FCC: Leap, Cellular South, Cellular One, Cellular South, Cincinnati Bell

Rural regional carriers are worried about being able to compete and need the FCC to intervene in order to protect competition.  Fast forward to the minute 3 in this video and listen to Mignon Clyburn who is FCC Democratic commissioner.  The commissioner is concerned that there are areas that cover 10 million people that cover 2 or fewer carriers in some areas.  Concerned carriers include: US Cellular (NYSE: USM), Leap Wireless (NYSE: LEAP), Cellular One, Cellular South and Cincinnati Bell Wireless (NYSE: CBB), who combined have about 60% of T-Mobile USA’s customer base.  Carriers also want better inter carrier compensation and universal service reform to help bring down costs for consumers.  FCC also sees VoIP as a viable technology that should be more competitive with current voice technology.

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Rural Wireless Carriers Have Better Coverage

AT&T to FCC: "I Am Not A Crook"

AT&T continues to lie about the T-Mobile acquisition that should not be allowed.  Here are 5 lies from their merger submission to the FCC.     

#1) AT&T (NYSE: T) does not consider the current incarnation of T-Mobile USA to be a real competitor and points to smaller rivals like MetroPCS Communications (NYSE: PCS), U.S. Cellular (NYSE: USM), Leap Wireless (NYSE: LEAP),  Cellular South Inc. and Cincinnati Bell Wireless (NYSE: CBB), who combined have about 60% of T-Mobile USA’s customer base.  Read more.

#2) AT&T also claims to lack enough spectrum to launch UMTS in some markets. Spectrum shortage exaggeration.

#3) AT&T claims channel pooling for GSM services will increase capacity by as much as 15% in some areas.     How to relieve 3G data congestion.

#4)  T-Mobile's removal from the marketplace will not have a significant competitive impact.  AT&T says it is more focused on Verizon and Sprint than on T-Mobile USA, and AT&T too is seeing increased competitive threats from rapidly growing mavericks like MetroPCS and Leap and other providers.  Wireless competition

#5)  No mention of CDMA vs GSM handset competition

Goldman Sachs Bullish on Telecom Stocks?

I have been hearing lots retail and institutional players scooping up AT&T & Verizon shares recently chasing nice 7%+ yields.  One way for people to do this is through the IYZ ETF which contains a basket of telecom stocks which include mostly: Sprint, Verizon & AT&T which make up 28% of the IYZ portfolio's holdings.  The IYZ ETF has a yield of 3.7% according to Google and Yahoo Finance based on the last dividend payout.

This video above was originally broadcast from the floor of the CBOE by the ETF Super Pit Hit on the OptionMonster YouTube channel on Wednesday, June 9, 2010. The video highlights potential bullishness or a possible hedge on the  trading desks of the largest bank Goldman Sachs.  Apparently a customer of Goldman was looking to buy the Telecom Exchange Traded Fund (ETF) IYZ iShares. Goldman Sachs wanted a July 30th (Exp) 20 call option (Bullish) which is not too far out of the money and relatively cheap considering all of the market volatility we have had as of late.  Some sophisticated investors might also argue this as a bearish indicator or a hedge against a short position in the ETF or long position in an individual stock.  However, strangely Goldman wanted a funky expiration date of July 30th and not the normal month-end expiration July 16 or August 20 (see options expiration calendar).  I am scratching my head as to why they would not take the middle of the month of July or August.  Is there some additional telecom news coming to market in the next 45 days?  Lets watch and see.  Maybe a potential merger or acquisition of T-Mobile or Sprint?

If ETF does make it above 20 it should have room to fly based on technical chargs but what could be the catalyst for this to happen?  Are they predicting that all of the 4G / LTE buzz and the iPhone 4 phone (Not 4G only 3G) will be the driver for this?  I happen to think telecom is going to face some fierce competition from FREE Wi-Fi as the primary competitor to LTE and 4G. I am not particularly bullish but I have owned the ETF for a few years.  The industry and the ETF have not performed particularly well over the last 10 years but I am hoping for the best.

One thing that surprises me is that only 25% of the fund is invested in Mobile Telecom companies and the other 75% is in Fixed Line Telecommunications companies.  Yes . . .  fixed line telecom is a bit more stable but that is not where the growth is.  I am also surprised not to see a small portion of the fund invested in Clearwire as well (CLWR) even though it has its' share of financial issues.  The last thing that surprises me is that cable companies Comcast, Cablevision and Time Warner absent from the index. (CMCSA, CVC, TWC).  Cable Companies are making a huge push into telecom right now and will be direct competitors with AT&T and Verizon Wireless soon.

Ticker	Name	% of Assets
T	AT&T INC	18.31
VZ	VERIZON COMMUNICATIONS INC	12.84
S	SPRINT NEXTEL CORP	8.35
CTL	CENTURYLINK INC	6.25
Q	QWEST COMMUNICATIONS INTL	5.23
WIN	WINDSTREAM CORP	4.9
NIHD	NII HOLDINGS INC	4.59
VMED	VIRGIN MEDIA INC	4.02
LUK	LEUCADIA NATIONAL CORP	3.49
TDS	TELEPHONE AND DATA SYSTEMS	3.24
FTR	FRONTIER COMMUNICATIONS CORP	3.08
PCS	METROPCS COMMUNICATIONS INC	2.98
TWTC	TW TELECOM INC	2.86
LVLT	LEVEL 3 COMMUNICATIONS INC	2.3
LEAP	LEAP WIRELESS INTL INC	1.63
ABVT	ABOVENET INC	1.56
USM	US CELLULAR CORP	1.38
CBB	CINCINNATI BELL INC	1.3
NTLS	NTELOS HOLDINGS CORP	1.2
RCNI	RCN CORP	1.2
CBEY	CBEYOND INC	1.05
PAET	PAETEC HOLDING CORP	1.03
ATNI	ATLANTIC TELE-NETWORK INC	1.01
CNSL	CONSOLIDATED COMMUNICATIONS	1
ALSK	ALASKA COMM SYSTEMS GROUP	0.97
SHEN	SHENANDOAH TELECOMMUN CO	0.94
GLBC	GLOBAL CROSSING LTD	0.91
USMO	USA MOBILITY INC	0.87
GNCMA	GENERAL COMMUNICATION INC-A	0.77
SURW	SUREWEST COMMUNICATIONS	0.35

Customer Churn: Coverage vs.Contracts

Contracts Reduce Customer Churn . . . Not Service

It has become fairly obvious that if AT&T's lost its' current iPhone or iPad exclusivity contract that they would suffer tremendous customer carnage.  Every person I speak with tells me that if AT&T didn't have them locked into a Blackberry or iPhone contract they would switch to another smaller carrier.  Unlike, Europe where you can purchase a phone 1st and pick a wireless carrier 2nd.  US customers are only offered subsidized phones that lock them into exclusive carrier contracts.  It's bogus in my opinion and should get more government regulation by the FCC who continues to be a pussy on this topic. 

UMA Phone + Wi-Fi = Home Cell Coverage

Unlicensed Mobile Access (UMA) provides access to cellular mobile voice and data services over unlicensed spectrum technologies, such Bluetooth or Wi-Fi (802.11). A UMA phone will use a cellular networks (GSM, CDMA, etc.) when out and about, and automatically switch to a UMA-enabled Bluetooth or Wi-Fi local network when in range, such as at home or in the office. UMA technology is the 3GPP global standard for fixed-mobile convergence. UMA enables secure, scalable access to mobile voice, data and IMS services over broadband IP access networks. By deploying UMA technology, mobile operators can deliver a number of compelling fixed-mobile convergence services. The most well-known applications of UMA include dual-mode cellular/Wi-Fi handsets and 3G femtocells access points.

Leading operators around the world have embraced UMA technology as the foundation for their fixed-mobile convergence strategy, including Orange/France Telecom, British Telecom, T-Mobile US, TeliaSonera, Netcom, Saunalahti and Cincinnati Bell. UMA enables secure, scalable access to mobile voice, data and IMS services over broadband IP access networks. By deploying UMA technology, mobile operators can deliver a number of compelling fixed-mobile convergence services. The most well-known applications of UMA include dual-mode cellular/Wi-Fi handsets and 3G femtocells access points. Leading operators around the world have embraced UMA technology as the foundation for their fixed-mobile convergence strategy, including Orange/France Telecom, British Telecom, T-Mobile US, TeliaSonera, Netcom, Saunalahti and Cincinnati Bell.

Improving coverage in areas where cellular signals are weak is an important issue for many organizations. UMA extends coverage to the workplace without forcing employees to change the way they use their cell phones. The only difference is that the phone will switch to Wi-Fi when it loses cellular coverage. To improve coverage with UMA, an organization sets up Wi-Fi access points in areas with poor cellular coverage to overcome coverage gaps and call dead zones. Companies with state-of-the-art, centrally managed wireless LANs (WLAN) can make a global configuration change to enable Wi-Fi UMA access from any location.

UMA-enabled Dual-Mode Wi-Fi Handsets: By far the most well-known UMA service is dual-mode cellular/Wi-Fi handsets (DMH), which enables operators to provide high-performance, low-cost mobile services to subscribers when in range of a home, office or public Wi-Fi network. With a UMA-enabled dual-mode Wi-Fi handset, subscribers can automatically roam and handover between cellular and Wi-Fi access, receiving a consistent set of services as they transition between networks.

UMA-enabled Femtocells: UMA-enabled femtocells represent a growing UMA service opportunity. The wireless industry has been searching for low-cost licensed indoor coverage solutions since the beginning of mobile networks. Unfortunately, the bulk of this opportunity (i.e. residential environments) has been beyond the addressable market for cost and operational reasons. To be successful, a residential licensed access point (i.e. femtocell) deployment must include low-cost femtocells (under €150), a reasonable approach for managing RF interference, and a standard, scalable, IP-based approach for core network integration.
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