The UpStream (Page 146)

Verizon Continues Its Focus on Wireless with $15+ Billion in Asset Transitions

posted Saturday Feb 7, 2015 by Scott Ertz

Verizon Continues Its Focus on Wireless with $15+ Billion in Asset Transitions

Last month, Verizon announced they were "nearly done" with FiOS installs, bringing to completion a promise made in 2010. While it would seem from their marketing that Verizon is highly focused on its FiOS business, their actions would suggest otherwise. In fact, their focus is on enhancing their wireless business at any cost.

This week, two of those costs were revealed through the transition of assets in both the wireline and wireless businesses. In the wireline business, Verizon agreed to sell all of its consumer wireline assets and customers to Frontier Communications in California, Florida and Texas for $10.54 billion. The sale includes Verizon FiOS Internet and Video, access lines, DSL Internet and long distance services. It does not include Enterprise or Wireless services. Verizon will continue to operate these services in 9 other states, plus the District of Columbia.

Verizon said in a press release,

Selling wireline operations in California, Florida and Texas to Frontier will concentrate Verizon's wireline operations on the East Coast. Verizon will focus on further penetrating the market for its FiOS business across a contiguous footprint in Eastern states.

We will pretend that Florida isn't an East Coast state, and instead say that focusing their operations in a particular geographical region makes financial sense for the company. Maintaining the aging copper lines, as well as installing fiber lines, is an expensive project; keeping them connected to the rest of the Verizon network, through states that they do not operate within, is even more so.

As the transition begins, likely in the first half of 2016, Verizon customers will become Frontier customers, and approximately 10,000 Verizon employees will make the leap. The two companies have made this transition in the past, with Verizon selling assets in 2009. There were few issues during that period, so it is expected that this period should be just as uneventful.

In the wireless business, the company will be transitioning over 11,000 of its towers to American Tower Corporation for approximately $5 billion. This will leave Verizon with very few remaining corporate towers, but instead will allow Verizon to lease back space on the existing hardware. American Tower Corporation will assume responsibility for land leases and tower maintenance, in exchange for the ability to lease unused space on the towers to other wireless providers. Verizon will have access to all of their former hardware for at least 10 years, with the option to extend to 50 years.

Verizon intends to use $5 billion of its new found money to accelerate their stock buyback program, while the rest of the cash will go to enhancing their other businesses, including wireless. Lowell McAdam, Verizon Chairman and CEO, said,

Our long-standing strategy has been to consistently invest in our networks, improve our customers' experience, and develop new products and services while delivering profitable growth. These transactions will further strengthen Verizon's focus on extending our industry leadership position in our core markets and return significant value to our shareholders.

From this statement, it can be assumed that they consider Wireless and Enterprise to be their "core markets" and wireless to be far less. It is an interesting move, and one that shows that Verizon's belief in its wireless technology is strong. As XLTE continues to expand across the country, Verizon Wireless suddenly has enough capacity to begin to replace copper and even consumer fiber for many customers. Hopefully this will also trigger Verizon to consider lowering the cost of wireless offerings, especially on data.

Xbox One Will Also Benefit from Microsoft's DirectX 12 Announcement

posted Sunday Jan 25, 2015 by Nicholas DiMeo

Xbox One Will Also Benefit from Microsoft's DirectX 12 Announcement

This week's Microsoft Windows 10 event showed off a lot of what Windows 10 can bring to the Xbox. One of the big announcements was how the new DirectX 12 would benefit gaming on the Xbox One. Xbox head Phil Spencer took the stage to explain all of the pros behind DX12 coming to not only the PC, but to the Xbox One.

For those unaware, DirectX 12 is a Microsoft programming interface that handles video activities on the computer, namely for gaming. It's had many names in the past but they now all live under the DirectX name. With each iteration, improvements and enhancements always come with it, giving developers more tools and capabilities, which can then be passed down to gamers in terms of graphical additions and gameplay benefits.

Spencer focused a portion of the event to talk about DX12 and how it would relate to the PC, but also made mention that the API would be open for Xbox One games, too, since Windows 10 is making its way to the console. How? Well, it first starts with the developers. Marketing head Aaron Greenberg took to Twitter about DirectX 12 after the event concluded. When asked if DX12 would affect the Xbox One substantially or would the PC benefit more, he replied, "both, but devs have to make use of it."

It will help developers on Xbox One. It's not going to be a massive change but will unlock more capability for devs.

Simply put, the devs will have the tools and will just need to take advantage of them for gamers to experience the benefit. DirectX 12 will allow better performance by giving developers the ability to send the GPU tasks to perform on the numerous threads available on the chip. In the past, this was not possible, as most of the task management is CPU-bound. The essence behind DX12 is that it changes this process by allowing many CPU cores to communicate with many GPU cores. Plus, with the Xbox One just recently unlocking its 7th core for gaming, although it will take some development time for us to see the benefit directly, it gives devs more power than they previously had on the Xbox One. This is key for the One's lifespan and usage, and will be especially powerful with exclusives.

What does that all mean for the average person? We should expect to see graphic performance increase by almost 50% and CPU usage drop by 20%. Current games will also see a slight boost to performance just by the firmware upgrade. An oversimplified comparison of DX11 vs DX12 breaks it all down in extremely fine detail, but in the end, this is good news for gamers on Microsoft's latest console.

We'll see more information about this at the upcoming GDC as well. If there's one thing to take away from all of this tech talk, it's that there are great things in store for gamers. And those things are coming very soon, so we should all be excited about them.

YouTube to Broadcast Own Halftime Show During the Large Container Game

posted Sunday Jan 25, 2015 by Nicholas DiMeo

YouTube to Broadcast Own Halftime Show During the Large Container Game

Tired of the same boring halftime show at the Super Bowl? Is "lights turned off because drama" just another played out scenario to you? Well, if you're looking for an alternative during the excruciatingly long halftime show, then you may want to look towards YouTube to fill those 45 minutes.

YouTube, in an attempt to maintain relevancy and market share, has decided to spin up a halftime show of its own in order to show off some of the website's offerings. Harley Morenstein from the crazy popular EpicMealTime channel on YouTube will be heading up the event as emcee, and the program will contain musical guests, skits, stunts and fake Super Bowl advertisements.

YouTube Space LA will play home to the video-streaming performance, where Morenstein will be joined by the likes of Freddie Wong, Toby Turner and others. In total, all of the creators' channels total more than 60 million subscribers, which YouTube is hoping will help them make this show a success. The site is banking so heavily on this being a hit that it has even thrown up billboards in major metropolitan areas in order to bring more attention to the event.

Google's managing director of brand solutions, Suzie Reider, said that she thinks it'll be interesting to compare the stats of YouTube's show with the ratings from NBC's halftime show.

It's a really good place to showcase our celebrities, our talent and our creator. It will be fun afterwards to see what was Freddie Wong's draw compared to Katy Perry and Lenny Kravitz.

Reider also added that the show will be more geared towards those who will be watching the Super Bowl for the ads, rather than the game. So if you're in that group, then this might be something you'll want to bring up on your mobile device while the rest of us see how deflated the Seahawks can get.

I'm curious myself to see how well this does against NBC's star-studded performance. Do enough people still care about YouTube to visit an appointment-based show on an on-demand site? YouTube Live hasn't seen too much success in total viewer count, and that may end up trickling down into the YouTubeapalooza on February 1st.

Netflix Ends 2014 Strong, Proves Doubters Wrong

posted Saturday Jan 24, 2015 by Scott Ertz

Netflix Ends 2014 Strong, Proves Doubters Wrong

When Netflix announced their price increase last year, there were a lot of doubters. Many people, including investors, believed that the rate hike could lead to existing customers leaving the service. They also believed that a higher price would actually incentivize new customers to opt for other services, such as Amazon Prime Instant Video or Hulu Plus.

As it turns out, Netflix was right and critics were wrong. Customers are often willing to pay a slightly higher price for a higher quality product or service. In fact, customers are willing to pay a higher price for a product or service of equal or lesser quality so long as they believe the product is superior. Starbucks learned this lesson themselves when increasing their prices last year.

The thing that is important here is that premium brands, either in reality or in perception, enjoy certain privileges in pricing. For a company in this position, it is insane for them to not exercise that privilege. A great example of a company taking advantage of their marketing position is Apple, who has always charged far above market value for fairly pedestrian products. If customers didn't believe that Apple offered a premium product they could never get away with their pricing model.

Because of the new pricing from Netflix, they saw an incredible fourth quarter. Their profit margin rose a full point to 13%, with revenue growing 35% year-over-year. This growth comes during a year in which new costs arose, including Comcast charging for direct access, and a rollout of Super HD to everyone. Netflix has also spent money on a new slew of original programming, making it a more attractive option than its competitors, whose original programming is in less quantity than Netflix.

Were you offended by the price increase, or did you accept it because of the content available on the service? Let us know in the comments.

Verizon Nearly Done with New FiOS Installs

posted Saturday Jan 24, 2015 by Scott Ertz

Verizon Nearly Done with New FiOS Installs

In early 2010, Verizon announced that they would slow down new FiOS installs at some point in the future, with the plan to stop new markets. Even though 2 years later they began ramping up again, it was only a matter of time before they completed their planned expansion. This week, Verizon CFO Fran Shammo said that they were nearing the end of new construction, saying,

I have been pretty consistent with this in the fact that we will spend more CapEx in the Wireless side and we will continue to curtail CapEx on the Wireline side. Some of that is because we are getting to the end of our committed build around FiOS, penetration is getting higher.

As the XLTE install has continued, and the speeds of wireless has gotten closer to that of wireline services, it makes sense that Verizon would want to focus their attention there. Wireline services are definitely not a growing industry, while wireless services are. This is especially important to a company who, as part of the same conference call, announced a net loss of $2.23 billion in the last quarter of 2014.

In regards to the overall health of existing FiOS subscriptions, Shammo said,

In broadband, we added 145,000 net FiOS customers in the quarter and 544,000 for the year. We have a total of 6.6 million FiOS Internet subscribers, representing 41.1 percent penetration... Overall net broadband subscribers increased 59,000 in the quarter and 190,000 for the full year. In FiOS video, we added 116,000 net customers in the quarter and 387,000 for the year. We have a total of 5.6 million FiOS video subscribers, which represents 35.8 percent penetration.

While this is good customer growth, it does not pay for the expansion of FiOS, or even the maintenance of a copper network. Hopefully they will use the money saved to speed up the expansion of XLTE, and even the 3G retirement plans, which will make room for more bandwidth. That will allow for Verizon to compete in a market that Clear tried to create - a wireless-based home Internet plan. Clear's network wasn't prepared to support the demand, though a renewed vigor from Verizon could make their network capable.

Nintendo 'Winding Down' Club Nintendo Reward Program

posted Saturday Jan 24, 2015 by Scott Ertz

Nintendo 'Winding Down' Club Nintendo Reward Program

This is the end of an era: after 6 years of running within the US, Nintendo has announced that they will be ending their Club Nintendo rewards program. For those unfamiliar, the program rewards coins for performing certain actions, such as registering games or completing surveys. Those coins can then be used to purchase Nintendo-related items, such as Virtual Console downloads or clothing items.

While an interesting idea in concept, the implementation has always left a lot to be desired. Coins were rare, and difficult to collect enough of to be eligible for any reward that mattered. The best rewards were reserved for gold or platinum members, which was even more difficult to become. Those who were eligible for rewards were often left without them because of timelines and other odd requirements that were missed.

The program will be phased out in stages between now and July 1, 2015. New products will no longer be eligible for Club Nintendo rewards beginning now. March 31 will see the end of earning new coins, either for registering products whose codes you already have or for taking surveys, as well as the end of new sign-ups. June 30 will see the end of redeeming any remaining coins, with all data vanishing on July 1.

While it seems like a loss, it isn't so much. Club Nintendo will be replaced by a "new program" which, hopefully, will work better than the current implementation. With the new program, one can hope that the Japanese-exclusive rewards, the ones that everyone always actually wanted, will come to and end and we will see prizes in the US that people actually want.

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