On the radio, I heard this reported as being a result of the current downturn in the UK (in the third quarter the UK experienced negative growth). But VirginMedia's reasoning is not the result of a change in consumer spending.

The problem VirginMedia face is that they have been carrying billions in debt generated during the rapid expansion of cable networks in the UK during the 90s.

Over the last few years, the level of market competition that VirginMedia has faced has limited VirginMedia's ability to generate significant enough revenues to retrieve their position. The vaunted multi-play that has been at the core of VirginMedia's strategy has resulted in a war on multiple fronts: in TV against Freeview and Sky; broadband versus Carphone Warehouse, BT, Orange, Sky, Tiscali; and home phone against Carphone, BT, and numerous others.

VirginMedia's announcement was a hangover from last time's problems, combined now with the greater difficulty in raising capital and sustaining existing debts caused by the credit crunch. Effects of changes in consumer spending will take longer to come through. There may be more pain to come.

Read related research on the economic downturn from us. More will follow soon.

They reported very fast mobile broadband growth, built upon aggressive pricing by other operators in European markets. Vodafone -- not aiming to be the cheapest priced -- reported an 84% increase in mobile PC connectivity devices and reckons about half of those are consumer buys. Given the early stage of the consumer mobile broadband market, that's an impressive result. Data-related revenues will be harder to secure: they rose by just 27%.

In the UK alone, Vodafone reported >500k mobile PC devices. This would place Vodafone among the leading ISPs if compared with home broadband, and with growth levels that only Sky could approach (but not match).

Note to non-European readers, pricing for mobile broadband is as low as 10ukp for one months' use on a pre-pay SIM, or 5ukp if an add-on to an existing contract plan. This isn't in every country, but in some where low prices exist, the market is moving extremely quickly.

There will be much more mobile broadband adoption to come as data spreads into emerging markets. Both Vodafone, and all of the operators I heard speak at last weeks' FT Telecoms conference, were sure this would happen very soon. Most, thought the opportunity is even greater than in Europe.

Vodafone's CEO: "In emerging markets: The Internet will be mobile."

Given the strength of some of the early mobile broadband take-up and of the arrival of numerous laptop-mobile subsidy sale models in retail, I think that's too narrow a statement, should read:

Ian: "The Internet will be mobile."

By that I mean that everyone, retailers, PC makers, home broadband providers, website owners, everyone... will have to adjust to the arrival of mobile/cellular in their businesses. Increasing numbers of consumers will go online using laptop PCs on relatively slow mobile broadband connections -- including very small netbooks -- leading to website design tweaks. Where and when people go online will change. Operators, retailers and device makers will have to embrace mobile industry pricing and packaging with subsidies and tight contract lock-ins. Additionally, and in parallel, phone handset Internet access is on the rise too.

I see any attempt to write about fixed and mobile Internet in isolation, or home broadband and mobile broadband on their own, as doomed to failure. Strategies must embrace both.

There is now one Internet, although with a few different flavours.

Exciting times.

While the extent of the economic crisis is debateable, regardless there will be direct effects on digital businesses, operators, startups, device makers etc. irrespective of whether the world's economies formally enter a recession or not:-

Consumer perceptions have likely been shaken by the extensive coverage of the credit crunch, housing market, stock markets, banks etc. These perceptions will effect consumer behaviour. Just as in a boom, perceptions can accelerate the rise, in a slowdown negative attitudes can turn a controlled dive into a tailspin. We'll be able to spot how consumer activity has changed when the latest Forrester consumer survey data comes back in a few weeks time.

In countries where the housing market is locked up with negative equity, or sharp price falls, that make moving logistically difficult there may be a retention benefit for fixed operators. Moving home is a key decision point in life when consumers are forced to reconsider what services they take. If people move less, this decision point won't come up.

Broadband and TV is an essential part of life now which will limit churn due to a slump. I strongly believe that home broadband, and even pay TV, will be resistant to a slow down. Few consumers will wish to end home broadband access if they have time on their hands and need to job hunt, or have renewed impetus to use the Internet to bargain hunt for cheap deals on utilities or retail. Similarly, consumers with more time, will have more time for entertainment, although I do see consumers becoming more likely to switch down to cheaper packages with the same operator, especially where they pay for premium channels.

If access to capital is difficult for any appreciable length of time, then operators' new network spend will likely be deferred. Fibre roll outs will take many years, rather than a few years. Current DSL and cable will dominate for longer. The result is that current home broadband networks will have to last. Product managers must become more creative with packaging and adding new features cheaply. In mobile, the much heralded WiMAX networks may never launch in Europe: WiMAX has, perhaps, a small window of opportunity after which cellular mobile broadband will be ubiquitous. If they miss that window, WiMAX will be in trouble.

(Some) Consumer product pricing will be less suicidal. This is perhaps a little controversial. In the boom, we've seen repeated examples of over-aggressive pricing, which was not profitable or sustainable in the medium term. In a slow down, few operators will be prepared to take such a cavalier approach to revenue and profits. Recent examples of such suicidal pricing include the mobile broadband offers in Austria and the UK.

Consumer prices for broadband and mobile will remain under pressure. Despite the above note about an end to suicidal pricing, operators will have to focus on value and price in a softer economic environment. Ideally, operators should pursue both approaches: tactically adding more features/texts/minutes/speed/data volume to some packages to add value and defend prices; while tailoring no frills but low price packages to other segments. Both the home broadband and mobile telephony market are mature or fast maturing, this would have happened to an extent regardless of the wider economy, but the crunch will accelerate such moves.

Unprofitable products will be killed if the slowdown continues. We will see a weeding out of free, advertising-supported, and even some paid services that are not delivering financially. This opens opportunities for competitors with a better business model to clean up. I see a lot of the online video services at risk here, as well as some telecom operator IPTV services and cable provider free video on demand services, but there are many others too.

Operators will have the option to buy Internet assets much more cheaply. Given the above, I suspect many start-up investors will be keen for an exit at a much lower price than they would have required six months ago. Operators, for the most part, are generating very significant quantities of cash. Should they choose, they will be able to select from a wide menu what they wish to take on to support their long term strategies. Many of these options will be poor buys, but there will a few bargains mixed in.

There are many other likely effects. If you're a client please send us an inquiry and I'm happy to chat further and point you to the relevant upcoming reports on the impact of the economic slow down on your area.

Whether you are a client or not, please join the discussion with me on twitter.

In other words, the more successful a phone is with its design, the more people want to use their phones various features, and so the more strain is placed on the battery and a phone's daily life expectancy falls.

Related research reports:
Mobile Devices - Meeting the Service Needs of Upgraders, published on August 16, 2008.
Mobile Music Phones, published on January 12, 2005.

Music Playback Competes with Many New Media Features for Battery Power

This has created enough of a stir with their rivals to prompt a referral to the competition regulator. However, now the regulator rules they may continue.

Received wisdom: Only the altnets, the competitive operators, will market these kinds of offers. Naked DSL benefits over the top VoIP players.

My take: If a competitor is successful, most European incumbents are nimble enough to respond by adjusting product strategy to maintain their market position. There is no reason for an operator not to have a home broadband + mobile offer like this as a part of their overall product portfolio.

Plus, if the mobile pricing is sufficiently cheap, and includes enough bundled minutes, then a consumer will see no need to add a home VoIP service to their naked DSL service.

The best current mobile applications and devices understand this, and download what content/messages they can as soon as they can. SMS works this way: messages are delivered direct to the handset. Blackberry push email's main benefit is that when a user opens their email, there is no wait while messages download.

This to my mind is the greatest advantage of building a mobile application, rather than a mobile website. Good applications work anywhere, anytime, whatever the network situation, and can use local storage and sync to deliver faster responsiveness than a website.

But Apple has made a strategic decision with the iPhone to target always-on behaviours.

The iPhone's entire design assumes that there is always a fast network connection present, for both the built-in Apple applications, and the bulk of those from the new app store.

Some examples:

• Google Maps (built-in) does not store any map data locally, even if the user has browsed that map before. Effect: the user has to wait for the map to download each time they open Maps, the speed depends on the vagaries of the mobile network. Despite the new GPS chip which works anywhere, the maps application is only usable if there's a data network. So, its usefulness in very rural areas is limited. Alternative approach: Nokia Maps automatically caches map data locally, speeding its responsiveness, saving the operator from unnecessary data transit, and avoiding data costs for the user if roaming abroad.
• Apple's iPhone email only automatically downloads the in box, not other folders, so there's a delay each time a user opens any other folder, and it doesn't work when there's no signal. How long the delay is depends on how many messages and the speed of the data network. With a 2G data connection and 20-30 messages I find it takes at least a minute or two. Similarly, there's no user setting to control how much of a message is downloaded, so routinely users experience partially downloaded messages, even if the iPhone has many Gb free space.
• Apple's new Exchange email support does not allow messages to be moved or deleted if there's no connection. Weirdly, Apple's IMAP support allows it. The experience when I tried to use Exchange email on the tube, above ground where there is patchy coverage, reminded me of the user access control alerts from Vista: the iPhone kept popping up warning messages.
• Sending SMS messages only works when there's a network present, and the iPhone does not auto-retry sending in the background until there's coverage. Effect: I write a message on London's tube where there's no signal and I have to remember to click send when I surface. I've seen the same poor behaviour on Windows Mobile 6. Alternative approach - my Nokia 7110 from 1999, write an SMS, try and send it, fails, but the text stays in the outbox and the phone auto-retries in the background. The SMS gets sent as soon as it's possible.

• Apple Weather app downloads weather each time the app is opened and has no local cache. Effect, doesn't work on London's tube. Slow to launch. No different in experience for the user compared with accessing a bookmark of a mobile website that has been saved to the iPhone home screen.
• Evernote (a great third party application) stores all notes on its servers with no local cache or sync, unlike the PC and Mac versions of Evernote that sync notes between Evernote's cloud and the local computer. Alternative approach - Windows Mobile syncs notes from Outlook to the handheld with a full copy of each note in both places.

• The newspaper applications for iPhone are little more than skinned websites, but which take longer to load than the iPhone's Safari web browser, and still only work with a live mobile data connection. Mobile News, Bloomberg, SFNetNews applications all require a connection to read stories, just like accessing a mobile website in Safari, yet take longer to launch and have a less standard UI as they are all distributed as separate applications. Alternative approach - antique Palm application Avanto Go, enables users to download content to their PDA for offline viewing. More recent Windows Mobile and Symbian versions offer over the air download. Local storage improves the speed to jumping between pages, so people read more, and see more adverts. The New York Times app for iPhone also appears to do this, but it needs a better UI to display when it has finished downloading stories.

If there's no data connection the current iPhone UI repeatedly nags the user to remind them to switch off flight mode (if the user has set it to on), or that there is no data connection if the mobile is "on" but has poor reception. This reminds me of the worst of Vista's user access control pop-ups (which can at least be switched off).

Bottom line - Apple needs to improve the iPhone's ability to operate where there is a slow connection, or when there is no mobile data network present. They need to add automatic local caches to their standard applications, and offer the user a few more settings to manage data roaming, beyond the current blunt on/off. Apple also need to make it easier for third party apps to store and cache data locally as well.

+ Examples of coverage issues:

In-building, 3G signals often don't reach or are weak. In rural areas, mobile networks routinely only offer gprs and sometimes there is no reception at all. Airplanes don't allow cellular radio use. Public transport often lacks good coverage: cellular masts tend to have been positioned along main roads, not along train lines, plus cuttings and tunnels break up the signal. London's tube has no underground mobile coverage whatsoever. If a 3g cell becomes very busy, speeds slow, and the geographical area that 3g covers actually shrinks. Etc. etc.

If a user is moving in a train or a car, there is no guarantee that a good mobile data signal, or any signal, will continue to exist as the user roams between cells and locations. They may start an activity in good coverage and then lose it.

To what kind of potential customers will this appeal the most? Those with big homes, who will tend to have higher than average incomes and/or wealth. Nice.

KPN's download speeds are good (30-60Mbps). Prices are not that high given that this is an initial launch aimed at testing the market, early adopters, and teasing a response from the savvy Dutch cable companies. The top package tier looks be have little differentiation to justify the higher price. Pricing is significantly above the benchmark set by France's Free (Euro30) which is a very good thing for the business models of all Dutch operators.

Upload speeds are low (3-6Mbps) and look to have been chosen to be just one tenth of the marketed download speed. They are especially poor if compared with other fibre broadband services around Europe.

As KPN's main competitors are cable co's, KPN are under less pressure on upload due to the weakness of cable's HFC (hybrid fibre coax) technology to deliver high upload speeds. Ideally, KPN should use the much higher upload speeds of which FTTH is capable to create clear differentiation from cable broadband packages, even those based on DOCSIS3.

The major competitor operators that have their own existing DSL networks -- Sky, O2, Carphone Warehouse, Tiscali -- will have to make decisions soon about whether to invest in fibre themselves.

A key part of that business case is the degree to which consumers are interested in next gen fibre broadband speeds. Today, JupiterResearch has published a new report with data on this precise subject:

Demand for Fiber Speeds
- Segmenting Targets for Next-Gen Internet

Other related reports on fibre:

The Fiber Future
- How FTTx Speeds Compare with WiMAX, 3G, DSL, and Cable

The Fiber Alphabet
- FTTx Broadband Technology and Its Effect on Net Neutrality

Clients - please ask us for more insight, we have other reports in preparation on this topic and have significant amounts of unpublished data which we are delighted to discuss on an enquiry call.