Analyst BTIG downgraded Apple from buy to neutral Monday citing changing dynamics in the wireless industry, including squeezed margins caused by frequent upgrade activity by iPhone customers, the possible need for a “price cut” on the $600 iPhone and the “elevated expectation” that the company will deliver “another revolutionary product” into the marketplace. The downgrade was made despite BTIG’s belief that Apple will deliver “another blow-out quarter” in fiscal Q2 of $40 billion. “We expect post-paid wireless operators to remain firm in their plan to stunt the pace of phone upgrades in 2012,” said Walter Piecyk, analyst, adding that some of the results of that strategy will be felt in the current quarter. Pressure will mount on Apple to grow its business in the pre-paid dominated emerging market space, “in which handset subsidies are a rarity” and the high price of the iPhone consumes a “big chunk” of a household’s monthly income, according to Piecyk. BTIG’s thesis won’t be supported in the current quarter, it said, because pent-up demand in China and the launch of the iPhone in 30 new markets are likely to drive strong demand that offsets sequential declines in existing markets. BTIG expects Apple to sell 33 million iPhones in fiscal Q2 and 27.5 million phones in fiscal Q3. The company maintains that Apple is the primary beneficiary of an “accelerating growth trend in the global adoption of smartphones,” noting that global penetration of smartphones hasn’t yet reached 30 percent. Subsidies by wireless operators have fueled the growth of the iPhone since its inception. Even in the pre-paid dominant markets of China and Europe, heavily-subsidized iPhones are available to users willing to sign up for a contract, BTIG said. Wireless operators have been happy to subsidize smartphones to new and existing customers in order to provide a lift to the average monthly bill (ARPU) of their customer base -- a metric which had been falling for the past three decades -- but now the cost to drive ARPU growth is starting to “eat away at profitability,” Piecyk said. The practice of operators offering generous upgrade policies -- including some that enabled a fully-subsidized phone upgrade halfway into a 2-year contract -- could be in flux, he said. “We expect those policies to change as the faster upgrade rate of smartphones compared to legacy feature phones has been a costly surprise to post-paid and pre-paid operators, alike,” he said.
The FCC requested a copy of all Baltimore TV stations’ public-inspection files (CD April 2 p13), the Media Bureau said Friday. FCC Chairman Julius Genachowski that day circulated for a vote a bureau order to make all U.S. TV broadcasters post online most of their public and political-ad files. The biggest public file among the eight Baltimore stations was that of WJZ, with 8,222 pages, the bureau said in a “submission for the record” in docket 00-168 (http://xrl.us/bm27ey). About half that was the political file, and of the entire file, 938 pages are at fcc.gov. Letters and emails took up about 2,000 pages apiece in the public files of WJZ, WBFF -- which had the second-biggest public file overall in the market at 8,116 pages -- and at No. 3-ranked WBAL. A rulemaking proposed to exclude such material. Maryland Public TV’s WMPT and WMPB each had 2,180 public-file pages, excluding what the commission has online. Free Press expects broadcasters to be “lobbying hard to weaken” the draft order before it’s voted on at the April 27 FCC meeting (CD April 9 p5), Senior Policy Counsel Corie Wright said Monday. “We're very concerned by reports that the FCC is considering excluding many stations and markets from these requirements,” she said of phased-in rules which initially would only apply to Big-Four broadcast network affiliates in top markets.
An FCC proposal to end some broadcast proceedings was opposed by a state broadcast association and six nonprofit groups. A 2004 petition on protecting New Jersey full-power radio stations from interference by translators and low-power outlets, which the Consumer & Governmental Affairs Bureau proposed in February to terminate, shouldn’t be closed out, said the state’s broadcaster group. “Although the Petition was filed almost eight years ago, the Association has yet to receive any response from the Commission,” the New Jersey Broadcasters Association said (http://xrl.us/bm27bi). What’s proposed in a docket opened in 2005 by a commission rulemaking notice on expanding rules about radio and TV stations giving public notice when they're being sold should be adopted, not killed, the nonprofits said. “The objectives of the proceeding are still relevant and are consistent with commission goals of transparency and fostering public participation,” said the Benton Foundation, Free Press, National Hispanic Media Coalition, United Church of Christ and others (http://xrl.us/bm27co). “Requiring public notices of station sales to be posted online and creating a specific site devoted to the process would modernize procedures.” The filings were posted Friday in docket 12-39.
New rules on dealing with 6,500 pending requests for FM translators made in a 2003 filing window take effect May 9, an FCC notice in Monday’s Federal Register said (http://xrl.us/bm27ay). The order approved by commissioners last month “adopts national and market caps to prevent the trafficking of translator construction permits,” the agency noted.
More than a third of U.S. households have at least one TV connected to the Web via a videogame or Blu-Ray player, Apple TV, Roku set-top box or the TV itself, according to data from Leichtman Research Group. That’s up from 30 percent last year and 24 percent in 2010, Leichtman said. Videogame systems are the primary enablers, with 28 percent of households connected to the Internet through a game system, the industry researcher said. Four percent of households are connected directly through a TV and 1 percent are connected via Apple TV or a Roku box, it said. Use of connected devices is higher among Netflix subscribers, Leichtman said, with 35 percent of them watching video from the Internet via a connected device per week, compared to 5 percent weekly use among all non-Netflix subscribers. The number of adults watching full-length TV shows online once a week rose from 12 percent to 16 percent, and 19 percent of mobile phone owners, up from 15 percent last year, watch TV shows online at least once a week, according to the study. Cord-cutting isn’t a significant trend, President Bruce Leichtman said: “Video is increasingly being watched on different platforms and in different places,” but emerging video services are generally “complements to traditional television viewing” rather than a substitute. Just 1.6 percent of households in the sample that had paid to subscribe to a multichannel video service in the past year no longer subscribed, and 0.1 percent of respondents that had dropped the service don’t plan to subscribe again in the next six months because their video needs are met by Netflix or another streaming option, it said. The study was based on a phone survey of 1,251 adults from throughout the continental U.S. conducted mostly in February with a 2.8 percent margin of error.
The FCC sought comment on a request by the Texas Health Information Network Collaborative (TxHINC) for a 120-day extension of the June 30 USF rural healthcare pilot program funding commitment deadline for choosing vendors and requesting commitment letters from the Universal Service Administrative Co., said a Wireline Bureau public notice (http://xrl.us/bm263g). TxHINC wants its deadline extended to Oct. 30, “due to circumstances unique to the state of Texas” that have led to delays, the notice said. Comments are due May 7 in docket 02-60, replies May 21.
FCC public notices should make it easier for broadband adoption program staffers to reach out to eligible telecom carriers in their area, Benton Foundation executives told a Wireline Bureau official, according to an ex parte filing (http://xrl.us/bm26xe). Benton suggested the inclusion in public notices of an appendix listing ETCs by state, or providing information on how to look up ETCs by location. Benton also requested a commission-led workshop walking through the particulars of the broadband pilot program, and an extension of the application deadline.
The FCC Public Safety Bureau on Friday asked for comments on 700 MHz transition issues relative to the recently enacted Spectrum Act and the creation of a new national network for public safety. Among its proposals is rescinding the waivers that would allow early deployment of networks in the 700 MHz band (http://xrl.us/bm2x2n). “What would the impact -- including cost -- be to the Waiver Recipients of such an approach?” the bureau asks. “Could the cost impact be minimized in any way? For instance, could we rescind the waiver authorizations of only those jurisdictions who have not yet expended significant funds? Is there another method to achieve the same objectives, while minimizing any adverse impacts? Is this approach consistent with the Spectrum Act?” Oklahoma, Louisiana and other jurisdictions have been pressing hard to join the list of waiver recipients. The bureau notes that only Texas and Charlotte, N.C., appear close to going live with early networks. “We seek comment on the most expedient and cost-effective way to transition the Waiver Recipients’ authorizations,” the notice says. “What actions should the Commission take to effectuate the transition? Should the Commission issue a stay to halt deployment by the Waiver Recipients in order to avoid additional costs being incurred by the Waiver Recipients? What impact would such action have on Waiver Recipients’ funding, including obligations such as those under the Broadband Technology Opportunities Program (BTOP)?” Comments are due April 20.
The FCC International Bureau granted SES a 14-day extension to file a $750,000 bond. The bond was required after the FCC granted SES U.S. market access for the SES-4 satellite at 22 degrees west, the Satellite Division said Friday in a public notice (http://xrl.us/bm2xyr). The bond is due April 28.
Cincinnati Bell Wireless, Cricket, Flat Wireless, which operates under the Clear Talk brand, and nTelos sought an extension of Saturday’s deadline, until May 15, for the carriers to put in place the Commercial Mobile Alert System (CMAS) for transmitting emergency alerts to subscribers. Each is working with TeleCommunication Systems, but has encountered a similar problem, they said in a filing at the FCC (http://xrl.us/bm2xxo). “The Carriers all have been working with TCS for a considerable period to meet the ... implementation date, and substantial progress has been made,” they said. “Connectivity between TCS and each of the Carriers has been established and tested. The Carriers either have CMAS-capable handsets available and in service with certain end users or on order for near term delivery.” The only problem has been working out a link between the Federal Alert Aggregator/Gateway and TCS, they said. “The standard Interconnection Security Agreement proposed by FEMA for CMAS implementation was crafted for direct connections by a participating carrier with the Gateway and not for a third party service provider such as TCS,” the filing said. “As a consequence, implementation was delayed at a critical time in the schedule.” The carriers said they're advised that the earliest date by which this problem could be resolved is April 19.