost is $1100 per at a 50% take rate. I’d be willing to bet AT&T has just about that level of investment in deploying Uverse.  Simple math shows that even with the outrageous overhead the telcos carry, they’ll fully recapture a similar investment in less than 5 years even at this tiny scale. Bottom line. We’ve been had by the telcos and a government that has insured their monopoly status. They are not interested in improving service.

I think it’s time for all of us to work locally and build our own. The little 400 home project in Ottawa could be the beginning of a new revolution.

Wired has an interesting article How American Youth Will Screw Viacom. Now in my wildest dreams do I think that teenagers are doing this? Nope. Far from it, they are a viewer after all. There is a reason that the remote can select 500 channels. –

“The primary question we have received in recent weeks is, ‘What happened in the ad market?’,” said Dauman during yesterday’s conference call. “Advertisers in a few categories . . . pulled back their on-air spending as they adjusted their own operating plans and product launches. Low ratings at a few of our networks also contributed to the softness.”

The culprits, according to the Wall Street Journal , were MTV and VH1. And although the company expects the ratings to return soon, thanks to the season premiere of “The Hills” and the MTV Video Music Awards in September — we suspect it’s not just the economy or a short-term ratings dip that ails Viacom.

The fundamental problem could be that the “youth demo” that Viacom has hotly chased after for the last couple decades is a bust. Teens and twenty-somethings don’t watch TV anymore; they don’t read newspapers; and they’re technologically promiscuous — how can big media sell advertising against them if you can’t corner them in front of any single device?

30 years ago my partner and I here were in that ‘youth demo’ that Viacom was chasing. But like Mark Steyn’s quip, “demographics are futures” the same applies to TV viewing. Yep I am a little heavier, a little balder and have a touch of grey now. I never was however a MTV viewer. I just did not find the gyrations that entertaining. Not to say there weren’t some vids I liked. Just life demands more than just being a couch potato.

Viacom’s problem isn’t the viewer, it the product they are offering. So Ms. Schiffman, don’t fall for the corporate press kit. What your piece is really saying without saying it is that it is the viewers fault that Viacom is not riding high. Sorry doesn’t work that way. Never has.

Back in May we had this to say in regards to BCRA and how technology is gong to invalidate the Act. Well folks is looks like it is going to happen. Sadly not against BCRA but against the wiretap provisions in the latest update to the Patriot Act.

The best laid plans of the Pols have yet again been placed asunder. That bipartisan effort to ‘cure’ campaign finance, BCRA, will be totally destroyed by this. BCRA puts a gag order 30 days before an election. It was generally targeted at 527 groups and other financially well healed political groups.

Here’s what is happening –

The grassroots group Get FISA Right has created a 30-second spot critical of the surveillance bill passed by Congress earlier this month. It’s placed the spot with a Los Angeles startup that buys ad time in bulk from cable providers and resells off slivers to individuals willing to pay for airtime in markets around the country.

The mashup means anyone who supports the repeal of the controversial law can pay online with a credit card to run the advertisement in any of eight cable TV markets around the country. By August 15, 22 markets will be available. The cost of spots varies from six dollars for placement on CNBC between 9 a.m. and 4 p.m. in Cleveland, for example, to $1,856 to run on CNN in New York City between 6 p.m. and midnight.

The wiretap protest movement started life as a group on Barack Obama’s social networking site My.BarackObama.com. The group was dedicated to deterring Obama from voting for a measure that legalized President Bush’s warrantless wiretapping program and granted retroactive legal immunity to the phone companies that cooperated with the spying when it was illegal. Membership swelled to more than 24,000 ahead of the July vote, but it still failed to deter Obama from supporting the unprecedented expansion of U.S. domestic spying powers.

Put aside your political leanings for or against Obama. In fact don’t even worry at the message either as us ole Baby Boomers are want to say. In this case it is the vehicle that is important. Imagine being able to fund a political ad of any stripe for any purpose. I whip out my credit card and fund an advert in Dallas for McCain. Who is going to stop me? The Feds? Hell I won’t even appear on their radar scope. Nor would thousands of others. Spread the message via email and IM’s. The funds trickle in by the individual thousands.

A revolution ensues. Thomas Jefferson would be proud

The point to all this of course the singular observation that BCRA is dead. But I have one other as well. Though mass marketers are dead, the mass market medium may not be. When I can narrow cast on cable to a specific audience for pennies that is a sea change in the marketing medium.

Linky

No, no. Not like in Stoned out of his Mind. More like Stoned to Death. EMI just lost one of their biggest artists — The Stones. Yeah those guys. Just goes to show, turn 65 and eventually something sinks in. Like your record publisher has been stealing you blind. –

Hedge fund Terra Firma Capital Partners’ corporate name feels like a misnomer these days, standing as it is on shaky musical ground.

Before taking over major-label behemoth EMI last year, the private equity player got the gas face from top-shelf British acts like Radiohead and Paul McCartney, who walked away from EMI the minute they could. On Friday, Terra Firma scored the humiliation hat trick when The Rolling Stones, the planet’s highest-earning act of 2007, defected to Universal Vivendi.

McCartney and crew defected last year from the label to go private. I am surprised that Jagger did not do the same. But hey, at 65, he’s going to be going buggers on the royal pension eh? But it just another trend that the record labels are becoming irrelevant.

Linky.

From Wired comes a report that AT&T’s 2nd quarter new installation results have cratered. What I mean by cratered is a drop of 90%. Give a read –

Att AT&T posted its second-quarter report this morning, and boy, was it a doozy.

The company added a modest 46,000 broadband subscribers during the quarter, a screaming decline from 491,000 additions in the first-quarter 2008; and down sharply from the 400,000 subscribers added in the second quarter 2007.

We’re not sure what the problem is, but there are two possible explanations: Either people are less willing to pay more than $30 per month for broadband service; or people are less willing to pay AT&T for broadband service.

Well that’s troubling. It will be interesting to hear what Verizon’s results will be. My gut says a combination of factors are in play here. 1) AT&T has plumbed all of its existing LATA territories. 2) Rap on poor service and subpar speeds. 3) Inept marketing. 4) and Finally, the economic conditions. Look broadband as the Duopoly sells it is treated as a premium alternative to off the air broadcasting services. In that guise, in the consumers eyes it gets labeled ‘Entertainment’, not ‘Information’. So when the times are tight the luxuries are turned off. What is happening to Starbucks is probably going to happen to some segments of broadband as well.

Yes Dear Reader, we are back to the Third Pipe argument of selling the consumer plain dumb pipe. So long as you wrap yourself in the ‘Entertainment’ category you the provider run the risk of being kicked to the curb. Give us transport only options, no mail, websites, or other goofy services like ‘The Fan’. Residential data cable, we buy the modem, $15/month. FIOS speeds, same conditions, for $30/month. Oh I can hear the roars, but our staff levels! RIF them. You were going to do it anyway and lumber on with crippled services. Dispense with the Land of OZ mentality. It will only garner you more bad press.

On a related note. Readers if you know of a good provider in the Plano Texas area that provides a good price for T1 or SDSL at 768kbps I would like to hear from you!

Linky.

The FCC’s much ballyhooed panel on the future of broadband included mostly presentations that have nothing to do with broadband itself. Chairman Martin, wants more mapping as a means to introduce more regulation and is concerned with cable tv rates. Others reported on their individual obsessions with piracy, porn, social engineering, subsidies and take rate. There was one brief shining moment of relevance:

Commissioner Robert McDowell, appearing to reject some of the more regulatory policies of his colleagues, said that the Internet has flourished because engineers have, and should continue, to be the solvers of engineering problems, not governmental officials.

The comment drew applause from the crowd. (Broadband Consensus)

What almost no one at this meeting understands is that broadband itself is nothing more than the big dumb pipe that our duopoly dreads. That is not surprising since the availability, quality and cost of broadband to the consumer is of no interest to most of them. They are merely using the hot topic of broadband as a platform to push their individual, irrelevant agendas. These individuals and others like them are the reason why broadband growth has stalled and that economies of scale have not reached consumers.

Cnet’s Declan McCullaugh unknowingly sums up the problem with government  involvement with the following quote:

Cynics might say the field hearing itself was an exercise in political pacification: Doyle is the vice chairman of the House Commerce Committee’s telecommunications and the Internet panel, which oversees the FCC.

Marge Krueger, an administrative director for the Communications Workers of America union and an invited speaker, called Doyle “our favorite congressman for working families in Pittsburgh.” She said the CWA is in favor of more broadband competition “as long as companies’ don’t compete on…lower labor costs.”(Cnet)

Of course McCullaugh decries lack of consensus in the hearing, a typical socialistic view. Lack of consensus is a healthy normal state for a democratic government when they have extended their reach into places where they do not belong to begin with. The internet grew exponentially when it was free and unmanaged in the days of dial up. Government regulation that was supposed to insure fair competition on incumbent carriers network has actually ended said competition in last mile access when broadband became the norm. It’s time for the regulators to retreat from their mistakes and let the market work by restoring and equal access requirement, and do nothing else. Yes there will be disorder and disruption. That is what is supposed to happen.

As for the next hearing, I have a suggestion for the FCC. Any presenter that is not addressing the the big dumb pipe is not relevant to broadband. While everyone is free to express themselves, these irrelevant agendas should be vetted in other forums.